Prospect of the Evolutionary Theory: Policy Questions

What public policy questions might appropriately be explored with the aid of evolutionary theory? The term “policy research” does not identify a category parallel to “theoretical research” and “empirical research”; rather, every policy-oriented study has its theoretical and empirical components. On the other hand, one hopes that all re­ search is ultimately relevant, by whatever roundabout path, to some real question that needs an answer; in the light of that hope, all re­ search can be seen as policy research. The distinction that, in our view, warrants separate consideration of a narrower domain of pol­ icy research is one of motive and structure: policy research is under­ taken for the purpose of answering policy questions and is visibly structured by that purpose.

In the broadest terms, evolutionary theory is concerned with the fates of “ways of doing things.” It views functioning organizations as the repositories of an important part of society’s know-how, and also as the creators of new types of know-how. These core concerns suggest the sorts of policy questions to which the theory is most directly applicable and reveal the nature of the perspective it offers. Our studies of Schumpeterian competition in Part V, for example, provide the essential background for a more directly policy- oriented exploration of structure and progressiveness. What is required for such an inquiry is, first of all, an abstract representation of an array of alternative policy regimes that is more realistic than the one of­ fered in our model. We intend in particular to assess the conse­ quences of stylized antitrust policies, such as placing an absolute upper limit on permissible market share. The consequences of this policy will be assessed in terms of its expected implications for the entire course of industry evolution; in effect, the policy is part of the characterization of the s election environment. Only such an assess­ ment fully allows for all the indirect effects of the policy intervention on structure and progressiveness.

Our discussion of government policy toward R&D is similarly a starting point for further inquiry. It reveals some of the subtlety of the problems involved in using policy tools to amplify and modify the private incentives to create new technologies. The importance of the stakes, the diversity of industrial situations, and the complexity of the technical issues all combine to suggest that, in the future as in the past, policy interventions relating to R&D will be numerous, di­ verse, and situation-specific. As in the past, general principles and propositions about the appropriate roles and relative merits of gov­ ernmental and private activity will neither describe the experience accurately nor provide much normative guidance. Aside from their inevitable rhetorical uses, such propositions are useful mainly as warnings posted on the various forks of the policy road. Unfortu­ nately, in our imperfect world the warnings voiced in the policy de­ bates seem to have more substance than the promises.

To recommend reasonable policy for a particular case, it is neces­ sary to assess the existing institutional framework in detail, to make tentative judgments about an uncertain future, to draw on the fund of experience with related problems, and-above all-to recognize that new information will be coming in as the future unfolds . In these policy- development activities, expert knowledge of the array of options and speculations that define the technological situation should be teamed with sophisticated economic analysis and institu­ tional understanding. Orthodox theory cannot adequately provide that analysis and understanding because, fundamentally, it is about an ahistorical world in which genuine novelties do not arise. The evolutionary approach, though in need of further elaboration to deal with specific cases, has at least the merit of placing the problems of change at center stage.

Finally, there are areas somewhat remote from the concerns of this book that are of great importance and in which we believe an evolu­ tionary viewpoint would ultimately prove frui tful. The quest for the “microeconomic foundations of macroeconomics” has had limited success because the appropriate microeconomics has not existed. In the areas of pricing, employment and output determination, and in-vestment, economists have displayed great reluctance to make con­ tact with the available evidence on microbehavior, probably because that evidence seems riddled with “arbitrary” features that sq uare imperfectly with maximization-in-equilibrium – and should there­ fore, according to orthodoxy, be disregarded. It might be useful to take the behavioral data more at face value- to ask whether they are compatible with an approximate evolutionary equilibrium, and, if not, what the pace and direction of evolutionary change would be. Perhaps it would turn out that the orthodox economists’ difficulties in understanding the macro economy arise in large part from their insistence on imposing their notions of unbounded rationality on the behavior of the individual actors in their models – whereas real actors behave in highly patterned ways, often skillfully or according to complex routines, but with a rationality that is definitely bounded.

In summary, the analytic vantage point of an evolutionary theory reveals things from a different angle. After one gets used to that viewpoint, it turns out that much of what is seen is familiar. However, previously unnoticed features of the familiar objects be­ come apparent, and some objects once visible from the orthodox angle have mysteriously vanished. Were they real or only an illu­ sion? Things hitherto overlooked come into view- not merely dif­ ferent facets of familiar objects, but also entirely new objects. In all, the view seems clearer, as if the different angle had provided relief from distorting shadows. One hopes that others will come to appre­ ciate the view.

Source: Nelson Richard R., Winter Sidney G. (1985), An Evolutionary Theory of Economic Change, Belknap Press: An Imprint of Harvard University Press.

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