Back to questions

Away from tragedy and back to questions. One major issue in responding to changes in the economy is how much control or foresight we can have over it in reality. And in this respect the issue of evolution increasingly has to be confronted.
Since the 1990s, there has been a wave of research which argues that modern economies evolve. This is more than a metaphor or analogy, this approach says. It is precisely the same process as in the natural world.
It started with a new renaissance in evolutionary theory, much of it centered around Stuart Kaufmann and the Santa Fe Institute. They investigated evolution as a mathematical algorithm , including its ability to handle complexity and rapid change.
And in this light it turns out evolution - in essence generation of variation, selection, and reproduction - is a startlingly efficient way to deal with daunting complexity and unpredictable change. If there is a better solution to a problem, dumb evolution is likely to find it, given time, and better than far more complex, forward-looking algorithms.
In essence a simple algorithm generates all the dazzling diversity and ingenuity of nature, after all. The simple process searches for outcomes more effectively than anything else.
This awareness of the efficiency of evolution carries over into economic life too, as argued by Eric Beinhocker in his book Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. Not in the simplistic sense that darkened the 19th century, red in tooth and claw, but in the sense of just how much extraordinary diversity the economic process can develop, and how effectively it can search out solutions to problems without much conscious intent.
This is very different from seeing the economy as a simple market equilibrium, in the dimmer sort of 20th century economics. Instead, it sees the economy as a process of generating alternatives and choosing the best among them. Beinhocker points out the dazzling variety of goods on sale in a major center like New York City, for example - as many as ten billion different stock-keeping units, or SKUs. The complexity and variety is astonishing, as is the ability to react to change.
So in this perspective we have now hit, perhaps by accident, on a set of processes in a market economy which means evolution in the full sense kicks in, rather than the whims of potentates or planners. It is extremely efficient in solving complex problems. It generates thousands of alternatives. It chooses between them. It builds on the successes.
More recent books take up the theme, like Tim Harford's Adapt: Why Success Always Starts with Failure. He shows how variation, selection (including actually recognizing failure, which is often hard) and then repetition of the successes explains many contemporary problems and their solution.
The failure of the Soviet Union, for example, wasn't so much a a failure of planning in his view. If the world never changed, then planning may have been an effective way to proceed. It worked very well for thirty years, at least if you do not count human misery and waste along with the pig iron production statistics.
The problem was that the system was incapable of experimentation and variation and diversity - and so could not cope with change. The whole point of central planning was to have one way to do things. There was no variation and no selection. The Russian economy literally became inbred. Static efficiency was catastrophically inefficient in a dynamic sense. Evolution is much better at dealing with unpredictable changes in the environment than planners.
So where does all this leave us? I find these approaches persuasive, much more so than much of market equilibrium economics, which is a stale handmedown of 19th century physics. But does it leave much room for conscious agency or human choice? How can we affect our own lives?
Much depends on the nature of selection. The criteria of fitness often change in nature.