Evolutionary economics is a school of economic thought that is inspired by evolutionary biology. Although not defined by a strict set of principles and uniting various approaches, it treats economic development as a process rather than an equilibrium and emphasizes change (qualitative, organisational, and structural), innovation, complex interdependencies, self-evolving systems, and limited rationality as the drivers of economic evolution.Hodgson, G. M. (2012). Evolutionary Economics, in Fundamental Economics, edited by Mukul Majumdar, Ian Wills, Pasquale Michael Sgro, John M. Gowdy, in Encyclopedia of Life Support Systems (EOLSS), Developed under the Auspices of the UNESCO, EOLSS Publishers, Paris, France, . Archived from on April 24, 2023. The support for the evolutionary approach to economics in recent decades seems to have initially emerged as a criticism of the mainstream neoclassical economics,Hodgson, G. M. (1993). Economics and Evolution: Bringing Life Back Into Economics. Cambridge, UK and Ann Arbor, MI: Polity Press and University of Michigan Press. but by the beginning of the 21st century it had become part of the economic mainstream itself.Friedman, D. (1998). Evolutionary Economics Goes Mainstream: A Review of the Theory of Learning in Games. Journal of Evolutionary Economics. 8(4), pp. 423–432. Archived from on March 8, 2022.Hodgson, G. M. (2007). Evolutionary and Institutional Economics as the New Mainstream? Evolutionary and Institutional Economics Review, 4(1), pp. 7–25. Archived from on July 9, 2020.
Evolutionary economics does not take the characteristics of either the objects of choice or of the decision-maker as fixed. Rather, it focuses on the non-equilibrium processes that transform the economy from within and their implications, considering interdependencies and feedback.Galor, O. (2005). From Stagnation to Growth: Unified Growth Theory. In P. Aghion and S. Durlauf (eds.), Handbook of Economic Growth, Vol. 1A, pp. 224–235. The processes in turn emerge from the actions of diverse agents with bounded rationality who may learn from experience and interactions and whose differences contribute to the change.
Roots
Early ideas
The idea of human society and the world in general as subject to evolution has been following mankind throughout its existence. Hesiod, an ancient Greek poet thought to be the first Western written poet regarding himself as an individual,Barron, J. P., Easterling, P. E. (1989). Hesiod. In Easterling, P. E., Knox, B. (eds.), The Cambridge History of Classical Literature: Greek Literature. Cambridge University Press, p. 51. described five Ages of Man—the Golden Age, the Silver Age, the Bronze Age, the Heroic Age, and the Iron Age—following from divine existence to toil and misery. Modern scholars consider his works as one of the sources for early economic thought.Gordon, B. J. (1975). Economic Analysis Before Adam Smith: Hesiod to Lessius. Palgrave Macmillan, p. 3.Rothbard, M. N. (1995). Economic Thought Before Adam Smith: Austrian Perspective on the History of Economic Thought, Vol. 1. Cheltenham, UK.Brockway, G. P. (2001) The End of Economic Man: An Introduction to Humanistic Economics, 4th edition. W. W. Norton & Company, p. 128. The concept is also present in the Metamorphoses by Ovid, an ancient Roman poet. His Four Ages include technological progress: in the Golden Age, men did not know arts and craft, whereas by the Iron Age people had learnt and discovered agriculture, architecture, mining, navigation, and national boundaries, but had also become violent and greedy. This concept was not exclusive to the Greek and Roman civilizations (see, for instance, Yuga Cycles in Hinduism, the Three Ages of Buddhism, Aztecs’ Five Suns), but a common feature is the path towards misery and destruction, with technological advancements accompanied by moral degradation.
Medieval and early modern times
Medieval views on society, economics and politics (at least in Europe and Pax Islamica) were influenced by religious norms and traditions. Catholic and Islamic scholars debated on the moral appropriateness of certain economic practices, such as interest.Thomas Aquinas. Summa Theologica. New York: English Dominican Fathers, 1981. Part II, Q78, A1. Archived from on March 29, 2023.Institute of Islamic Banking and Finance (2023). Riba. Archived from on June 4, 2023. The subject of changes was thought of in existential terms. For instance, Augustine of Hippo regarded time as a phenomenon of the universe created by God and a measure of change, whereas God exists outside of time.Augustine of Hippo. Confessions, Book XI. Project Gutenberg. Archived from on April 19, 2023.
A major contribution to the views on the evolution of society was Leviathan by Thomas Hobbes. A human, according to Hobbes, is a matter in motion with one's own appetites and desires. Due to these numerous desires and the scarcity of resources, the natural state of a human is a war of all against all:Thomas Hobbes, Leviathan, Chapter XIII. Project Gutenberg. Archived from on January 3, 2023.
"In such condition, there is no place for Industry; because the fruit thereof is uncertain; and consequently no Culture of the Earth; no Navigation, nor use of the commodities that may be imported by Sea; no commodious Building; no Instruments of moving, and removing such things as require much force; no Knowledge of the face of the Earth; no account of Time; no Arts; no Letters; no Society; and which is worst of all, continual feare, and danger of violent death; And the life of man, solitary, poore, nasty, brutish, and short."
In order to overcome this natural anarchy, Hobbs saw it necessary to impose an ultimate restraint in the form of a sovereign.
Economic development, natural state, and social evolution
A landmark work in many senses, The Wealth of Nations by Adam Smith was also one to offer a description of economic development throughout the history of mankind—as well as insights into the nature of this development. In Book III (Of the different Progress of Opulence in different Nations), Smith constantly underlines the importance of the natural order of things, which economic improvements follow, and shows the feedback chain that allows economies to progress further, based on what has been achieved. This falls in line with the notion of natural rights shared by other Age of Enlightenment thinkers, such as John Locke and Montesquieu.
A somewhat different view relates to the names of prominent socialists of the 19th century, who viewed economic and political systems as products of social evolution (in contrast to the notions of natural rights and morality). In his book What is Property?, Pierre-Joseph Proudhon noted:Proudhon, Pierre-Joseph (1994). What is Property? Project Gutenberg. Archived from on April 5, 2023.
"Thus, in a given society, the authority of man over man is inversely proportional to the stage of intellectual development which that society has reached."
The approach was also employed by Karl Marx. In his view, over the course of history superior economic systems would replace inferior ones. Inferior systems were beset by internal contradictions and inefficiencies that made them impossible to survive in the long term. In Marx's scheme, feudalism was replaced by capitalism, which would eventually be superseded by socialism.Gregory, P. R., Stuart, R. C. (2005). Comparing Economic Systems in the Twenty-First Century, Seventh Edition. South-Western College Publishing.
Emergence as a separate field of study
The term "evolutionary economics" might have been coined by Thorstein Veblen. Veblen saw the need for taking into account cultural variation in his economic approach; no universal "human nature" could possibly be invoked to explain the variety of norms and behaviours that the new science of anthropology showed to be the rule rather than an exception.Hodgson, G. M. (2004). The Evolution of Institutional Economics: Agency, Structure and Darwinism in American Institutionalism. London and New York: Routledge. He also argued that social institutions are subject to selection processCamic, C., Hodgson, G. M. (eds.) (2011). Essential Writings of Thorstein Veblen. London and New York: Routledge. and that economic science should embrace the Darwinian theory.Veblen, T. B. (1898). Why Is Economics Not an Evolutionary Science? The Quarterly Journal of Economics, 12(3), pp. 373–97.Veblen, T. B. (1899). The Theory of the Leisure Class: An Economic Study in the Evolution of Institutions. New York: Huebsch. Archived from on November 22, 2021.Veblen, T. B. (1919). The Place of Science in Modern Civilisation and Other Essays. New York: Huebsch. Project Gutenberg. Archived from on June 5, 2023.
Veblen's followers quickly abandoned his evolutionary legacy.Rutherford, M. H. (2011). The Institutionalist Movement in American Economics, 1918–1947: Science and Social Control. Cambridge and New York: Cambridge University Press. When they finally returned to the use of the term "evolutionary", they referred to development and change in general, without its Darwinian meaning. Further researchers, such as Joseph Schumpeter, studied entrepreneurship and innovation using this term, but not in the Darwinian sense.Witt, U. (2002). How Evolutionary is Schumpeter's Theory of Economic Development? Industry and Innovation, 9(1/2), pp. 7–22. Another prominent economist, Friedrich von Hayek, also employed the elements of the evolutionary approach, especially criticizing "the fatal conceit" of socialists who believed they could and should design a new society while disregarding human nature.Hayek, F. A. (1988). The Fatal Conceit: The Errors of Socialism. In William W. Bartley III (ed.), The Collected Works of Friedrich August Hayek, Vol. I. London: Routledge. Archived from on March 24, 2023. However, Hayek seemed to see the Darwin theory not as a revolution itself, but rather as an intermediary step in the line of evolutionary thinking. There were other notable contributors to the evolutionary approach in economics, such as Armen Alchian, who argued that, faced with uncertainty and incomplete information, firms adapt to the environment instead of pursuing profit maximization.Alchian, A. A. (1950). Uncertainty, Evolution, and Economic Theory. Journal of Political Economy, 58(2), pp. 211–22. Archived from on May 1, 2018.
An Evolutionary Theory of Economic Change and beyond