Saturday, February 7, 2009

Evolutionary Economics


In recent years, the closest analog to Spencer’s benign form of Social Darwinism may have been an obscure, short-lived movement centered on the book Bionomics by Michael Rothschild.  “The economy is an ecosystem,” Michael Rothschild told me.  For a short time in the mid-90s, this analogy became popular, especially with libertarians and other free-market advocates (though Rothschild, who makes no claim to being a biologist, eventually left bio-economic theorizing to start the more pragmatic software company Maxager).  The economy, says Rothschild, is “a virtual rainforest, and within that are not species but industries.  They’re comprised of organizations rather than organisms.  Those organizations exist in product market spaces, market niches.  Those organizations adapt, are shaped to survive, as in biological or ecological niches.”  Just an analogy?  Rothschild anticipates and even embraces this criticism, starting Bionomics with a quote from sociobiologist E.O. Wilson: “The key instrument of the creative imagination is analogy.”

Rothschild’s new economic lingo was well-timed, coming immediately after the collapse of Communism, when thinkers were groping for new economic metaphors less rooted in a central planner/technician mentality.  Rothschild likens business plans and procedures to DNA and corporate departments to cell structures, with similar economic influences sometimes giving rise to analogous corporate structures in places and times far removed from each other, just as similar environmental pressures sometimes create analogous biological structures in unrelated animals.  In some sense, economic competition, biological evolution, changes in tradition and culture over time, and the history of technology can all be seen as sorting processes, in which the codes that work tend to be preserved and proliferated while the ones that do not are weeded out.

But bionomics is a bunch of pseudo-science, charged New York Times columnist (now econ Nobelist) Paul Krugman in a column on Slate.  Still, Krugman patted himself on the back for drawing his own parallels, years earlier, between evolution and economics.  I asked Krugman how he thinks bionomics will be remembered.  “Evolutionary ideas are definitely going to play a significant role in economics,” he said via e-mail. “In many cases, an ‘evolutionary’ argument is the only way to predict the outcome of some games, and anyway eventually we will want to go beyond the usual assumption of utility-maximization for some deeper explanation of behavior.  But the bionomics guys have nothing to do with all this — just another small-time econo-cult, of the kind that crops up with regularity over the years.”

But I — like Skeptic magazine editor Michael Shermer, who recently wrote the evo-nomics book The Mind of the Market — think there’s more than faddishness to the idea that biological evolution offers at least a highly eye-opening analogy for market processes.  (Sometimes, they meld perfectly, as in discussions of monkey butlers and chimpanzee bartenders — but more on that next week.)

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