Philip Ball
consultant editor of Nature
author of Critical Mass
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Is the discipline of economics built on sand?
Most economists would answer with a resounding “no”. But...
Standard economics and the ‘evolution’ thesis can coexist
Is the discipline of economics built on sand? Most economists would answer with a resounding “no”. But...
Martin Wolf, FT 1/17 2007
most must also know that the economy is not characterised by perfect foresight and equilibrium, but by trial and error and evolution. That was the intuition of the Austrian economists, Joseph Schumpeter and Friedrich Hayek. But this vision has had next to no influence in the discipline itself.
Welcome, McKinsey’s Eric Beinhocker argues in a brilliant, thought-provoking and wide-ranging book, Welcome to the world of “complexity economics”, computer-based simulations and more realistic assumptions.
Mr Beinhocker, in understanding that the economy is “a complex adaptive system”, which works under the same logic as biological evolution – differentiate, select and amplify.
Conventional economics cannot explain such an evolutionary process, because the science that has provided most of its ideas is not biology, but physics. Conventional economics assumes that human beings are rational, consistent, far-sighted and selfish. But human beings are not desiccated calculating machines. They decide quickly and make predictable mistakes. Their evolutionary history equipped them with the ability to survive in a complex, fast-changing and often dangerous environment.
Is this thesis true? Is it useful? Does it replace standard economic analysis? The answers to these questions, I believe, are: yes; yes; and no.
The Origin of Wealth: Evolution, Complexity and the Radical Remaking of Economics (Random House, 2006)