Preface The evolutionary perspective in economic analysis has been gaining significance since at least the early 1950s. Many new books and papers in journals devoted to this not essentially new, but much refreshed view of economic analysis appeared in the last decades. The evolutionary perspective opposes in many aspects the neoclassical view of orthodox economics, but there are some indications that both mainstreams of economic analysis co-evolve and each pertains to the best of the antagonist. I embarked on the research in evolutionary economics at the end of the 1980s. In the previous years, at the end of the 1970s and the beginning of the 1980s, I was engaged in general research on evolutionary processes, and particularly in developing the models of biological evolution of asexual, sexual-haploid and sexual-diploid populations. Some results were published but most of them are still unpublished, mainly due to my fascination with evolutionary perspective in economic analysis and preoccupation in that field in the last years. In February 1988 I was invited by Luc Soete and Gerald Silverberg to participate in the opening workshop of a new institute – Maastricht Economic Research Institute on Innovation and Technology, MERIT. I presented the paper on the role of diversity in evolutionary processes; the economic problems tackled in the workshop’s papers were essentially new to me. These few days are marked in my memories as my great personal economic education. My trip back to Poland, lasting over 15 hours, allowed me to think the whole matter over. I was waiting for the train in Köln for about two hours, and at that time the first, very unclear, idea on the possibility of applying my biological model to the analysis of economic problems came to me. During the long trip on the train from Köln to Wroclaw I worked out the details of the model, and within the next year I programmed the model and made the first, very promising computer simulations. After my return to Wroclaw I read very carefully the book by Richard Nelson and Sidney Winter on An Evolutionary Theory of Economic Change, which I had just got from Richard Nelson. No doubt that work of Nelson and Winter essentially shaped my stream of thoughts and helped me to see the junction between evolutionary ideas in economic analysis and my earlier research on general properties of evolutionary processes. Discussion with Gerald Silverberg in the next year, when I visited MERIT in November, encouraged me to continue my efforts and further develop the model. In the next two years I was engaged in making ‘cosmetic’ improvements of the model to make its behaviour more closely reflect reality and to investigate the behaviour of the model under extreme simulation conditions. In 1992, I decided to publish the first results of the simulation of the model, as I considered them promising and interesting (Kwasnicki and Kwasnicka, 1992). As I understood my work, it is still far from being complete, but I think the present book constitutes a whole and may contribute to the ongoing discussion on evolutionary economics. The model of industry behaviour and its simulation results, presented in the second part of the book, form the main body of the text. But economy and economic analysis are parts of the wider socio-cultural process, so I consider it necessary to place the model in a wider perspective. The first part of the book is devoted to more general problems (methodology, knowledge development, and a general view on cultural and social evolution) and readers not interested in those matters may go directly to the second part, which is devoted to industrial dynamics problems. To make the book as short, and as comprehensive, as possible, all the chapters tackle only the most important aspects of the related subjects. In fact, some chapters demand more detailed and wider consideration. I hope that I will do this in the future, but I am convinced that at the present stage of the model’s development it is enough to mark only the main thesis and general problems. Physics is frequently considered as the ideal and normative pattern of science. On the basis of this supposition many economists use the matured mathematical tools of physics and apply them almost directly in their description of the behaviour of social and economic systems. But social systems have their own peculiarities and it seems unjustifiable to make a direct application of the formal apparatus of physics to describe such diversified entities of human processes. I believe that economists may learn a lot from physicists, not through applying directly their formal apparatus but by applying their matured methodology of research to the study of social phenomena. So, in the first chapter I present a short description of conventionalism, which is in my opinion the prevailing methodology of research of contemporary physics and which seems to me to be very useful for economists and other social scientists. At the end of the chapter, I make a plea for the proper application of biological metaphor in evolutionary economics and the achievements of contemporary physics. Physics is the most developed of all contemporary sciences, especially if we think about the elaborated methodology of research, philosophical background and mathematics used. The other truth is that proper use of biological metaphors may be intellectually very fruitful. It seems that future development of theoretical economics should be based on a balanced application of current achievements of physics and biology, with concurrent efforts by economists to work out proper mathematical tools applicable to the description of economic phenomena. I believe that all evolutionary processes, starting from biological evolution, through cultural, social and technological evolutions, and ending in the development of our personal knowledge, have common, general properties. Knowledge is the basis for any human action and the evolution of ideas may be considered as the essence of human evolution. We may discuss much about the material evolution related to, for example, evolution of tools, technological evolution, and so on. But all material, tangible evolutions are based first of all on the evolution of ideas, that is, on our personal knowledge. In the second chapter, I present my personal view on knowledge development as an evolutionary process. Parallels, similarities and discrepancies between the knowledge development and the biological evolution are presented in this chapter. Economy and economic analysis are parts of the general process of knowledge development and the evolution of ideas. Cultural and social evolutions influence the development of economy as well as the development of economics, both being significant elements in social sciences. Therefore in the next chapter, I present a view on modes of knowledge development and I propose the so-called taxonomy of knowledge. I see the development of a human system as a set of waves of different frequencies. I am far from any deterministic vision of historical development and I greatly oppose the view that ‘history repeats’ itself. Development of any part of human activity is a unique, historical process, but it seems possible to point out a number of problems and questions faced by, and to be solved and answered by, any civilization and any society. The fundamental problems and questions have remained constant in a few thousand years’ history of human civilizations but the solutions and answers differ. In this chapter, a list of some categories of problems and questions related to cultural, social, economic and research spheres of human activity are stated. I do not pretend that the proposed categories exhaust all the questions which are troubling human beings, but I think that they are the most important ones. Human beings are conservative in their nature, and all the time they try to cling on to prevailing explanations, but they also have free will and an internal force impelling them to search for alternative answers if problems arise. If faced by obstacles, which are not possible to overcome on the basis of an existing set of answers and currently used routines, we try to modify the answers to reach our ends. It is much easier to modify the answers related to our almost everyday problems than those related to, for example, our worldview, or ideology. This is one of the reasons for diversified waves of development related to different spheres of human activity. The longest waves are related to cultural development (or civilization, as some historians call them); within each cultural cycle we observe a few cycles related to the social (political) system, and within a social cycle a few cycles related to economic organization, and so on up to the modes of research (paradigms). The proposition put forward in this chapter needs further separate and thorough elaboration; here I present it mainly to point out that even if we discuss some specific economic problem, for example, industry organization, all the time we ought to keep in mind that this specific problem is a part of the more general evolutionary process. To understand the proposition of the evolutionary view of industrial dynamics it seems profitable to consider the main differences between the two main perspectives in economic thinking which prevailed and competed in economic analysis in the last decade. So the second part starts with the chapter in which a short characterization of neoclassical and evolutionary perspectives in economic analysis is presented. To make the arguments of both perspectives more distinguishable the characteristics of both attitudes are greatly stylized. What is interesting is a kind of co-evolution of these two approaches which has been observed in recent years – neoclassical economists try to incorporate some evolutionary ideas into their theories, and vice versa some neoclassical ideas are included in evolutionary models. The next four chapters deal with the proposed model of industrial evolution. There is close interrelationship between the model of industrial evolution and the general model of knowledge development presented in the first part of the book. In fact most ideas presented in the first part are adjusted to the specific circumstances of industrial development and are expressed in the more formal, mathematical way. What ought to be stressed is that, as usual in scientific research, the development of any model is not a linear process; on the contrary it is a highly iterative process going back and forth: from an idea, or hypothesis, expressed in a verbal form, next put in the form of an equation (or equations) and incorporated into the model, and finally back to the initial idea to modify (or to exclude) it. Frequently it occurs that a verbally expressed idea, which at first glance looked quite reasonable and very promising, when incorporated into the model turns out to be wrong – in the sense that the mathematical model which was satisfactory before the incorporation of that idea, generates quite unreasonable results after its inclusion. During the model’s development it was frequently necessary to modify the initial idea or even to throw it away. So in fact the verbal model of evolution presented in the first part of the work and the simulation model of industrial evolution presented in the second part were developed in parallel, reciprocally influencing each other. Not going into details, I would like briefly to express my personal approach to the research – we may have a lot of nice looking ideas, which when written down give the impression of being very reasonable and quite coherent, but to check that coherence we ought to try to express those ideas in more or less qualitative, mathematical (or simulation) models and next, through investigation of the dynamics of the model, study whether all those hypotheses incorporated into the model give reasonable results. If so, we are reassured that our thinking is going in the right direction. The basic model, presented in Chapter 5, embraces only an ‘economic’ part of industrial process, that is, without a research process causing the emergence of innovation. A simulation study of the basic model, presented in the succeeding chapter, aims to show similarities and dissimilarities between the model’s behaviour and the classical, well-known modes of development of real processes. As Nicholas Kaldor (1961) writes:
Following his proposition I start off with seven important ‘stylised facts’, namely:
Some new insights into industrial development are also provided in chapter 4, for example, (1) the invariability of industry behaviour for a constant value of the factor equal to multiplication of unit cost of production and productivity of capital (so-called cost ratio), (2) the roles of long-term and short-term objectives of a firm, or (3) observations on the emergence of fluctuations in industrial development. An evolutionary part of the model related to the search process for innovation is included in the basic model and presented in Chapter 7. Mechanisms of search for innovation seem to be the common property of all evolutionary processes, and in fact this part of the industrial model is ‘borrowed’ from my former model of biological evolution. It is reflected also in the nomenclature used, such as mutation, recombination, and so on, so well known in biological models. Presented in this chapter, the results of the simulation of the model with an embedded search process expose the impact of the innovations on the modes of industry development. The intriguing problems of contemporary economics related to cumulative causation and path-dependence are shortly discussed in the last chapter. The title of this chapter ‘Chance and necessity ...’ is clearly borrowed from the famous book of Jacques Monod. According to the conventional principle of ‘idealization and stepwise concretization’ presented in Chapter 1, the model presented in the second part of the book may not be considered as the final entity. I treat the model as the first step to its further development. Acknowledgements I would like to express my thanks to my colleagues and co-workers of the Futures Research Center (where I started to work on this book) and of the Institute of Engineering Cybernetics of the Technical University of Wroclaw (where I finished it) for creating a friendly and very stimulating atmosphere. Of many people to whom I am very grateful I would like especially to mention two names: Karol I. Pelc, whose advice and encouragement helped me to overcome problems and continue my work, and Wojciech Wróblewski, with whom I held long discussions, when still working at FRC, and whose many critical comments were extremely valuable to me.
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