Tuesday, December 15

Evolutionary economics

I recently discovered a new discipline of economics that I didn't know existed: evolutionary economics. In a nutshell, it tries to understand the economy by drawing parallels with evolutionary theory from biology.

I came across evolutionary economics by accident through an assignment for our microeconomics class. We were asked to find two papers describing non-traditional theories of the firm and compare them. To make the exercise interesting, I tried to find the wildest theory I could find, which led me to The Firm as an Interactor: Firms as Vehicles for Habits and Routines. It's a 2004 paper published by two European economists, Geoffrey Hodgson and Thorbjorn Knudsen, in the Journal of Evolutionary Economics. Yes, there is such a journal (actually, it's the 98th-ranked economics journal, according to Journal-Ranking.com).

Basically, the paper argues that the purpose of firms is aligned with evolutionary biology theory. Essentially, the routines and practices firms employ are like traits, and the firms are like organisms that pass those traits on through a survival-of-the-fittest kind of mentality. Firms with inefficient practices get weeded out over time, just as humans with "weaker" traits get weeded out through evolution. The paper is an interesting interpretation of why we see technological progress.

I find it strange that I've been studying economics for more than five years and have never heard of an entire discipline. But I guess learning something new is what makes studying exciting.