Evol. Inst. Econ. Rev. 3(1): 3–25 (2006)

ARTICLE

Redefining Evolutionary Economics
Makoto NISHIBE
Graduate School of Economics, Hokkaido University, Kita 9, Nishi 7, Kita-ku, Sapporo,
060–0809, Japan. E-mail: nishibe@econ.hokudai.ac.jp
Abstract
The aim of this paper is to redefine evolutionary economics in view of its negative andpositive identities. The negative identity is formed as a counterargument to neoclassicaleconomics with the hypotheses of optimizing agents and equilibrium, and this functions asa ‘vision’ that leads to the positive identity. According to the vision, the market is not auniversally designed or constructed system, but an autopoietic system or a spontaneousorder. In order to specify the positive identity, we examine the ontological/epistemological
double meanings of evolutionary economics that entail a recursive relation between
economy and economics. Evolutionary economics is redefined as the economics of a largescale, complex and uncertain economy that exists as a loosely connected system with amicro-macro loop structure, facilitated by such social institutions as rules or conventions,multi-layered buffers and routines. It also means the ‘analogical-evolutionary pluralist’
approach within economics as well as meta-economics in terms of the relationship between
economics and history of economics or other disciplines of science.
Keywords: the negative and positive identity, bidirectional causal relation, analogicalevolutionary pluralism, meta-economics, large-scale and complex system, multi-layered
adjustment, buffer, micro-macro loop.

Introduction: The Negative and Positive Identities of Evolutionary
Economics
Evolutionary economics is still in the early days of institutionalization and its systematicformulation has not been firmly established. That is all the more reason for evolutionary
economics to be strongly motivated to question its definitions, objects, domains,concepts and methods as in ‘what is it, and what and how does it study?’ Indeed, toanswer is not an easy task, but I believe it is worthwhile to try.
I do not mean by the title ‘Redefining Evolutionary Economics’ that clear definitions
are already given and we have only to reassess their validity. On the contrary, I want toexpress that there are no conclusive answers yet so we should keep on inquiring about
them. Moreover, the very nature of evolutionary economics might suggest that we cannot
JEL: B25, B41, B52.

M. NISHIBE

help but remain in an endless process of research without any final answer. In short, theprefix “re” means ‘again and again’ in the evolutionary trial and error process of defining
it in a positive sense.
The questions raised above instantly take us to another adjunct but most fundamental
one, ‘what is evolution, in particular, in socioeconomy?’ To give a convincing solution to
the question is the goal of this article and it can, as a result, establish a truly original
theoretical position of evolutionary economics. But this is apparently another hardquestion because, to define it properly, we need to use concepts such as selection,
heterogeneity, variation, diversity, complexity, and uncertainty, and venture into
ontological and epistemological investigations. So we may well go on a roundabout pathfor the time being, and will later on come back to the issues when considering thepositive identity of evolutionary economics.
1.

The Negative Identity of Evolutionary Economics as a Guide to ‘Vision’

A new theory is advocated in the course of criticism and objection to an old theory inorder to overcome its demerits and defects, in most cases, without any clear-cut
definitions of itself. Evolutionary economics is no exception. So it is much easier torecognize what kinds of criticism and objection have been raised when it first emerged.
In order to do so, we had better ask ‘what is not evolutionary economics?’ replacing theoriginal question of ‘what is evolution economics?’ Obviously, evolutionary economics
was formed through criticizing the neoclassical economics that was the orthodox
doctrine at the time and is even more so at present. Thus an initial identity ofevolutionary economics was negative in the sense that it is ‘not to be’ neoclassical.
Truly, negative identity is not sufficient to systematically establish a certain discipline ofscience. But it well explains the driving forces deep underneath to initiate and develop a
new project. And it is also, as we shall see below, crucial to understand the double
meaning of the term ‘evolutionary’ in evolutionary economics. The term ‘negative
identity’ seemingly has negative connotations, but it surely has positive theoretical
implications as in ‘negative freedom.’
This is true of the two founders of evolutionary economics, Marshall and Veblen. In
particular, it is easily seen that, when Veblen wrote his precursory article ‘Why is
Economics Not an Evolutionary Science?’ (Veblen, 1898), his criticism to the ‘realism’of neoclassical economics was based on his dissatisfaction and antipathy towards its
hedonistic view of human nature, as well as its Newtonian mechanistic view of themarket, although he reversely raised the same question of ‘what is not evolutionary– 4 –Redefining Evolutionary Economics

economics?’, not from the side of ‘evolutionary economics’ that did not yet exist, butfrom that of generic ‘economics’ actually meaning orthodox neoclassical economics. But
Veblen not only criticised the economics of those days but also showed an alternative
direction for evolutionary economics.
‘The economic life history of the individual is a cumulative process of adaptation ofmeans to ends that cumulatively change as the process goes on, both the agent and his
environment being at any point the outcome of the last process. His methods of life
today are enforced upon him by his habits of life carried over from yesterday and by thecircumstances left as the mechanical residue of the life of yesterday’ (Veblen, 1898).
On reading this passage, we find that rudimentary ideas were expressed to be further
elaborated as a cumulative process and even a bidirectional causal relation between
agents and the environment (a micro-macro loop). This case seems to indicate thatnegative identity functions as a guide to produce a stage of positive identity ofevolutionary economics. The negative identity is in this sense ‘vision’ as a ‘preanalytic
cognitive act’ (Schumpeter, 1954, p. 41) prior to the firm establishment of a positive
identity.
2.

The Negative Identity as Counterargument to Neoclassical Economics:
Static Views of the Market and Efficiencies with Rational Agents andEquilibrium

The modern neoclassical economics that originated from the Lausanne school
successfully formed the mainstream in the 20th century. Its central tenet is constituted by
two major hypotheses: ‘rational choice (optimization)’ on the decision-making of
economic agents, and ‘equilibrium’ on overall economic coordination. Adam Smith
explained in his Wealth of Nations (Smith, 1981) that, in a society where division oflabour is extensively observed, every individual pursuing his own interest as homo
economicus, led by an ‘invisible hand’, frequently promotes the public interest of thesociety more effectively than he really intends to. Many modern (in particularneoclassical) economists have considered the relation between the father of economics ofthe 18th century and neoclassical economics in the following way. Neoclassicaleconomics has developed Smith’s two profound metaphors of homo economicus and the‘invisible hand’ in his account on mechanisms of the market economy into the moresophisticated concepts of ‘optimizing agents’ and ‘equilibrium’, and given rigorous
demonstration of the essential problem of ‘how rationality of the market economy isattained’, so that neoclassical economics may well occupy mainstream status for its– 5 –M. NISHIBE

distinguished contribution. However, there are certain problems in this plausible
argument.
Let us take notice of the following point. Smith had comprehended the unintended
desirable result generated by the ‘invisible hand’ as development of productivity, in moreelaborated words, the development of labour productivity caused by improvement in ‘theskill, dexterity, and judgment with which its labour is generally applied’ (Smith, 1981,
Introduction and Plan). But, neoclassical economics bypassed the crucial point andsimply exchanged it to optimal allocation of scarce resources (called ‘Pareto efficiency’at present). The point is that, whilst it was the dynamic nature of labour productivity for
Smith that the market and division of labour should attain, it has been replaced withstatic efficiency by neoclassical economics. This difference, though it is frequently
overlooked, has great implications. Both sides advocate rationality of the market but
their arguments are based on completely different grounds.
For example, even if one attributes the collapse of the socialist planned economy tothe predominance of the market economy, the theoretical implications are quite distinct,
depending on which ground underpins such an argument. Static efficiency is not always
conducive to dynamic efficiency and vice versa. Whilst a capitalist market economy
induces severe economic fluctuations and produces unemployment and superfluous
capital, it has brought rapid economic growth and various new technologies and products
not only to advanced countries but also to developing countries. This is the fundamental
fact that we have lived through the 20th century. From this commonsense experience, itwould be reasonable to presume that the market economy promotes development inproductivity through innovation and technical progress more than optimal allocation of
resources as given, namely, dynamic efficiency more than static efficiency.
However neoclassical theory has never been refuted or falsified by such basic stylized
facts. Rather, the free market is admired only for its advantage in static efficiency andincentive compatibility ignoring its deficiencies, and this assertion is reflected inlibertarian policy ideals called laisser-faire and cheap governments. We thus admit thatneoclassical hardcore hypotheses—‘optimizing agent’ and ‘equilibrium’—which
exclusively focus on static efficiency are not only unnecessary but also prime obstacles
for recognizing the issue on Smith’s (and the classical school’s) dynamic efficiency.
Many approaches in evolutionary economics raise concerns about the contents andimplications of the central propositions of neoclassical economics, but this is not all. In
fact, they criticize the axiomatic hypotheses of ‘optimizing agent’ and ‘equilibrium’ fordrawing such propositions as unrealistic simplification.
– 6 –Redefining Evolutionary Economics

General equilibrium has been thought of as the most formally refined analyticalframework of neoclassical economics. It not only presupposes homo economicus, whomerely considers his own interest based on utilitarian motives, but also adds stronger
conditions that firms maximize profit and consumers maximize utility, viz., economic
agents optimize their objective function. It is assumed in general equilibrium that
economic agents regard prices fixed in the market as signals on which they cannot haveany effect, and decide production or consumption plans by calculating the solutions of
optimization problems with some constraint conditions. However, the rational agents canstay at optimal states all the time only under many implicit assumptions on human ability
in terms of data collection, cognition, computation, and execution. Such assumptions
correspond to perfect information (zero information gathering cost), infinite
computational capacity (zero calculation cost), and unlimited execution capability (zeromanagement cost). They are not only unrealistic but also untenable because they enable
the general equilibrium theory to exclude the viewpoints of evolution and complexity.
The problem of rational agents casts a shadow over not only the construction ofmarket theory but also its application. For, in the economic calculation debate from the
1920s to the 1930s, whilst Mises and Hayek of the Austrian school criticized acentralized planning economy as unfeasible because of the impossibility of economic
calculations, Lange and others claim that, assuming producers and consumers to berational agents, the model of feasible market socialism can be constructed as anapplication of the general equilibrium theory, and that it is more efficient than that of themarket economy. However, the very concept of static efficiency is in itself drawn fromassuming the unlimited capacities and unbounded rationality of agents. On the contrary,evolutionary economics endeavors to recognize the peculiar nature of human rationality
and capacities. To have bounded rationality and limited capacities as theoreticalpresuppositions is one of major characteristics common to evolutionary economics.
The general equilibrium theory further presumes that the market economy isunderstandable only in terms of equilibrium. Here the market is identified merely as a
price mechanism, and all transactions presumably take place only with the market
clearing prices formed at equilibria of equating overall demand and supply. In otherwords, the market for neoclassical economics is nothing more than a natural analogue
computer, which is more wasteful and inefficient than an artificial digital computer for
Lange, to calculate equilibrium prices so as to attain an optimal allocation of scarce
resources.
Evolutionary economics does not restrict itself to such a narrow functional view of the– 7 –M. NISHIBE

market. Rather, it tries to approach the market from fundamentally different angles toclarify the following points.
(i) Individual transactions take place here and there, today and tomorrow, in adecentralized manner, not at equilibrium prices that match the overall demand andsupply of all commodities, but at different non-equilibrium prices that satisfice bothbuyers and sellers.
(ii) The market is not a simple tool for calculation to show the price signals necessary toattain static efficiency, but a complex and dynamic social institution to make economic
behaviors meaningful and spontaneously produce socioeconomic order by embodying
various levels of rules, and the market exists only as a loosely and dispersively
connected network of individual buying and selling initiated by money owners.
(iii) The market is also a sort of sociopolitical field where the mutually colliding aims
and interests of different individuals are reconciled peacefully in the form of economictransactions.
I believe that these are the ontologically basic descriptions of the market for evolutionary
economics in contrast to those of neoclassical economics. Naturally, each approach ofevolutionary economics would put an emphasis on different aspects. But, common to
evolutionary economics is to conceive the market not as a universally designed orconstructed system, but an autopoietic system or a spontaneous order, self-generating
and self-organizing, in which its unique history (hysteresis) matters.
3.

Three Fundamental Questions for Positive Identity: Basic Concepts
and Objects, Methods and Pluralism and, Descriptive and Normative
Explanation

The aim of evolutionary economics is not only to become a new branch of economics
but also to form transboundary integration of various branches of heterodox economics
by proactively building upon their academic outcomes irrespective of the existing
borders between them. Moreover, it endeavors to open the door to not only such social
sciences as economics, sociology, linguistics and philosophy, but also such naturalsciences as physics, biology, geo-science, cosmic science and engineering. Evolutionary
economics thus seeks to form an association with a great diversity of disciplines beyond
the borders inside and outside of economics. We may say it has a huge potential to create
a new transdisciplinary social science by integrating the humanities and science. To
define evolutionary economics in such a broad sense might be adventurous. However, inJapan this is not just an empty wish, but a real ongoing process. A wide range of research– 8 –Redefining Evolutionary Economics

collaborations between evolutionary economics and other sciences has been realized in
the past decade.1) In order to make evolutionary economics as coherent and unique as
possible in such a situation, we need to give certain answers to the following basic
questions.
(1) What exactly do the central concepts “evolution” and “genes” used in evolutionary
economics mean?
(2) What objects and by what methods does evolutionary economics perform thetransdisciplinary study of socioeconomy?
(3) How does evolutionary economics not only explain the reality of socioeconomy atpresent but also describe it normatively or show a policy agenda for the future?
These questions stem from the most crucial question as to what evolutionary
economics is/ought to be. This signifies the positive identity of evolutionary economics
and represents its own unique characteristics not seen in other types of economics. The
first two questions inquire about the methodology of evolutionary economics,
particularly with regard to prime concepts and objects of study. Question (1) concerns
the different connotations of the same terms ‘evolution’ and ‘genes’ used in biology andeconomics, or, peculiar properties in economic evolution in contrast with biologicalevolution. Question (2) focuses on various fundamental aspects of methodology inevolutionary economics: ontology/epistemology as a domain of study, deduction/induction/
retroduction as methods of scientific discourse and discovery and its relation to otherfields of economics, history of economics and other disciplines of social and naturalsciences. Question (3) takes up the issue of its uniqueness, distinct from other fields of1)

Shiozawa (2004) has already reported that the U-mart project features a virtual futures market byusing computer simulation techniques. This is one example of transdisciplinary collaboration ofhuman and natural sciences in which natural scientists participate. Nishibe (2004), which is acollection of articles on such various topics as the framework of study, money, local currencies,
market, cognition of agents and complex patterns of world trade and life expectancy of firms, isanother example of collaborative research project by young researchers from both natural and social
sciences. It is also widely observed, as Shiozawa pointed out, that articles and presentations withmulti-agent simulations models whose authors include natural scientists on complex systems
propagated in the Japan Association for Evolutionary Economics (JAFEE). Agent-based simulation isa necessary method of study to deal with complex systems with non-linearity and chaos because it is
impossible to study a complex system exclusively depending on mathematical analysis. The articles ofHashimoto and Tominomori published in this issue are thought of as the products of transdisciplinary
research collaboration, both of which were first presented at the autumn conference with the main
theme of ‘Redefining Evolutionary Economics’ held in Sapporo on September 10, 2005, where six
guest speakers from the natural and social sciences approached the main theme from different angles.

– 9 –M. NISHIBE

economics, of evolutionary economics as factual study as well as normative or politymaking study.2)
4.

The Double Meanings of ‘Evolutionary’ as a Metaphor: The Recursive
Definition of Evolutionary Economics

Evolutionary economics is, most simply defined, such an approach as to study economy
and economics from an evolutionary perspective.
It is, on the one hand, a new way of the cooperative creation of theoretical networks ina pluralist framework in which many approaches, using the multisense term ‘evolution’as a key metaphor, endeavor to form a loosely coupled system of ‘division ofknowledge’ in order to ontologically identify and explain such economic objects of study
as money, market, exchange, finance and so on. We call this aspect of evolutionary
economics ‘analogical-evolutionary pluralism.’3) On the other, it comprises a new way ofunderstanding the recursive relation between economy and economics, which
systematically recognizes and explains both economy and economics as evolving ascomplex systems.
It is comparatively well recognized that various economic doctrines of major
economists, say, Smith, Ricardo, Marx, Keynes and Hayek affected, and, on occasion,transformed on a large scale mechanisms, structures, systems and tendencies ofsocioeconomy as objects of study through change of policies of governments, or changeof value, cognition and behaviors of individuals and groups of individuals. But, on thethe other hand, economics has always been affected not only by such internal factors as
the development and situations of theories, methodology and analytical methods, butalso by such external factors as change of economic environments, social situations andits related scientific interests. In other words, economics try to study economy as its
external object, but, as economics and economists actually belong to an economy and do
not transcend it, they are in reality internal observers. The relation between economy andeconomics is self-referential and makes a recursive loop. It is not a fully recognizedprocess, but rather an unconscious one. How evolutionary economics differs fromconventional economics is that the former tries to be fully aware of the bidirectionalcausal relation between economy (object) and economics (theory) from an evolutionary
perspective, and to appreciate the significance of variances and diversities for the2)

Let us say in advance that question (3) is completely untouched in this article because of constraintsof space. Nishibe (2005) provides comprehensive answers to these three questions.
3)
The reason why this is called as such will be explained later on.

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Redefining Evolutionary Economics

evolutionary process more seriously, and situates them in its own methodology.4)
To use the phrase ‘Names and natures often agree’, the name ‘evolutionary
economics’ symbolizes its unique natures arising from the fact that the adjective‘evolutionary’ attached to ‘economics’ expresses a double meaning. We can express suchcharacteristics in the two following cases:(a ) The case without a self-referential or recursive relation between economy andeconomics:‘Evolutionary economics that explains economy as an evolving system is in itself
evolving.’(b ) The case with a self-referential or recursive relation between economy andeconomics (Different types of brackets in a sentence signify economy’s subsumption of(evolutionary) economics in different ranks of reference.):‘Evolutionary economics that explains economy as an evolving system (evolutionary
economics that explains economy as an evolving system [evolutionary economics that
explains economy as an evolving system evolutionary economics that explains
economy as an evolving system is in itself evolving is in itself evolving] is in itself
evolving) is in itself evolving.’
Definition (b ) continues to extend itself indefinitely and cannot stop by itself because
it embraces infinite recursive loops within it. So we understand that it defines not adefinite description of state, a sequential procedure or process in order to makeeconomics evolutionary in the double sense. To put it differently, it expresses ‘knowing
how’ (practical knowledge), not the ‘knowing that’ (propositional/theoreticalknowledge) (Ryle, 1949), of the positive identity of evolutionary economics.
In this vein, evolutionary economics as thus defined is characterized as follows.
(1)

Researchers from different perspectives, by different approaches, endeavor tounderstand and explain the generation, preservation, development, and extinction ofsocioeconomic institutions, networks, knowledge and techniques while they share such
key concepts as institution, evolution and complexity for undertaking analogy, abduction
or retroduction (hypothetical inference) for the ontological identification of mechanism,
4)

Herrmann-Pillath (2001), in his extensive study on the ontological foundations of evolutionary
economics, assumes a bimodal ontology of a subject world of mind and an object world without it. He
contends that this is essential for establishing the reality of evolutionary economics (pp. 98–100). We
admit that there is a substantive similarity in terms of such ontological premise and its theoretical andepistemological implications (say, for pluralism) between his approach and ours when we argue on‘economy (object) and economics (theory) from an evolutionary perspective.’– 11 –

M. NISHIBE

structure, powers and tendencies in social domains.
(2)

Creation of a moderate academic association with diversity is encouraged in orderthat novelty may emerge from the coevolution of different approaches with mutualcompetition and cooperation, with a self-referential or recursive relation between
economy and economics. A great deal of diversity is necessary particularly in such acase where the economy as the object of economics evolves very rapidly in abruptchange, and conventional frameworks or theories of economics become obsolete at highspeed.
Here, the description (1) characterizes evolutionary economics as explaining‘economy as an evolving system’ in terms of objects and methods of study, as expressedin the first part of the definition (a ) as in ‘Evolutionary economics (...) explains economy
as an evolving system’, and the characterization (2) presents as its other aspect, as apractical solution in the situation with a recursive loop formed by economy andeconomics as given, the pluralist position for the discovery of novelty as well as
reproduction and development of academic disciplines, as expressed in the other part ofthe definition (a ) as in ‘Evolutionary economics (...) is in itself evolving’.
Evolutionary economics is thus, from the above definition of evolutionary economics,
the economics of an evolving economy as well as the theory of an evolving economics.
We refer to the latter side of evolutionary economics as ‘meta-economics’ as thiscorresponds to transcendental inquiry into economics.
5.

The Viewpoint of Meta-economics in the Relation between Economics
and History of Economics

Before exploring the implications of the pluralism of evolutionary economics mentioned
above in the next section, we shall consider the relation between economics and thehistory of economics from the perspective of ‘emeta-economics’ in this section.
First, let us turn to the problem of the bidirectional causal relation between economics
and the history of economics. The history of economics can provide building blocks forconstructing, and new inspirations for developing, modern economics since it studies thegeneration, development and extinction of a variety of schools and theories from past topresent. If innovation of doctrines is conceivable as inventing new combinations, withpartial modifications, of building blocks consisting of old doctrines, then the history of
economics will be indispensable in order to understand the genealogy and constellationof various doctrines and schools, and to generate a new theory that has never existed.
Evolutionary economics, being aware of this, advocates the ‘meta-economics’ approach– 12 –

Redefining Evolutionary Economics

to integrate economics and the history of economic theory form the evolutionary andself-referential viewpoint.
In fact, this approach has already been initiated virtually. The best example of the‘meta-economics’ approach in evolutionary economics is Hodgson’s Economics andEvolution (1993). In the book he presents his own taxonomy, making free use of
metaphors and abduction/retroduction, in order to classify a multitude of meanings of‘economic evolution’ into systematized categories and, by using retroductive abstraction,
to arrange such major economists as Smith, Malthus, Marx, Marshall, Menger, Walras,
Schumpeter, Veblen, and Hayek in the taxonomy so that a whole picture of economics isgiven in view of evolutionary ideas. The case indicates that meta-economics is aconcrete form of substantiation of the ideas of the aforementioned pluralism, analogicalevolutionary pluralism.
The task of the history of economics from the perspective of this approach is not tojustify the present state of economics by tracing back a lineal historical path, from past topresent, of economic doctrines, but rather to enable us to recognize that the collateraldiversity of economic schools and doctrines has continued to exist over time, and that
this fact suggests not only that there are also many potentially parallel states of affairs
which are not actually realized but might have been possible, and will be possible, butalso that a diversity of states of economy and economics in the future will be generated
through hybridizing them in a new form. This is what the ‘meta-economics approach’ ofevolutionary economics can add to conventional interpretation on the history of
economics.
Such a history of economics in a meta-economics approach does not justdiachronically describe the generation, development, and completion of a specific school
and doctrine. It rather seeks an integration of theory and history in order to study
different schools and doctrines synchronically as in a comparative history of economics,
or to scrutinize the difference and significance of specific theories and doctrines as in thehistory of economic theories, so that it might bridge the gap between theories and their
genealogy to search for a new combination of theories. Evolutionary economics, then,has a double meaning. It is economics to study socioeconomy in view of evolution, and,at the same time, ‘meta-economics’ to understand economics also in view of evolution
so that it enables us to understand the diverse doctrines of economics in the past as a sortof bundle of possibilities open to the future, just like gene pools for potential use in the
future presently scattered through the various species of biological organisms.
Put differently, it is necessary for economists, in order for economics to become a– 13 –

M. NISHIBE

systematic academic discipline, to observe actual phenomena in socioeconomic worlds
and ontologically identify real entities as the object of study by performing
abduction/retroduction (hypothetical inference). Suppose that economists’ eyes toobserve them metaphorically represent the ontology and/or epistemology adopted bydifferent approaches. The eyes can be directed to all aspects of the object from various
angles, and, symbolically, even from the surface to the deep layers and structures.
Accordingly, they have various directions and distances, occasionally crossing eachother. The role of evolutionary economics as meta-economics is to make us be keenly
aware of the diversity of those eyes and to integrate images of two-dimensional planes
cut off by different approaches into a three-dimensional solid of reality. The method ofstudy of meta-economics is thus different from the diachronically descriptive method in
the conventional history of economics, even if both study various schools and doctrines
from past to present.
A conventional history of economics tries to restage the genealogy of schools in
economics from past to present as faithfully as possible, but it is inclined to describe its
history as a process where economics gradually develops towards perfection as new
doctrines complement deficiencies and overcome the defects of old ones. As a result,
such a history is supposed to be constituted so as to describe a single path predeterminedon a time path, from past to present, developing towards the ideal end state, as if thehand scroll of history, whose contents had already been written but unknown to us at thestarting point, gradually becomes visible to our eyes as it is unrolled. Such a mono-linear
historic view has been dominant in the conventional history of economics, and the multilinear historic view describing divergence processes with coexistence relations ofvarious schools or doctrines has been mostly neglected. Consequently, the history of
economics often functions as legitimating the present configuration of various schools
and the consequent power relation among them, rather than providing building blocks forcreating a new theory or doctrine in modern economics. In this vein, it is not difficult toadmit that neoclassical economics is legitimated because of its present dominance since
it is, in a presumed mono-linear historic view, regarded as being most scientific andeffective after its survival as the fittest among other schools. The conventional history of
economics, because of the intrinsic nature of its own method, even unconsciously tends
to function as justifying the present situation.
In contrast, evolutionary economics as meta-economics sees diversity positively froma future-oriented perspective. The role of economics is not only to objectively/mindindependently observe socioeconomy from outside it and explain its structure and– 14 –

Redefining Evolutionary Economics

mechanism from an evolutionary perspective but also to become self-aware of its own‘social’ status and power as social practice within socioeconomy. Statements or
discourses of economics in themselves function as such internal effect factors as toconstitute part of reality by way of their influence on the behaviors and beliefs of humanagents, and, as a result, have the power to change the mechanism of an economic systemand effectiveness of economic policies. In other words, economists are not external
observers to an economic system but internal observers/practitioners who belong withinsocioeconomy and commit themselves to its constitution and evolution. Such selfreferential characteristics cannot be fully described in definition (a ), ‘Evolutionary
economics that explains economy as an evolving system is in itself evolving,’ so thatrecursive loops between economy and economics should be introduced in definition (b ).
In fact, the evolution of economics has affected the course of the evolution of theeconomic systems which economics tries to describe and explain. Evolutionary
economics’ self-awareness of this fact, expressed as a self-referential or recursive loop,
properly clarifies the practical meanings of economics to the socioeconomic domain. The
lack of this self-awareness of an epistemological recursive loop might be termed an
objectivist fallacy.
For instance, in conventional historical materialism in which economic base or
substructure determines ideological and idealistic superstructure, we may say that the
one-way causal relation of real economy to economics is only pointed out. But,
evolutionary economics in the absence of the objectivist fallacy recognizes the existenceof the opposite causal relation of economics to economy. It conceives not of aunidirectional but of a bidirectional relation between economy and economics. It
contends that, even though the effect of the first causal relation is stronger than that of
the second one ordinarily in human history, particularly in a capitalistic market economy,
the latter is not negligible, and is even stronger than the former occasionally.
As stated before, novelty emerges not from nothing, but phylogenetically from a new
combination, with certain necessary amendments and different implications, of modules
or parts of old beings. Evolutionary economics therefore needs to become more aware ofits self-referential property, endeavor to create a new theory by integrating building
blocks or modules used in various old theories, and form a better influential relation to
the real economy. Evolutionary economics seeks not conventional approaches for thehistory of economics that diachronically describe the ‘objective’ history of individual
schools, but meta-economics approaches attaching a higher value to awareness of where
it could lead economics in the future. Then, for that purpose, researchers in evolutionary– 15 –

M. NISHIBE

economics are asked to carve specific aspects out of the history of economics andreconstitute them from their proper visions on those issues inherent in the time and place
they inhabit, and, from such viewpoints, try to make cross-cutting comparisons ofvarious schools so as to reach a comprehensive understanding of economy andeconomics.
6.

The Implications of Analogical-Evolutionary Pluralism

Here we extensively examine the implication of the pluralism for evolutionary
economics discussed in section 4, referred to as ‘analogical-evolutionary pluralism’.
Methodological pluralism (Caldwell, 1982) describes the situation where many
schools or research programs with definitely different sets of concepts, methods of study,or proper domains compete and coexist. Its main problem can be explained as follows.
The diversity of different schools or research programs is just described as a given
situation of a certain discipline and justified for novelty or productive dialog among
members of alternative research programs, but there is no explanation of how suchdiversity is created in the first place, and why novelty and productive dialog are
generated without plunging into a state of incomprehension and mutual distrust.
Analogical-evolutionary pluralism can answer such questions. It is the kind ofpluralism where the common use, by different approaches and angles, of analogicalconcepts and analytical methods can activate multi-dimensional complex networks ofdiverse approaches to spontaneously and dynamically develop. Accordingly, thenetworks thus formed mediated by analogical concepts can enhance the collective
capability of associations for evolutionary economics to identify proper (butoverlapping) domains and ontology for study. Besides, as, with built-in self-referential orrecursive relations between economy and economics, both of them dynamically fluctuate
in a relatively independent way with such occasional upheavals or cataclysms as
revolutions or the collapse of systems, then a vast disparity between economy andeconomics is eventually created, so that the diversity of different schools or research
programs should become much larger than otherwise. This shuffling movement explains
why the initial diversity is created in the first place.
Pluralism in economics has recently been discussed extensively, and it is sustained inmany arguments. Bouwel (2005) identifies five distinct motivations for pluralism ineconomics: a) ontological motivation, b) cognitive limitations as a reason for plurality, c)historical and geographical situatedness as source of pluralism. d) pragmatic motivation,e) strategic motivation. For example, one of the arguments for b) is as follows.
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Redefining Evolutionary Economics‘Since no theory can consider all relevant factors in any particular economic context,
there is a strong prima facie case for theoretical pluralism. Different theories will often
be complementary rather than alternative, so that ‘to seek dominance for one theory over
all the others with the possible result that all the rival theories are extinguished amounts
to advocating scientific regress’ (King, 2004).
This can be interpreted as a reference to ‘meta-economics’. The complexity of
economic reality necessitates the complementarity, rather than substitution, of different
theories, and rivalry among them encourages an intentional better result of scientificprogress through an evolutionary process.
The motivations for ‘analogical-evolutionary pluralism’ may be summarized as‘ontologically and epistemologically evolutionary’, and in fact correspond to the
combination of a) through e). Each position is interpreted appropriately in evolutionary
terms: a) as ontological complexity and openness of evolutionary systems for objects ofour study, b) as ontological limitation or locality of cognition and calculation ofevolutionary agents for objects of our study, c) as ontological spatio-temporal diversityof evolutionary systems for objects of our study, d) as epistemological partiality andfallibility of different approaches in evolutionary economics, and e) as a strategic movein the meta-economic game of trying to dominate as a majority in a discipline based on
the ontological character of economics as a social science. Analogical-evolutionary
pluralism means not only a disciplinary framework of description and explanation, butalso the attitude and ethics of study in academia. Accordingly, the position forevolutionary economics with the double meanings of ‘evolutionary’ can give us the mostplausible and comprehensive accounts of motivation for pluralism in economics.
7.

On the Relation of Evolutionary Economics to Other Disciplines

Let us move on to the next issue on the relation of evolutionary economics to othersocial and natural sciences.
Evolution is conceivable in various stratified domains such as the spacesphere,
geosphere biosphere and humansphere, even in natural sciences. To directly import theconception of evolution in biology, in particular the neo-Darwinism presently dominant
in the field, into economics is rather more misleading than insufficient. In such a case,the peculiar characteristics in the social domain are easily lost. But we must also admitthat there might be unknown deep connections between different domains so that, forexample, the revelation of the evolution of the universe, the galaxy, the solar system andthe earth unraveled in the domains of spacesphere and geosphere must affect our– 17 –

M. NISHIBE

understanding of evolution in the biosphere and humansphere of the future. The principleof emergence, where new properties or entities emerge in the upper domain of the realworld that are not seen as nor reducible to those in the lower levels, also acts on theconception of evolution. Hence we must understand that the single universal concept ofevolution is not applicable to all the spheres, and that concepts of evolution are not only
multiple but are themselves evolving as emergent properties peculiar to the stratified
domains of our universe.5) It is indispensable for evolutionary economics to conduct a
meta-evolutionary approach by which we identify the appropriate concept of evolution
for the socioeconomic domain, with reference to various types of concepts of evolution
in the natural sciences. This is one of the reasons why evolutionary economics must seek
to integrate the humanities and sciences.
From the 18 th century to the 19 th century, economics had a substantial influence on
biology. The thoughts on evolution in the economics of Mandeville, Smith and Malthus
contributed to the birth of the Darwin’s theory of evolution (‘descent with modification’).
At the end of 19 th century, Veblen and Marshall made attempts to create evolutionary
economics or biological economics, though they only left the grand concept of aframework rather than its concrete contents. Nevertheless, economics in the 20th century
has developed by importing the concept or technique of such old physics in the past asclassical mechanics and thermodynamics. It is probably because, on the one hand,studies in theory of evolution had not fully ripened into maturity in those days and had
not yet come to have a big impact on economics, and, on the other hand, it was hard torecognize the evolutionary viewpoint accompanied with complexity and pluralism in the20th century that was swayed by the simple dichotomy of market vs. planning, or,
capitalism vs. socialism.
But the situation is changing now. Such various related fields in natural science ascomputing, cognition, artificial intelligence, artificial life, chaos, complexity, selforganization, and autopoiesis have greatly developed, and have had great influence on
economics. Moreover, cases where natural scientists participate in research into
evolutionary economics are increasing in number because the theory of evolution andcomplex system science has come to target not only nature but also society. On the other
hand, original deployment of evolutionary economics in evolutionary game theory,
experiment and simulation analysis has affected natural science. Besides, since thedefects in a state socialist planned economy as well as in a laissez-faire capitalist market
5)

For the evolution of evolution, see the discussion in the next section.

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Redefining Evolutionary Economics

economy had become quite clear by the end of the 20 th century, the 21st century will be
the time when polymorphic systems of socioeconomy are sought. Under suchcircumstances, evolutionary economics is now expected to be a discipline that
understands diversity as a bundle of possibilities open to the future.
Here let us examine Lawson’s assessment of evolutionary economics from ourviewpoints of meta-economics and analogical-evolutionary pluralism. Lawson (1997,
2003) argues that ontology should be more appreciated since modern economics
continuously neglects explicit ontological analysis because of its epistemic fallacy.
Particularly on evolutionary economics, Lawson (2003, ch. 5) further maintains that thisis also shown in the manner that evolutionary economics directly borrows evolutionary
concepts from biology to social theory. According to him, this easy transfer of a method
or framework from one realm to another takes places in the form of a universal approachwith natural selection models, irrespective of the different nature of the object of study.
He identifies five essential features of a general evolutionary model: population ofindividuals (P), variety generation (V), reproduction (R), selection mechanism (S) andthe degree of independence between V and S. Then he presents three kinds of PVRS
models, i.e., the neo-Darwinian PVRS model with V-S strictly independent, theLamarckian feed-backward PVRS model, and a feed-forward PVRS model. Although
Lawson admits all of these can actually exist in the biological realm, he insists that the
neo-Darwinian PVRS model representing the natural selection mechanism is nothing but
the one that evolutionary economists borrow from biology, and asks whether the PVRS
model can do anything more than the transformational model of social activity (TMSA)
that can already explain the nature of a social system as open and dynamic. His answer
to the question is no. He thus concludes that borrowing evolutionary concepts or models
of natural selection from biology into economics is of some use, but not more useful than
TMSA.
This whole argument seems to be developed to explain that such an endeavor
eventuates in an abductionist fallacy as epistemology is more appreciated than ontology.
I agree with his general diagnosis of the case of ontology and epistemology ineconomics, but not with his criticism of the alleged borrowing from evolutionary
biology. He tends to describe evolutionary economics in a narrow range so that he cancriticize it as a straw man. Evolutionary economics, as least in large part, neither
commits an abductionist fallacy, or, direct application of the neo-Darwinian type ofnatural selection without recognizing ontological differences between the biological andthe social realm, nor asserts validity of such a universal framework of analysis, denying– 19 –

M. NISHIBE

pluralism in economics. I rather suggest that evolutionary economics should, without
importing evolutionary concepts and ideas directly from biology, identify replicators andinteractors unique to socioeconomic domains. It is crucial, in so doing, that we use
metaphorical or retroductive abstractions of what we can learn from the recent
development of DNA studies, particularly after the complete determination of the humangenome sequence, reconsidering the transformation of the rigid view of gene
reductionism based on ‘nature vs. nurture’ into a more flexible idea of a Genome
Organizing Device (GOD) based on ‘nature via nurture’ (Ridley, 2003). In short,evolutionary economics is, and can be, much more widely defined than it is by Lawson.
8.

The Concept of Evolution and Genes in the Socioeconomic Domain

We explained in section 4 that evolutionary economics has a double meaning, in which
the term ‘evolutionary’ modifies both ‘economy’ and ‘economics’, and described its selfreferential character in the sense that evolutionary economics is a description both of
economy as an evolving social practice system on the object level, and of economics asan evolving social discourse system on the meta level. We examined the latter aspect ofevolutionary economics as meta-economics in section 5. We now turn to the former
aspect thereof.
The connotation of the term ‘evolution’ presently used is different not only fromreversible move or change, but also from irreversible growth or progress anddevelopment or unfoldment. While growth or progress means increase or incremental
change in quantity or quality desirable for people, as in GDP growth or technologicalprogress, development or unfoldment is interpreted as the gradual manifestation overtime of a predetermined future or end state. Evolution, even if it is an irreversible
process, does not assume a single pathway in development, nor teleology indevelopment. Before proceeding further to identify the meaning of social evolution, let
us first take a look at the recent development of biological evolution.
The human genome project was completed in 2003 and determined the sequences of
the 3 billion chemical base pairs that make up human DNA. It was found that the humangenome contains only 30,000 genes that code protein formation,6) occupying only 2% of
human DNA; the remaining 98% are related to the control of genes. However, thegenome of Escherichia coli (E. coli) is mostly used for coding genes; its number is
4,000. The difference seems to suggest that the central domain of biological evolution
6)

The number of genes has been corrected from 30,000 to 22,000 genes thereafter.

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Redefining Evolutionary Economics

has historically moved from that of genetic codes to determine the structure of protein, tothat of control of genes to determine when and where to use genetic codes in response toontogenetic growth of individual organisms or change of external environment, andfurther to that of adaptive ability to widen the diversity of the control of genes toincrease the tolerance level to the overall change of environments. Even though, as thegene-centric view contends, genetic mutation and natural selection are the central
mechanisms of evolution for a simple organism such as E. coli, in the case of a highly
complex animal like the human, multi-feedback networks formed by genes and proteinsfor control mechanism, sustaining a diversity of genes and adapting to various
environmental changes, are central in the driving forces of evolution (Kaneko andKodama, 2004). Now we must take account of the implication of the evolution of
biological phylogenetic evolution and, by using such meta-evolutionary abduction, try torecognize the even more complex nature of socioeconomic evolution.
A modern economic system that evolutionary economics has as its object of study ischaracterized as large-scale, complex and uncertain. While ‘large-scale’ denotes a large
number of agents in the system such as individuals and organizations, ‘complex’ implies
a wide variety and number of, whether linear or non-linear, interrelations andinteractions among many agents, mostly forming multi-layered networks ofinterdependencies. Here ‘uncertain’ means not only the undetermined character ofstochastic future events in prediction and expectation of agents, or in statistical laws, but
indeterminacy endogenously generated from mutual ignorance and the diversity ofinterpretations and recognitions that individual agents have with different cognitive
frameworks as to events or affairs from past to present under the condition of ignoranceof agents.7)
Methodological individualism has so far regarded an economic system as being in theharmonious state where optimal behaviors of individual agents are mutually coordinated.
But, as economic agents are faced with a limited capability for information collection,
information processing and execution in a large-scale economic system with complexity
and uncertainty, they draw upon routinized behaviors, conventions or social rules ofconduct in order to decrease the heavy loads imposed by continuous decision-making
and execution. Such situated rational agents with limited ability must have sufficient
hardwired cognitive and responsive frameworks built-in from the outset, but more
complex frameworks are a posteriori obtained and revised through learning or imitation
7)

See the next note for the meaning of ‘endogenous indeterminacy’ as mentioned here.

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M. NISHIBE

of behavioral rules and social institutions through actual interactions with other agents.
At all events, it would be observed that the whole pattern of decision-making and theactions of each agent form multi-layered nested structures of feedback and/or
feedforward mechanisms with different frequencies over time, for instance, from shortterm reflex actions to long-term deliberation or forecast. In this vein, it is important tounderstand that a large-scale and complex system is feasible only as a loosely connected
system with multi-layered buffers. Such buffers that consist of inventories (physicalbuffers) and money stocks (financial buffers) function as decoupling and informational
mechanisms on the multi-layered adjustment behaviors in terms of stocks of goods ormoney, capacities of production or credit, investments or depreciation in fixed capital,
and R&D and innovations with different time horizons (temporary, short-run, mediumrun, long-run and super long-run).8) Economic systems are apt to be regarded as
independent of other social, political and cultural factors, but, as the multi-layered nested
structures of decision-makings and the actions of each agent are complexly intertwinedwith such factors, the economic system cannot be separated from other systems. This
inseparable whole system is termed a ‘socioeconomic system’ that exists as an evolving
ecosystem where various systems, institutions and social rules coexist in complementary
and/or substitutive relations. The principle of socioeconomic evolution is different fromthat of biological evolution.
First, replication or heredity does not hold in socioeconomic systems in the strict sensethat genes as real entities exist in biological evolution. Rules, institutions andorganizations, routines or customs are regarded as quasi-genes that can endure andreproduce themselves for a fairly long time and are replicable, though without precision,
8)

Kichiji and Nishibe (2004), concretizing the general ideas of Nishibe (1996, 1998), Shiozawa (1990,
2004) by using agent-based simulation models, study the endogenous dynamics of the market systemformed as a dispersive network of transactions among agents, where 1) firms have the same structuresof ‘if-then’ rules of routinized behaviors for multi-layered adjustment in which firms increase (ordecrease) the production level if inventory vanishes (or exceed the threshold value), and increase (ordecrease) the price of products if the cumulative number of change in production in the same direction
exceeds the predetermined tolerance values, 2) they have the same values for all parameters except fordifferent threshold/values for inventories of finished goods, and 3) they are mutually ignorant of otheragents’ inner parameters. The combinations of different threshold/tolerance values signify thedifferent cognitive/responsive frameworks. So once all the initial parameters are set, agents show
different patterns of adjustments in terms of inventory/production as well as price formation overtime, which endogenously create the macro dynamic fluctuations of the system. This can be depicted
as a model for the market of a loosely connected system formed by interactions of agents with thedecoupling mechanisms of inventories and frequencies of price change that be explained here.

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Redefining Evolutionary Economics

but those equivalent to biological genes in socioeconomic domains are not materially
identifiable. They are not physical or chemical materials, but social things or relations
that can only exist on such platform institutions or communication media as language ormoney. Social quasi-genes, compared with biological genes, are much more abundantly
various and exist on every level of social domains. But even in biological evolution there
is still controversy over whether or not there is group selection, or, more generally,
multilevel selection contrary to the gene-centric view of evolution.
Secondly, variation of such quasi-genes does not arise in mutation or crossing but
more prompt drift as aberration from the norm or innovation occurring to such
purposeful behaviors as imitation and learning using language/sign or money ascommunication media. This case corresponds to the Lamarckian inheritance of acquired
characteristics in social domains. But knowledge is communicated more rapidly thaninheritance between generation through learning and imitation among individuals andgroups in markets, organization and communities. Thus Lamarckian evolution is further
extended in social evolution.
Hence, it is now clear that evolutionary economics need not adopt evolutionary
concepts in biology. In order for evolutionary economics to explain the emergence anddynamic movement of a system from behaviors of micro-level constituents or agents, it
should first search for a Darwinian, non-consummatory, phylogenetic approach without
embracing Dawkins’s gene reductionist position. Thus, evolutionary economics must,
unlike the neoclassical economics that confines replicators to the rational behavior ofselfish agents such as individuals and firms, 1) permit a wide range of stratified entities
of such quasi-genes as customs, routines, conventions, social rules, institutions andeconomic systems, 2) theoretically constitute multiple bidirectional causal relations
between the micro level of behaviors of agents and the macro level of the emergence ofrules, institutions and economic outcomes (a micro-macro loop), incorporating such
Lamarckian evolutionary factors as improvement/innovation though imitation/learning,and differentiation/diversification by division of labour/knowledge, and 3) depict theprocess where the social actions, positions and attributes of economic agents(individuals, firms and other groups and organizations) as interactors are selected
through interaction with the environment including those of other agents. Social macrosystems exist as multipolar and multi-layered structures (a multi-lattice structure) where
each constituent interacts horizontally with other constituents on the same level and isaffiliated with multiple constituents on the upper levels. Social evolution with theseproperties can be called ‘Lamarckian-Darwinian’, based on stratified realism as– 23 –

M. NISHIBE

ontological understanding.9)
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The concept of stratified ontologies (Lawson, 1997, ch. 6) is extremely important for evolutionary
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Redefining Evolutionary Economics

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