Finding ‘needles of good design in haystacks of possibility’

The Mecca of the economist lies in economic biology rather than in economic dynamics” – Alfred Marshall

Should economists use more evolutionary principles? According Eric Beinhocker, of the McKinsey Global Institute, author of the recent “The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics”, it’s a definite yes. The Economist reviews his book;

“The evolutionary formula—variation, selection and replication—is a formal, “all-purpose” principle, which can perform its magic equally well in either domain….

He argues that economists should abandon blackboard deduction in favour of computer simulation. The economists he likes do not “solve” models of the economy—deducing the prices and quantities that will prevail in equilibrium—rather they grow them “in silico”, as he puts it.

An early example is the sugarscape simulation done in 1995 by Joshua Epstein and Robert Axtell, of the Brookings Institution. On a computer-generated landscape, studded with “sugar” mountains, they scattered a variety of simple, sugar-eating creatures, which compete for this precious commodity. Some creatures move faster than others, some see farther, and some burn sugar at a higher metabolic rate than their rivals…

Surprisingly, the results of their myopic lives can be gripping. Even simple rules of behaviour result in collective patterns that are impossible to foresee yet easy to recognise. The sugarscape, for example, is quickly beset by a division between haves and have-nots, which bears a strong statistical resemblance to the distribution of income in real economies. These macro-results cannot be deduced from the micro-rules simulators write. Rather, they emerge from the interactions of the creatures in the model, just as “wetness” emerges from the interaction of water molecules, rather than being a property of the molecule itself…”

I’ll wait for a review by David Warsh before buying the book.

The Power of Biobabble
Creating Strategy in an Unknowable Universe
The adaptable corporation
Strategy as a Portfolio of Experiments
Also in the latest Economist, special report on “Japan's economy; As Japan emerges from an era of a zero interest rate, the country still needs to put more of its past behind it”


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This page contains a single entry by Paul published on July 20, 2006 2:18 PM.

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