Complexity Economics

The notion that the economy is an evolutionary system is a radical idea, especially because it directly contradicts much of the standard theory in economics developed over the past one hundred years. It is far from a new idea, however. Evolutionary theory and economics have a long and intertwined history. In fact, it was an economist who helped spark one of Charles Darwin's most important insights. In 1798, the English economist Thomas Robert Malthus published a book titled An Essay on the Principle of Population, as It Affects Future Improvements of Society, in which he portrayed the economy as a competitive struggle for survival and a constant between population growth and humankind's ability to improve its productivity. It was a race that, Malthus predicted, humankind would lose. Darwin read Malthus's work and described his reaction in his biography.

     In October 1838, that is fifteen months after I had begun my systemic enquiry, I happened to read with    amusement "Malthus on Population", and being well prepared to appreciate the struggle for existence which everywhere goes on from long-continued observation of the habits of animals and plants, it once again struck me that under these circumstances favorable variations would tend to be preserved and unfavorable ones to be destroyed. The result would be the formation of a new species.

Here then I had at last got a theory by which to work.

   Darwin's great insight into the critical role of natural selection in evolution was thus inspired by economics. It was not long after Darwin published his Origin of Species that the intellectual currents began to flow back the other way from evolutionary theorists to economists. In 1898, the economist Thorstein Veblen wrote an article that still reads remarkably well today arguing that the economy is an evolutionary system.

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