Evolutionary economics studies how economies change over time through processes of innovation, selection, and adaptation. It treats the economy not as a system that settles into equilibrium but as an open-ended, historically evolving process. Its modern form emerged in the 1980s, with Richard Nelson and Sidney Winter's An Evolutionary Theory of Economic Change (1982), drawing on earlier work by Alfred Marshall, Thorstein Veblen and Joseph Schumpeter.

​

The field has broad intellectual roots, and a continuing debate concerns how far Darwin's principles of variation, selection, and inheritance can be generalised to social phenomena ("Generalised Darwinism").  Darwin’s basic insight has a lot of value when, for instance, considering the dynamics of economic agents competing in the market. In biological organisms evolutionary ‘fitness’ is maximised when they increase their chances of survival and reproduction. Similarly, Firms also have fitness, which is maximised when they increase their revenues and cut costs. Some scholars argue they apply to any complex population system, while others hold that economic evolution differs in important ways, for example because innovation is often intentional and knowledge can be deliberately copied. 

​

Evolutionary economics also overlaps with, but is distinct from, behavioural economics and evolutionary psychology, which examine why human decision-making departs from perfect rationality. An evolutionary perspective may be pertinent when questioning in assumption of 'homo economicus', a rational agent that choses those actions that yield the best balance of rewards versus costs. Real human beings behave in a very different way. Of course, it’s not enough to say that we fail to measure up to the lofty standards assumed by the rational choice theory. Evolutionary economists go further by understanding in what ways our behaviour deviates from ‘perfect rationality’ and why we evolved to behave in these ways. In the last couple of decades the fields of evolutionary psychology and behavioural economics have been making great strides in answering such questions.

​

An example of applied evolutionary thinking to broader economic questions can be found in literature concerning Path Dependence and cumulative causation, in that early events and choices can constrain later possibilities, often through increasing return. Paul David's account of the QWERTY keyboard and Brian Arthur's work on competing technologies show how a technology can become locked in because of an early lead. Gunnar Myrdal's earlier concept of circular and cumulative causation made a related argument about regional and social inequality: initial advantages set off reinforcing effects that widen gaps rather than closing them. These ideas challenge the assumption that markets reliably converge on a single best outcome. 

​

Evolutionary economic geography (EEG), developed by scholars such as Ron Boschma, Koen Frenken, and Ron Martin (based at the Geography department here in Cambridge), applies these ideas to space. It asks how new industries emerge in particular places, and how a region's existing capabilities, firms, and institutions shape its future. Key themes include relatedness and regional branching (new industries tend to grow out of related existing ones), lock-in and resilience, and the role of historical contingency in uneven regional development.

 

One major problem faced by the current research in  these two streams of evolutionary economics is that, because it has inspired research in many different areas in business studies and social science, these have become specialised and fragmented. Hence, forming a sufficiently developed core-theory may help to promote greater conversation in the field. Nevertheless, being an emerging wave of thinking, evolutionary economics has provided important insights. Firstly, it highlights that failure is as important as success - failure paves the way to economic prosperity by encouraging further developments and higher efficiency. Moreover, it teaches us that it takes time for a market, or a society, to adjust, evolve and develop, so being patient is as important as actively trying to improve the current economic system.

​

References:

​

https://econpapers.repec.org/article/aeaaecrev/v_3a75_3ay_3a1985_3ai_3a2_3ap_3a332-37.htm

https://www.jstor.org/stable/2234208

https://academic.oup.com/joeg/article-abstract/6/3/273/934947

https://link.springer.com/chapter/10.1007/978-0-585-35155-1_2

https://www.britannica.com/topic/evolutionary-economics

https://www.investopedia.com/terms/e/evolutionary-economics.asp#:~:text=Evolutionary%20economics%20is%20a%20theory,an%20American%20economist%20and%20sociologist.

https://www.economicshelp.org/blog/143308/economics/evolutionary-economics/

https://www.jasoncollins.blog/evolutionary-economics/