Publications Ulrich Witt
Abstracts
Selected Books
Individualistische Grundlagen der evolutorischen Ökonomik (Individualistic Foundations of Evolutionary Economics), Tübingen: Mohr-Siebeck, 1987, 210 pages.
This book has had some impact on the emerging discussions on an evolutionary approach to economics among German language economists. There have been several reviews of which some appeared in English. K.-H.Paqué from the Weltwirtschaftsinstitut in Kiel, for instance, wrote in Weltwirtschaftliches Archiv, Vol. 124, 1988, pp.381-2:
"This book .. aims at providing a coherent conceptual basis for the so-called evolutionary economics as an alternative to the neoclassical orthodoxy. To justify his focus on a new paradigm, the author sharply attacks neoclassical economics for its failure to address two major features of economic life: that many economic decisions by whatever agents are taken in the face of blatant uncertainty - not just risk - and that innovations in the broadest sense of the term - not just product and process innovations by firms - play a pervasive role as driving forces of economic development. Neoclassical economics typically accounts for these phenomena by simply squeezing them into the scope of static optimization over a set of (at best probabilistic) alternatives. In the author's view, such attempts are doomed to failure since the assumptions of the underlying mechanistic model miss fundamental aspects of human nature and behavior. ..... No doubt, this book provides quite a few insights into branches of science which economists usually ignore. In particular, it succeeds in bridging the gap between cognitive psychology and economics and thus helps to give the reader a more thorough understanding as to why, from a psychologist's standpoint, human behavior can hardly be narrowly described as the outcome of constrained optimization of whatever kind..."
Unfortunately, an English translation of the book, which had already been announced for a while on the basis of a contract signed with Cambridge University Press, faced serious delay and was eventually deliberately abandoned since, in the view of the author, an excitingly increasing research activity in evolutionary economics all over the world requested new responses and thus -- a new book to come.....
SMS - A Program Package for Simulation and Gaming of Stochastic Market processes and Learning Behavior, Berlin: Springer, 1982 (together with J.Perske) -- a research monograph in the series "Lecture Notes in Economics and Mathematical Systems", Vol. 202, 266 pages.
The preface states the purpose of this research monograph as follows:
"The FORTRAN program package SMS, Stochastic market Simulation, is intended for inquiring into
- the rather complicated dynamics of learning and adapting behavior in a complex imperfectly known stochastic market environment,
- the price- and quantity-processes in a monopoly market, resulting from alternative patterns of monopolist's behavior,
- the interfering effects which simultaneous, interacting learning and adapting behavior may have in monopolistic competition markets, where consumers search for acceptable offers.
Because of the complexity of the problems there seems to be no satisfactory way of exploring them analytically. This is not unusual in economics. Straight forward application of methods like experimental programming and Monte Carlo simulation, which we set out and document in detail here, however, seems to be rare. In our view this should be changed to broaden the understanding of the complex intertwining of systematic and random factors driving economic processes in a non-stationary environment. Therefore our purpose is not only to offer a program package for particular research tasks but also to demonstrate how a large simulation system can be constructed, handled, and integrated into microeconomic theory."
Special Journal Issues
Special Issue on "Universal Darwinism", Journal of Evolutionary Economics, Vol. 16, No 5, 2006
Abstract: The role of Darwinian concepts has been a matter of controversy in evolutionary economics from its very beginnings. The seminal approaches to this question taken by Veblen (1898), on the one hand, and Schumpeter (1912), on the other, reflect the opposing views, attributing and denying relevance to Darwinian concepts, respectively. In December 2004, the Max Planck Institute of Economics in Jena organized a workshop on "Evolutionary Concepts in Economics and Biology" that brought together people with different disciplinary background to reappraise the question in an interdisciplinary dialogue. More specifically, the problems discussed were: What precisely may be the relevant insights from evolutionary biology for evolution in the cultural sphere, particularly in the domain of economics? What role do cultural forms of adaptations play? What general, unifying insights and principles, if any, can be gained from the interdisciplinary dialogue?
The papers in this special issue try to provide answers to these questions from different points of view, resulting in different, and somewhat controversial, assessments.
Special Issue on "Economic Growth – What Happens on the Demand Side?", Journal of Evolutionary Economics, Vol. 11, No 1, 2001
Abstract: The collection of papers presented in this special issue emerged from a symposium on the topic of "Escaping Satiation – Increasing Product Variety, Preference Change and the Demand Side of Economic Growth", held at the Max-Planck-Institute in Jena in December 1997, and a session on "Economic Growth – What Happens on the Demand Side?" held at the meeting of the American Economic Association in Boston in January 1999. The common theme of both events was the interest in the much-neglected demand side phenomena related to, or constitutive for, the soaring economic growth of the past few centuries. The papers in this special issue have been selected with the intention to broaden our understanding of what aspects need to be considered when investigating changes in products and services, in consumer behavior, and in consumption patterns. These essays may help to identify what empirical observations deserve our attention in an attempt to explain what is happening on the demand side during the process of economic growth. Each of the papers looks into a different subset of aspects that become relevant if the above questions are seriously addressed. Jointly, the papers may be considered as contributing to an important, newly emerging research topic.
Contributions to Books
"Knowledge-based Entrepreneurship: The Organizational Side of Technology Commercialization", in: F. Malerba, S. Brusoni (eds.), Perspectives on Innovation, Cambridge: Cambridge University Press, 2007, 352 - 371. (together with C. Zellner).
Abstract: New knowledge with commercial potential is continually created in academic institutions. How is it turned into economically valuable businesses? This paper argues that the transfer is an entrepreneurial process. To understand this, the actions and the constraints characteristic for the entrepreneurial reshaping of the division of labor must be recognized. In the case of knowledge-based entrepreneurship, specific constraints result from the peculiarities of scientific knowledge - epitomized by contrasting tacit and encoded knowledge. Scientifically trained labor is required for transferring both forms of knowledge. However, the mode of transfer differs crucially and shapes the organizational form of commercializing new scientific knowledge. [funded by the European Commission (FP6) Project: KEINS - Knowledge-Based Entrepreneurship: Innovation, Networks and Systems, Contract n.: CT2-CT-2004-506022]
"On Novelty and Heterogeneity" in: T. Lux, S. Reitz, E. Samanidou (eds.): Nonlinear Dynamics and Heterogeneous Interacting Agents, Heidelberg: Springer, 2005, pp. 123-138.
Abstract: Novelty and heterogeneity are two closely related issues. Heterogeneity is not only a result of the emergence of novelty which creates variety in any evolving system. Heterogeneous elements are also required as inputs for the recombination processes underlying the generation of novelty. However, while heterogeneity figures prominently in computational and agent-based economics and in complex adaptive systems analysis, novelty and its emergence are neglected topics. In order to make progress with the latter the paper starts with a discussion of how novelty is being generated both in the case of genetic novelty and that of mental novelty. For the case of mental novelty it is then shown that the bottleneck in our understanding of novelty is not the generation procedure proper, but rather the procedure by which our mind evaluates or interprets the outcome. On the basis of this distinction it is briefly sketched how, for different forms of novelty, the degree of novelty may be rank-ordered and how the limits to predictability in the context of novelty vary with that degree.
"Market Opportunity and Organizational Grind: The Two Sides of Entrepreneurship", Koppl, R. (ed), Advances in Austrian Economics, Vol. 6, 2003, pp. 135-151.
Abstract: In pursuing profit opportunities, entrepreneurs often use multi-person firms. Since employment contracts leave some discretion to the employees, organizational coherence requires that they are coordinated on the entrepreneurial business conception as their own frame of action. Accordingly, the entrepreneurial reorganization of production and trade implies two different coordinating tasks: the exploitation of market opportunities and the seeing through of the business conception in the firms' daily organizational grind. The former has been center stage in the Austrian school of economics. For the neglected latter task a cognitive theory is suggested which highlights an Austrian, or entrepreneurial, approach to the firm.
"Multiple Equilibria, Critical Masses, and Institutional Change: The Coup d'Etat Problem" in: S.Bowles, M.Franzini, U.Pagano (eds.), The Politics and Economics of Power, London: Routledge, 1998, 286-299.
Abstract: In this paper it is argued that multiple equilibria are a crucial concept for understanding the contingencies of societal evolution. Public choice theory has paid little attention so far to evolutionary phenomena. No wonder that it has largely failed to recognize the relevance of multiple equilibria. A striking example is the contractarians' argument for legitimizing the state's coercive power. Unlike the contractarians' own view it is shown that their basic argument - that anarchy can be overcome by collective consent to a social contract - presupposes the existence of multiple equilibria. To overcome anarchy the state's protective agency must be endowed by superior power to guarantee law and order. Precisely this, however, creates a new case of multiple equilibria expressed by the dilemma that the agency may be difficult to prevent from usurping ist power in the private interest of ist personnel. From a historical point of view, the existence of multiple equilibria here is quite obvious. Usurpation of state power is a serious problem in many, thought not all, states.
"Bounded Rationality, Social Learning, and Viable Moral Conduct in a Prisoners' Dilemma" in: M.Perlman, E.Helmstädter (eds.), Behavioral Norms, Technological Progress and Economic Dynamics: Studies in Schumpeterian Economics, Ann Arbor: Michigan University Press, 1996, 33-49.
Abstract: Conditions under which the clash of rationality and morality, as epitomized by the prioner's dilemma, can be overcome are explored within an evolutionary approach. Starting from a reinterpretation of bounded rationality, the role of social learning processes is discussed. Interactions are assumed to take place in local neighborhood structure. Provided moral behavior is associated with aggressive response to defection, imitation can be shown to lead to morality, i.e. cooperative behavior, to be a viable strategy in a prisoner's dilemma in certain settings.
"Moral Norms and Rationality within Populations: An Evolutionary Theory" in: J.C.Pardo, F.Schneider (eds.), Current Issues in Public Choice, Aldershot: Edward Elgar, 1996, 237-256.
Abstract: Social cognitive learning theory is adapted into a game theoretic context in a way which may help to reframe the tensions between rationality and morality. For the archetype of a rationality puzzle - the prisoner's dilemma - a modified representation is given which accommodates for evolution in the sense of a social learning process. Conditions are derived on this basis under which the dilemma can be overcome through collective compliance with learnt rules of conduct. The paper relates to ideas on societal evolution which have been launched by the late Hayek and models some core elements of a corresponding theory.
"Endogenous Change - Causes and Contingencies", Advances in Austrian Economics, New York: JAI Press, Vol. 1, 1994, 105-117.
Abstract: In the paper different ways of approaching economic change are characterized. Concern here is with endogenous change. A causal interpretation of endogenous change is suggested and the relationsships to the questions of freedom of choice (or will) and predetermination are discussed.
"Theory of Social Evolution: Hayek's Unfinished Legacy" in: J.Birner, R.Zijp (ed.), Hayek, Coordination, and Evolution, London: Routledge, 1994, 178-189.
Abstract: The hypotheses concerning cultural and socioeconomic evolution form a central part of the late Hayek's social philosophy. However, there was no time left to Hayek to actually conduct an analysis of socioeconomic evolution. The nature and significance of (tacit) collective rule learning and selective transmission of rules of conduct which he assumed is therefore unclear. Unclear, too, is the extent to which the spontaneous development of rules of conduct can avoid the emergence of social dilemmas. Where such dilemmas occur it may be incumbent upon individual intelligence to help figuring out how such development traps can be overcome. Unfortunately, the role of the individual in the group selection principle has not been defined by Hayek. All these issues, it is argued in the paper, need being clarified by the emerging evolutionary paradigm in economics, if there is to be a better founded theory of societal evolution in the future.
"Emergence and Dissemination of Innovations - Some Problems and Principles of Evolutionary Economics", in: R.Day, P.Chen (eds.), Nonlinear Dynamics and Evolutionary Economics, Oxford: Oxford University Press, 1993, 91-100.
Abstract:
Although there is a large variety of contributions to what has come to be labeled evolutionary economics little agreement has been achieved as to what the basic features of this approach are. The paper therefore proposes some basic standards by generalizing what might be considered the methodological and epistemological key concepts of any evolutionary theory.
"Turning Austrian Economics Into an Evolutionary Theory" in: B.Caldwell, S.Boehm (eds.), Austrian Economics: Tensions and New Directions, Boston: Kluwer Academic Press, 1993, 215-236.
reprinted under the titel "Schumpeter vs. Hayek: Two Approaches to Evolutionary Economics" in: G. Meijer (ed.), New Perspectives on Austrian Economics, London: Routledge, 1995, 81-101.
Abstract: Although two of the original protagonists of evolutionary thinking in economics - Schumpeter and Hayek - were born in Austria and educated in Vienna at almost the same time, Austrian economics and the evolutionary approach are usually considered to be two distinct and independent developments. The distinction is justified, yet there is also some common ground. It seems worthwhile, therefore, to examine in more detail why the two schools developed so differently and to reflect on whether matching the two lines of thought can yield a promising new research strategy.
"Subjectivism in Economics: A Suggested Reorientation", in: K.G.Grunert, F.Oelander, (eds.), Understanding Economic Behavior, Reidel Theory and DecisionLibrary, Dordrecht 1989, 409-431.
Abstract: The subjective nature of individual intentions, evaluations, and expectations is a major problem in the attempt to explain observable economic behavior. Yet it does not necessitate an aprioristic approach as it is argued by proponents of the "Austro-American" school. In fact, as this paper points out, such an approach, if it were to be consistent, would render economics a mere logic incapable of explaining any empirically observable behavior. As an alternative for coping with the subjectivism problem, a revival of the idea of a psychological foundation for the theory of economic behavior is suggested, and a brief outline is given of how results from recent psychological research can be utilized for economic explanations without interfering with the subjectivism problem.
"The Demsetz-Hypothesis on the Emergence of Property Rights Reconsidered", in: R.Pethig, U.Schlieper (eds.), Efficiency, Institutions, and Economic Policy, Springer, Berlin 1987, 81-93.
Abstract: The present inquiry into the conditions under which property rights emerge and suggests some revisions of a widely accepted view going back to a contribution by Demsetz (1967).
Journal Articles
"Output Dynamics, Flow Equilibria and Structural Change – A Prolegomenon to Evolutionary Macroeconomics", Journal of Evolutionary Economics, Vol. 18 (2), 2008, 249-260 (together with T. Brenner)
Abstract: In an evolutionary approach to macroeconomics, the market disequilibrium dynamics resulting from structural change need to be properly represented at the aggregate level. As suggested by the late F.A. Hayek, a suitable equilibrium concept required to this end as a frame of reference, is that of a flow equilibrium. The paper explores the corresponding flow dynamics that draw attention to variables not usually considered in macroeconomic theorizing. Using statistical estimates for these new variables for the West German manufacturing sector during the German unification process allows some important new insights on the relationships between structural change and macroeconomic performance.
"Observational learning, group selection, and societal evolution", Journal of Institutional Economics 4:1 (2008), 1–24.
Abstract: The core problem of any group selection hypothesis is the possibility that pro-social individual behavior contributing to a selection advantage for the group as a whole is potentially subject to free-riding. If group behavior and, hence, the conditions for group selection change through imitation and migration between groups, as argued in Hayek’s theory of societal evolution, the explanation of group selection needs to account for the individuals’ cognitively reflected motivation to adopt pro-social behavior in the face of free-riding. To do so a game-theoretic model is suggested that incorporates observational learning as a mechanism of acquiring, and choosing between, strategies.
"Firms as Realizations of Entrepreneurial Visions", Journal of Management Studies, 44 (7), 2007, 1125-1140.
Abstract: In the debate on why firms exist, the question of who chooses between firms and markets and on what basis is rarely addressed. This paper argues that the choice is a core element of the entrepreneurial pursuit of visions or conceptions of business opportunities. To successfully organize resources into the envisioned businesses – be it via firms or markets – resource owners must be coordinated on the entrepreneur’s conception of the business and be motivated to perform properly. To solve the dual problem, the organizational form of the firm offers the entrepreneur unique advantages not feasible under the organizational form of markets.
"How problems of organizational growth in firms affect industry entry and exit.", Revue de l'Observatoire Francais des Conjonctures Economiques, June 2006, 47-62 (together with G. Buenstorf).
Abstract: Many newly emerging industries show similar patterns of development regarding entry and exit dynamics. This paper argues that several features of exit and new entry into industries through diversification and spinoff formation can be related to problems arising within firms when their organizations grow during the industry's life cycle. Drawing on earlier work, the growth-induced learning and coordination problems of the firms are outlined and their impact at the industry level is discussed.
"'Production' in Nature and Production in the Economy - Second Thoughts About Some Basic Economic Concepts", Structural Change and Economic Dynamics, 2005, Vol. 16(2), 165-179.
Abstract: If production means generating output by application of specific inputs, then production is a ubiquitous phenomenon in nature. This observation invites a double comparison. First, physical production processes in nature can be compared to those in the economy. The differences highlight cumulative changes in technology which explain how specific modern forms of human production have become feasible through cultural evolution. Second, such a 'naturalistic' perspective on production can be compared to, and sheds new light on, the remarkably different perspective in economics which interprets production not as physical processes, but as a problem of human social interaction and coordination.
JEL: A12, B12, B14, B51, B52, D24, O13, O14
"Network-Induced Oscillatory Behavior In Material Flow Networks And Irregular Business Cycles", Physical Review E 70, 2004, 056118, 1-6 (together with D. Helbing, S. Lämmer, T. Brenner).
Abstract: Network theory is rapidly changing our understanding of complex systems, but the relevance of topological features for the dynamic behavior of metabolic networks, food webs, production systems, information networks, or cascade failures of power grids remains to be explored. Based on a simple model of supply networks, we offer an interpretation of instabilities and oscillations observed in biological, ecological, economic, and engineering systems. We find that most supply networks display damped oscillations, even when their units - and linear chains of these units - behave in a nonoscillatory way. Moreover, networks of damped oscillators tend to produce growing oscillations. This surprising behavior offers, for example, a different interpretation of business cycles and of oscillating or pulsating processes. The network structure of material flows itself turns out to be a source of instability, and cyclical variations are an inherent feature of decentralized adjustments.
"Arms and the Man: World War I and the Rise of the Welfare State", Kyklos 57, 2004, 475-504 (together with L. Dudley).
Abstract: Why did peacetime government shares of total spending double in a number of Western economies between 1910 and 1938? The widely separated dates for the introduction of universal manhood suffrage and the evidence of a rise in protection during the inter-war period indicate that neither democracy nor globalization can explain this development. This paper reexamines two other explanations, namely, (1) a shift in the demand for public goods and (2) a war-induced willingness to share with one's fellow citizens. By introducing into Schelling's (1978) Multi-Person Dilemma a learning game whose payoffs change endogenously, we provide theoretical explanations for this transformation. We then test the resulting propositions with data on public spending as a share of GNP for the U.S., Canada, the U.K., Germany and Denmark, from the 1870s to the 1930s. In each case, we find no unit root but a break in trend, a result shown to favor explanation (2) over (1).
"On the proper interpretation of 'evolution' in economics and its implications for production theory", Journal of Economic Methodology, 11(2,)2004, 125-146.
Abstract: How relevant is the notion of evolution for economics? In view of the paradigmatic influence of Darwinian thought, several recently advocated interpretations are discussed first which rely on Darwinian concepts. As an alternative, a notion of evolution is suggested that is based on a few, abstract, common principles which all domain-specific evolutionary processes share, including those in the economy. A different, ontological question is whether and, if so, how the various domain-specific evolutionary processes are connected. As an answer, an evolutionary continuity hypothesis is postulated and its concrete economic implications are discussed exemplarily for the theory of production.
"Generic Features of Evolution and its Continuity -- A Transdisciplinary Perspective", Theoria 18 (48), 2003, pp. 273-288.
Abstract: Evolution is thought to occur in many disciplinary domains. Because of the intellectual attraction of the neo-Darwinian theory of evolution, evolutionary processes in other domains are often conceptualized in terms of that theory. However, as explained, such a heuristic strategy is neither necessary nor is it always helpful. An attempt is therefore made to identify generic features of evolution which transcend all domain-specific characteristics. Epistemological, conceptual, and methodological implications are discussed, and the ontological question is raised how non-biological evolutionary theories can be accommodated within the Darwinian world view of the modern sciences.
JEL: A12, B25, B40, B52
Keywords: Darwinism, Emergence, Evolution, Evolutionary Ontology, Novelty
"Games with Frequency-Dependent Payoffs", International Journal of Game Theory, 31, 2002 (Oct. 2003), 609-620 (together with T. Brenner and R. Joosten).
Abstract: Games with frequency-dependent stage payoffs (FD-games), are infinitely repeated non-cooperative games played at discrete moments in time, called stages. The stage payoffs depend on the action pair actually chosen, and on the relative frequencies with which all actions were chosen before. We assume that players wish to maximize their expected (limiting) average rewards over the entire time-horizon. We prove an analogy to, as well as an extension of the (perfect) Folk Theorem. Each pair of rewards in the convex hull of all individually-rational jointly-convergent pure-strategy rewards can be supported by an equilibrium. Moreover, each pair of rewards in same set giving each player strictly more than the threat-point-reward, can be supported by a subgame-perfect equilibrium. Under a pair of jointly-convergent strategies, the relative frequency of each action pair converges in the long run.
Keywords: frequency-dependent payoffs, limiting average rewards, jointly-convergent strategies
"Myopic behavior and cycles in Aggregate Output: A Note on the role of correlated quantity adjustments", Jahrbücher für Nationalökonomie und Statistik, Vol. 222, 2002, 366-376 (together with G.Z. Sun).
Abstract: In pursuing their plans economic agents regularly have to adjust their pacing of orders, production, and deliveries in unanticipated ways. Information constraints turn many of these adjustments into myopic reactions to accelerations/decelerations observed in the activity level of suppliers and/or customers. For analyzing the resulting dynamics, this note suggests a macroeconomic model derived from the idea of representing the adaptive interdependencies in terms of a system of integrated service channels. It sheds new light on what happens in stages of strained/exhausted production capacity and implies the possibility of cycles in aggregate output due to imperfectly synchronized production processes.
"International Co-movements of Business Cycles in a 'Phase Locking' Model", Metroeconomica, Vol. 53, 2002, 113-138 (together with T.Brenner and W.Weidlich).
Abstract: The possibility of co-movements in the cyclical variations of aggregate output in different countries has received increasing attention in recent years. The present paper derives sufficient conditions for the occurrence of persistent co-movements in the mean processes of aggregate economic variables of different countries, an effect called 'phase-locking'. The fact that the 'phase-locking' effect results under fairly elementary assumptions may be taken to challenge the sophisticated theoretical speculations about the international transmission of business cycles. International co-movements may simply be due to a 'technical' effect which is generic to interrelated cycling dynamic systems.
"Between Appeasement and Belligerent Moralism: The Evolution of Moral Conduct in International Politics", Public Choice, Vol.106 (3/4), 2001, 365-388.
Abstract: What are the conditions for 'moral' conduct in international politics to be viable? This question is explored by modeling regional conflicts as a two-stage game in which imitation of other countries' strategies and public opinion formation processes are assumed to have an impact on a country's strategic choice. The results derived by using the notion of an evolutionary stable strategy point to some very special conditions for moral conduct to emerge and survive, a fact that may explain the historical finding that there have been rather rare periods during which peaceableness did indeed prevail in international politics, at least at a regional level.
"Learning to Consume - A Theory of Wants and Demand Growth", Journal of Evolutionary Economics, Vol.11/1, 2001, 23-36.
Abstract: The theory of economic growth takes little notice of what is happening on the demand side of the markets so that ever more goods and services can be sold. In order to make progress, this paper revives a classical notion in economics, the concept of wants, and re-casts it in terms of a behavioral theory. Hypotheses are discussed concerning the wants people pursue, the changes in these wants, and the corresponding consumption knowledge. The implications derived focus on why, in spite of the historically unique growth of per capita income in the modern economies, consumption has not been altogether satiated. In the suggested explanation, increasing variety of consumption items offered in the markets and increasing specialization of the consumers in their demand activities play a key role.
"Changing Cognitive Frames - Changing Organizational Forms: An Entrepreneurial Theory of Organizational Development", Industrial and Corporate Change, Vol. 9 /4, 2000, 733-755.
Abstract: This paper discusses the notion of development in firm organizations on the basis of a comparison with ontogenetic phenomena in nature and offers a behavioral foundation that highlights in particular the impact of bounded rationality, cognition and social learning. On this basis the paper explores the role of entrepreneurship and its cognitive underpinnings, particularly with regard to the nucleus (multi-person) firm, i.e. a newly started entrepreneurial business. If the entrepreneurial venture is successful and grows, the increasing business volume requires that the firm organization also be expanded. Its size then sooner or later reaches a stage where the cognitive underpinnings of the firm change qualitatively in a way that forces the firm into major restructuring. At this point developmental paths can branch off in quite diverse directions, some of which are briefly highlighted.
"Bioeconomics as Economics from a Darwinian Perspective", Journal of Bioeconomics, Vol. 1, 1999, 19-34.
Abstract:
Bioeconomics -- the merging of views from biology and economics -- on the one hand invites the ,export‘ of situational logic and sophisticated optimization developed in economics into biology. On the other hand, human economic activity and its evolution, not least over the past few centuries, may be considered an instance for fruitfully applying ideas from evolutionary biology and Darwinian theory. The latter perspective is taken in the present paper. Three different aspect are discussed in detail. First, the Darwinian revolution provides an example of a paradigm shift which contrasts most significantly with the "subjectivist revolution" that took place at about the same time in economics. Since many of the features of the paradigmatic change that were introduced into the sciences by Darwinism may be desirable for economics as well, the question is explored whether the Darwinian revolution can be a model for introducing a new paradigm in economic theory. Second, the success of Darwinism and its view of evolution have induced economists who are interested in an evolutionary approach in economics to borrow, more or less extensively, concepts and tools from Darwinian theory. Particularly prominent are constructions based on analogies to the theory of natural selection. Because several objections to such analogy constructions can be raised, generalization rather than analogy is advocated here as a research strategy. This means to search for abstract features which all evolutionary theories have in common. Third, the question of what a Darwinian world view might mean for assessing long term economic evolution is discussed. Such a view, it is argued, can provide a point of departure for reinterpreting the hedonistic approach to economic change and development. On the basis of such an interpretation bioeconomics may not only go beyond the optimization-cum-equilibrium paradigm currently prevailing in economics. It may also mean adding substantial qualifications to the subjectivism the neoclassical economists at the turn of the century were proud to established in the course of their scientific revolution.
"Do Entrepreneurs Need Firms? A Contribution to a Missing Chapter in Austrian Economics" , Review of Austrian Economics, Vol. 11, 1998, 99-109.
Abstract: In popular understanding, firms and entrepreneurs are intimately connected: entrepreneurs without firms are rare exceptions and vice versa. Curiously enough, economic theorizing has not taken much interest in that relationship. Theories focusing on the entrepreneurial element in the economy, in particular the contributions to the Austrian tradition, have paid hardly any attention to the role of the firm, while the various theories of the firm have largely disregarded the role of the entrepreneur. In this paper an attempt is made to develop the missing Austrian approach to the firm, i.e. an entrepreneurial theory of the firm.
"Imagination and Leadership: the Neglected Dimension of an Evolutionary Theory of the Firm", Journal of Economic Behavior and Organization, Vol. 35, 1998, 161-177.
Abstract: Bounded rationaltity prevents humans from tracing all action plans that could, in principle, be imagined. In the present paper, individuals' partly socially-shaped cognitive frames explain which action plans do gain attention. This provides the basis for a new entrepreneurial theory of the firm where 'business conceptions,' which underlie any entrepreneurial venture, play a key role. Coordination and motivation of the firm members can be achieved - and opportunism be held down - if through 'cognitive leadership' the entrepreneur succeeds in implementing and defending his own business conception as a tacit cognitive frame collectively shared within the firm.
"Self-Organization and Economics - What is New?", Structural Change and Economic Dynamics. Vol.8, 1997, 489-507.
The Theory of self-organization, discussed recently in the sciences, provides an abstract, general description of evolutionary processes. This paper argues that it is also of some relevance to economics. Insights into the functioning of dissipative systems - the basic unit of self-organization - can shed new light on the economic theory of the means of production and long-term growth. Moreover, as the economic counterpart to self-organization, the classical 'invisible hand' conjecture concerning the self-regulation capacity of markets is incomplete. Self-organization theory suggests to extend it to account for the self-amplifying features of innovative change in the market.
"'Lock-in' vs. 'Critical Masses' -- Industrial Change Under Network Externalities",International Journal of Industrial Organization, Vol. 15, 1997, 753-773.
Abstract: Where increasing returns to adoption play a role in the diffusion of a new technology, technological "lock-in" is now often claimed to occur. However, this result, and the modeling approach that produces it, are problematic. Further innovations could never have a chance of disseminating, if "lock-in" had occured in the diffusion process of earlier innovations. Yet, in reality, industrial change does not come to a halt. The paper offers a discussion of the apparent paradox. From an alternative modeling approach conditions are derived under which a newly introduced technology can successfully disseminate in the market despite existing network externalities.
"The Hayekian Puzzle: Spontaneous Order and the Business Cycle", Scottish Journal of Political Economy, Vol. 44/1, 1997, 44-58. reprinted in: B. Bouckaert, A. Godart van der Kroon (Hrsg.) Hayek Revisited, Cheltenham: Edward Elgar, 2000, 72-86.
Abstract: A distinction is often made in F.A.Hayek's oeuvre between his earlier enquiries into the theory of capital and the business cycle and his later work on social philosophy and spontaneous economic order. The paper argues that these phases are based on two different, and basically incompatible, research paradigms -- general equilibrium vs. the dynamics of learning and expectations formation. Apparently running into troubles with his general equilibrium approach, Hayek abandoned business cycle research and never attempted to integrate it with his later thought. The paper therefore reconsiders the role of cyclical economic fluctuations within a theory of spontaneous economic order.
"A 'Darwinian Revolution' in Economics?", Journal of Institutional and Theoretical Economics,Vol. 152, 1996, 707 - 715
Abstract:
In discussing the potential and future directions of an evolutionary approach to economics it may be time to raise a provocative question: can evolutionary thought ever be expected to result in something like a "Darwinian revolution" in economics? If, as may be argued, chances are not too bad, then another question arises and is explored in some detail in the present, programmatic, paper: what major changes would be implied by such a revolution?
"Innovations, Externalities, and the Problem of Economic Progress", Public Choice, Vol. 89, 1996, 113-130.
Abstract: In modern industrial societies innovativeness is seen as a source of economic growth and welfare increases. Following this assessment economic research presently focusses almost exclusively on the question of how to elicit innovations. Yet innovative economic activities have always also meant losses, sometimes even hardship, to some members of society, and incalculable risks. The present paper tries to develop a more balanced picture by acknowledging these less pleasant implications. Whether, and under what conditions, the permissive regime which modern societies have adopted towards innovations can be justified is discussed within the framework of a contractarian approach.
"Evolutionary Concepts in Economics", Eastern Economic Journal, Vol. 18, 1992, 405-419.
Abstract: An attempt is made to outline some basic concepts of an evolutionary approach to economics. This approach focusses on economic and social change, on the emergence of novel ways of running the economy, on becoming rather than being. Particular emphasis is put on those causes of change which originate from the very activities of the agents whose behavior economic theory is concerned with - hence the notion of endogenous change. It has been shown how hypotheses on the respective, innovative, activities which account for the epistemological problems implied by novelty can be developed. Considerations relating to these problems suggest, it has been argued, that attention be paid to population thinking, a typical attitude of theories dealing with evolution. Two generic features resulting from such a perspective, frequency-dependency and selection effect, have been explored together with their common ground in the notion of replicator dynamics. Finally, the relevance of these ideas for reappraising, within an evolutionary approach, the classical notions of competition, the coordinating power of markets, and the long-run tendencies in the economy have been discussed.
"The Endogenous Public Choice Theorist", Public Choice, Vol.73, 1992, 117-129.
Abstract: Public choice theory has effectively explored defects in collective action and political processes. However, little attention has been given to the fact that any recommendations as to how to improve the situation can only be realized on the basis of precisely those defective institutions. What turns up here can be identified as a problem of self-reference. Normative contributions by Buchanan and Hayek may serve as an example. In order to clear up the seemingly paradoxical situation, "endogenization" of the public choice theorist within an extended theory is suggested. A straight-forward extension is briefly outlined.
"Economics, Sociobiology, and Behavioral Psychology on Preferences", Journal of Economic Psychology, Vol. 12, 1991, 557-573. reprinted in: G.Hodgson (ed.), Economics and Biology, The International Library of Critical Writings in Economics, Aldershot: Edward Elgar, 1995.
Abstract: Economists have become increasingly interested in hypotheses from sociobiology as a source of inspiration for filling gaps in the economic model of behavior. To avoid borrowing eclectically and arbitrarily from neighboring disciplines, this paper attempts to outline in a systematic way the similarities and differences between the approaches taken in economics and sociobiology. In doing so, special attention is given to an empirical theory of preferences that is lacking in economics. Here, inspiration from sociobiology would seem to be particularly useful. The considerations in the paper suggest that sociobiological arguments may indeed be helpful, albeit at a very elementary level only. A more comprehensive theory cannot ignore the influences of innate learning mechanisms in higher living beings. An elaborated theory of preferences in economics will have to acknowledge and incorporate insights from behavioral psychology.
"The Evolution of Economic Institutions as a Propagation Process", Public Choice, Vol. 62, 1989, 155-172. reprinted in: G.Hodgson (ed.), The Economics of Institutions, The International Library of Critical Writings in Economics, Aldershot: Edward Elgar, 1994.
Abstract: Based on some notions from recent game theoretic approaches to explain the emergence of institutions, a model is put forward which implies some generalizations and extensions. First, the evolution of institutions is interpreted as a diffusion process. This interpretation provides a general formal framework to cover both, the case of strategic and that of non-strategic interaction. Second, different forms of interdependency effects between the individuals involved are identified as making the crucial difference between the case where institutions emerge spontaneously in an unorganized form and the case where they do not.
"How Transaction Rights Are Shaped to Channel Innovativeness", Journal of Institutional and Theoretical Economics, Vol. 143, 1987, 180-195.
Abstract: In the huge literature on 'new institutional economics' transactions costs are usually considered under a legal regime of free trade. In a historical perspective, however, such a regime is the exception rather than the rule - free trade has been constrained in diverse ways by regulating who is entitled to make transactions with whom. Such restrictions on transaction rights do not only impinge upon current transaction costs of the parties involved. As is explained in the paper, by channeling innovativeness, the way in which transaction rights are regulated significantly shapes the set of transactions emerging in the future and, thus, economic development. Several implications of the role of transaction rights are discussed.
"Firm's Market Behavior under Imperfect Information and Economic Natural Selection", Journal of Economic Behavior and Organization, Vol. 7, 1986, 265-290.
Abstract: The economic natural selection argument claims superior survival performance for profit- maximizing firms. This assertion is investigated in a factorial simulation study assuming imperfect information. Three alternative models of firms' behavior are tested with respect to their ability to adapt to the observed realizations of non-stationary demand processes. Findings show that, in such a scenario, it is the difference in implicit learning and adaption capabilities rather than that in motivation or goals which affects survivability. Consequently, differential bankruptcy and disengagement rates vary with the peculiarities of the market environment. The tested assertion cannot generally be confirmed.
"How Can Complex Economic Behavior Be Investigated? The Example of the Ignorant Monopolist Revisited", Behavioral Science, Vol. 31, 1986, 173-188.
Abstract: The theory of economic decision-making behavior at the level of the organization is reexamined and developed, while allowing for more complex conditions than usually assumed. As an example, the problem of the initially ignorant monopolist is chosen as one who has to adapt in pricing, capacity, and output to the observed realization of a stochastic demand process. In the tradition of computer-based simulation approaches to the theory of the firm's behavior, an extended modeling procedure is proposed. The intricacies involved in the attempt to test hypotheses empirically on complex economic behavior are discussed, as well as test records obtained in laboratory experimentation with the ignorant monopolist's problem.
"Evolution and Stability of Cooperation Without Enforceable Contracts", Kyklos, Vol. 38, 1986, 245-265.
Abstract: Strict legal arrangements and sanctions against default are frequently absent in economic transactions. Even where such arrangements exist, enforcement costs are often prohibitive. Prisoner's dilemma logic shows that in these situations the incentive to default is strong. Nevertheless, although such transactions are common, default is rather rare. To explain this a theory of frequency dependent learning behaviour within groups of interacting agents is suggested. The approach can be generalized to indicate conditions under which many societal prisoner's dilemma situations can be prevented in the course of an evolutionary process.
"Coordination of Individual Economic Activites as an Evolving Process of Self-Organization", Economie Appliquée, Tome 38, 1985, 569-595. reprinted in: P.J.Boettke, D.L.Prychitko (eds.), Market Process Theories, The International Library of Critical Writings in Economics, Aldershot: Edward Elgar, 1997.
Abstract: An evolutionary approach to the economic coordination problem is suggested. Instead of the strong, neoclassical notion of perfect coordination represented by equilibrium points in the price-quantity-quality (pqq) space the notion of a corridor in the pqq-time space is developed. This corridor is established spontaneously by internal and external forces which control divergence. Within the corridor quite erratic individual pqq-movements are possible, but, due to those selectional forces, systematic changes occur if the bounds are exceeded. Some features of the alternative approach are outlined in a simple model and are compared with characteristics of self-organization phenomena in the natural sciences.
"Economic Behavior and Biological Evolution - Some Remarks on the Sociobiology Debate", Zeitschrift für die gesamte Staatswissenschaft (now Journal of Institutional and Theoretical Economics), Vol. 141, 1985, 365-389.
Abstract: This survey of the relationships between evolutionary biology and economics is particularly concerned with those aspects relevant to preference theory. It shows that (i) the attempt to rationalize altruism economically by demonstrating a reproductional advantage for individuals maximizing altruistic utility functions fails, (ii) a direct transfer of sociobiological explanations for altruism or other properties of individual preferences misses the fact of considerably weakened selection pressure on higher forms of human, e.g. economic, behavior (iii) innate elementary learning patterns and specific cognitive processes shape preferences, (iv) via this inherited basis, cultural factors become decisive for the evolution of preferences.
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