The Origin of Wealth by Eric Beinhocker

Author:Eric Beinhocker [D. Beinhocker, Eric]
Language: eng
Format: epub
Publisher: Random House
Published: 2018-12-13T00:00:00+00:00

Economic Evolution in a Nutshell

We now have all the elements of an evolutionary model for searching the Library of Smith for fit Business Plans. We have seen how Business Plans are instructions for creating businesses that can be implemented by qualified Business Plan readers. These instructions bind Physical Technologies and Social Technologies together into modules under a strategy. Business Plans are differentiated through the deductive-tinkering of agents as they search for potentially profitable plans. While the distribution of experiments created by this process differs from the purely random differentiation of biological evolution, it nonetheless feeds the evolutionary algorithm with a superfecundity of Business Plans for selection to act on.

The process of selection is nested and occurs at several levels, ranging from the mental simulations of individuals to the problem-solving activities of groups. Further selection occurs as Business Plans percolate up and down the hierarchies of organizations, but then at some point the plans are implemented and the market renders its judgment.

Finally, successful modules are rewarded by gaining influence over more resources. Success for a module comes at two levels. The first level is within an organization, when a Business Plan is implemented and is given resources for its execution, for example, when people and money are invested in executing a plan. The second level is when modules are expressed in the marketplace and rewarded with growth and more capital by customers and financial markets. This is a winnowing process; the superfecundity of Business Plans means that far more plan options are considered within an organization than can be implemented, and far more plans are tried in the market than can succeed. As selection does its work, fit modules eventually gain influence over a larger and larger percentage of the total resource base of the economy. This is a highly dynamic process; what is fit today may or may not be fit tomorrow. Thus, the evolutionary process never stops, as modules come and go and as businesses rise and fall, adapting to the needs of the marketplace.

Beyond the basic machinery of the evolutionary algorithm, we would not expect any particular similarities between economic evolution and biological evolution.16 For example, the notion that units of selection follow “descent with modification” through discrete generations in biological evolution, but hop around from Business Plan to Business Plan in economic evolution, does not make the process any less evolutionary, just different. Likewise, the ability of humans to use their brains and have foresight implies that the mechanisms for differentiation and selection are very different in economic systems versus biological systems, but again are evolutionary nonetheless.

Moreover, nothing in my proposed framework presupposes the existence of modern STs such as organized markets, money, private property, corporations, or even writing. The same processes apply for Harry the hominid contemplating how to get more meat for his hand axes as they do for a senior executive at a modern multinational considering strategies for China.

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