Economic Evolution, Novelty, and Diversity

This chapter takes a long-term view of economic evolution. Evolutionary theory is another important part of complexity economics. It is particularly helpful in explaining the emergence of innovation and new knowledge or novelty. After some theoretical thoughts on novelty, a brief history of technological inventions is given to show that fundamental novelty is rare and that many inventions are recombinations and improvements of existing ideas. This chapter presents an explanation of evolution in biology and then moves on to the more general computational view of evolution, of which both biological and economic evolution are instances. It argues why the economy is not like an evolutionary system, but is in fact an evolutionary system. For complexity economics, genetic or evolutionary algorithms are a useful technical tool, along with cultural algorithms, cladistics, and evolutionary systems modeling, all of which are explained. This chapter also discusses the relationship of complexity economics to its sister discipline, evolutionary economics. The chapter concludes with some thoughts on diversity and resilience in systems. Diversity is both a condition and a result of evolution; in other words, diversity breeds diversity.