Evolutionary Economics by Hirak
This book applies the evolutionary viewpoint to fundamental economic decision making.
The evolution of man has produced a brain with powerful competing emotions deep down in the skull which function ‘as if’ to generate diversity & choices. Men are social beings and cooperate with one another by a process of trial & error to discover survival synergies associated with specialisation & scale. Different folk, in different places, at different times trade with folk with different skills where the division of labour is limited by the scale of the market. In 1978 Herbert Simon suggested the word ‘satisficing’ to describe how human decision making behaviour coped with an unknowable future.
Some may find the writing style of the book confusing in places because the conventional, intentional, purposeful, planned design assumption is often described with rhetorical question marks and not debunked directly (maybe out of courtesy to conventional wisdom or timidity?)
The challenge is immense, how do you communicate to students of neo-classical economics such a controversial viewpoint which strikes at the heart of human purpose?
Darwin himself wrestled with the same problem, he delayed publication of ‘The Origin of Species’ for some 20 years and in a despondent moment he reflected, ‘It is an awful stretcher to believe the peacock’s tail was thus formed, I must be a very poor explainer’ ...
Hirak Bhattacharya raises issues that are not only of fundamental importance to understanding economic behaviour and policy but are also a breath of fresh air sweeping out prejudices of the past. The book will be immensely valuable for students; it will confront them with a distinctive evolutionary viewpoint, it will provoke them into doubting all the neo-classical assumptions and it will force them into questioning conventional economic policy and lead them to a very different understanding of economic growth.
Evolution is a convincing proposition placing the reality of economics in aesthetics and not in a political posture of planned design which is intellectually dishonest.
In the real complex world effects are causes and the free choices of life make the future unknowable. Everything is natural selection. The evidence of history provides a macroscopic statistical estimate of the incalculable worth of diversity & choice.
Ignorance is terrifying but free choice is not a delusion.
Aesthetics, the very fundamental survival circuits deep down in the brain are human universals, the products of evolution. The idea of ‘intention’ drives a schism into economics; the teleology of socialism versus the adaptation of capitalism’s evolved institutions. But the schism is only in our heads, natural selection is a notion that Darwin freely confessed, was ‘absurd to the highest degree’; teleology is adaptation.
- on capitalism
Evolution has no foresight so many project decisions must prove to be failures, a very few will be winners, that is the essence of Darwin’s natural selection. ‘Casino capitalism’ is an appropriate description of the natural process. So be afraid, especially when the stakes are high and the betting is done with your money, caveat emptor!
But cooperation is essential, our very survival depends on discovering synergies. So who do we trust?
Don’t scoff at capitalism, its only claim is to work better than the alternatives, and stop the search for a one-handed economist, he doesn’t exist. Sheer blind ignorance is the norm, and adaptation is a discovery process. The strong are violent but remember the weak are not timid, they do learn. The second law of thermodynamics is reality, but order & life come from hard work.
- on aesthetics
Keynes suggested our deepest instincts have evolved to solve economic problems, that is why we are still alive. Sure our intelligence and social evolution have delivered a pair of spectacles, nevertheless the process is evolution, there is nothing else is going on.
It is our instincts that have made us sociable. Adam Smith was not a prophet of laissez faire, he wrote ‘The Theory of Moral Sentiments’ in 1759, 17 years before he wrote ‘The Wealth of Nations’.
Instincts trump intelligence, instincts have stood the test of time, otherwise they wouldn’t have survived. Intelligence is the fad of the moment, inexorably adding to diversity. But amongst the diversity some behaviours survive. The only good economics is the economics that survives.
Economic problems are dynamic and experience wears out, problems never stay solved. So we must trust experimenters & speculators because improvement emerges from eliminating errors not from designing success. Each failure contains information. Thus we should not resist temptation & risk, there may be rewards but we should be prepared for a shock. The excitement of gambling & risk drives the experimental diversity of natural selection.
Societies are contracting individuals; more diversity, more deals, more synergy. Dealing for survival, for profit, is what social folk do. There are two sides to every deal, one is greed the other is doubt. predatory capital seeking out surplus value is speculation. In this way derivatives accelerate the marginal utility of capital, increasing the liquidity of markets and speeding up the discovery process.
Money value is a helpful measurement system linking divided labours and equating them in exchange.
But contracting is not a zero sum game, it is not vassalage, synergies are involved. Rewards go to the contractors of society who discover ‘know how’ which spills over and belongs to everyone. Owners cannot monopolise the benefits of ‘know how’ by siphoning knowledge out of companies by their deals; no synergy no deal.
There is no Panglossian utopia, just choices between alternatives, some of which prove to generate synergies, survival advantages.
- on the new economics
Darwinian science is explaining more and more, and art becomes a business of creating value in excess of costs. Markets organize activity, but such tyranny guarantees survival synergies otherwise there would be no deals. But it is not the equilibrium of perfect competition, rather the temporary monopoly of technological innovation, ‘know how’.
The relentless flow of entropy is interrupted only by work; the desperate search for survival synergies. But remember this search is mediated by ancient emotions in the brain and not by our experience as observers. Conscious design is a myth, the evolutionary function of consciousness is to create diversity.
Economic quality, like the quality of a book is not determined by the quantity of pages. Quality is recognised by the emotional (aesthetic) human universals, like love, excitement & fear ...
Economic theory changes as knowledge is uncovered, making it impossible for political dogma to succeed. Unintended consequences and the unknowable responses of others continually thwart the management of evolution. Economics must break away from the sham of a predictive science.
Evolution reduces the complexity of the process, but exposes the unknowable complexity of the whole, the quality of evolutionary economic theory rests on the critical tolerance of this humbling position.
- on policy
Democracy cannot be a route to some utopian equilibrium price which the President organizes. Democracy is a discovery process where everybody participates in the search for synergies in a flux of complex confusion & ignorance. This is bad news for the purveyors of snake oil, survival is not in the hands of arrogant elites, even when they are elected by majorities.
Hope resides in the contracts of society, the trial & error attempts to discover deal prices which are driven by the unavoidable costs of the gluts & queues associated with failure.
Demand is emotional satisfaction from - food, sex, music or nicotine ... brains are free to choose their particular route to satisfaction, as deep emotional circuits compete. But it is all physiology, all cravings are perceptions from chemistry. Maybe a dopamine kick in the brain?
- on profit
Profit is how we choose to measure retrospectively any surplus of survival value over entropy costs. But profit cannot be analysed by cause & effect, effects are causes. Profitable projects come from speculative opportunities for innovative ‘know how’.
- on business
Companies are the quintessential social organisation where individuals ‘satisfice’ and successful projects are profitable. It appears ‘as if’ companies chase profits and cut losses, but sound judgement is not a superior facility of mental effort but rather an option which worked with the benefit of hindsight. A random experiment but mediated by deep emotions within an inherited culture. Darwin’s creative destruction involves preservation, transmission & improvement by means of the destruction of failure.
Business has no magical view about the future, it is but a woven web of guesses. Successful businesses keep their options open, with flexible, speedy responses. Decrying or forbidding impatience & opportunism is a nonsense which disrupts the discovery of synergies. Trades are expectations, they may or may not result in synergies and organisations without synergies disintegrate.
Markets, organisation & morality cannot be separated, they are all parts of an evolving whole shebang & caboodle. No morality no trades, no trades no markets, no markets no organisation, no organisation no survival. But ancient creative destruction, faster & faster, organised disorder will always haunt the population. Always providing opportunities for Presidents, ‘We can do better! Let’s kick ass!’
Family businesses were the first organisational units where specialisations were easier as trust was genetic. But scale economies were secured by extending cooperation further into social activities in religious groups and companies where trust became cultural.
Companies should be analysed from the perspective of human emotions, biases & predispositions and not from purposeful design. Survival success is utterly social and failures are pathetically asocial.
Natural or artificial becomes an unnecessary distinction, all are experiments cooked up by the biased brain. Those that work are confirmed as natural and inherited. Those that fail are flawed designs, outside of the superintendent culture.
- on culture
Presidents, CEOs & Managers have a problem, there are general expectations that they should direct & instruct rather than satisfice & innovate. A Chief who teaches that he is in office but not in power is ridiculed. On the other hand no one accepts ‘The King can do no wrong’.
The only coherent management philosophy follows the eternal stability of the evolutionary process, inheritance with modification.
Separation of science and art is unnecessary. Evolutionary science explains art as a manifestation of the superintendent culture.
Globalisation and cultural congruence must be consistent with the evolutionary viewpoint which works across all cultures. The congruence involved is the process of evolution.
Social economies of scale work only by encouraging differences as the feedstock of evolution. No experiment is right or wrong, some experiments prove with hindsight to deliver survival synergies and others are harmful failures.
Empathy is the human universal underpinning all cultures. Social experiments won’t deliver synergies if devoid of empathy. Indian culture recognises the reality of the evolving whole shebang & caboodle with institutionalised specialisations & differences.
Organisations cannot exist as islands, distinct from social cultures. Differences must be celebrated and integrated into successful cultures. The best and wisest must rule but the least wise can do no wrong.
- on management
Getting it right is surviving by making order out of chaos but there are no infallible rules of complexity to help a good manager. Sound judgement is trial & error from an inherited base as the infinitely many alternatives are tested. The only ‘clever’ bit is remembering what seemed to work in the past. Specialisations & scale synergies are social experiments requiring plans, decisions & coordination which are embedded in culture.
Macho managers make things irretrievably more difficult!
Survival value cannot be prejudged, a functional chair maybe useful but a cosy chair may be better. Survival value cannot be complicated by analysis of applied & unapplied needs. Evolution has moulded behaviour through aesthetics. A dopamine kick if you get in right.
- on progress
So profit is not the result of cause & effect but of ‘satisficing’. Out of diversity one pre-existing variant will work better than the competitive alternatives in enhancing survival chances and that variant will spread throughout the population, as the benefits become universal.
The desire to survive is the desire to manage, the manifestation of deep brain circuits which motivate us all to try. We imagine results from some physical wiggling of reality. But the imagined result could never be known for sure. We have no control over what is good or bad, just an aesthetic predisposition.
Fear dissuades us from admitting ignorance and accepting trial & error. Bedrock beliefs in (temporary) concrete objects help our own survival (in the local environment) but such beliefs can also make us believe that the future is predictable leading us to strive to survive as the mind structures reality. But this is not any reality the 2nd law of thermodynamics sees to that.
Management is not the administration of some enforceable causality. As we trial & error there are many many more ways of being dead than alive. Failure is the norm but unfortunately our cooperative empathy leads us to protect failures as a priority over & above promoting our successes ... let us celebrate diversity & competitive choice, the feedstock of evolution ...
john p birchall
back to evolutionary economics