Hodgson on Hayek: a critique

In his book Economics and Evolution, Geoffrey Hodgson offersa detailed critique of F. A. Hayek's writings on cultural evolution.Certain aspects of Hodgson's treatment appear to be inaccurate.This paper criticises Hodgson's critique.     

The knowledge problem,determinism, and <Emphasis Type="Italic">The Sensory Order</Emphasis>

The arguments presented in Hayek's The Sensory Order suggest that the mind/brain is a decentralized spontaneous order. The decentralized nature of decision-making and the central role of classification in perception, cognition, and action, are solutions to the knowledge problem that confronts the system. The nature of this decentralized complex system suggests that the ordering is deterministic and that free will in the sense of a decision-maker being able to stand outside the circle of cause and effect is an illusion. If determinism is correct, how can we hold individuals responsible for their actions? It is argued that the evolution of responsibility, blame and credit are the products of a second Hayekian spontaneous order. Responsibility and the allocation of credit and blame are part of an implicit social contract that facilitates cultural evolution, political freedom, and economic growth. It is responsibility, not the existence of free will, that makes freedom possible.     

Spontaneous vs. policy-driven: The origin and evolution of the biotechnology cluster

The biotechnology industry is at the heart of the fast-growing knowledge-based economy. One of the distinguishing characteristics of this industry is clustering. A cluster, like an organism, experiences origin, growth, and decline/reorientation. Our study constructs a framework to analyze biotechnology clusters with different origins, “spontaneous” and “policy-driven”, through their life cycles. We use the Bay Area in the United States and Shanghai Zhangjiang Hi-Tech Park in China as two cases to represent spontaneous and policy-driven biotechnology clusters. This study fills the gap in the literature by comparing these two types of biotechnology clusters in an evolutionary perspective. The key success factors of both biotechnology clusters are their own human and financial capital, but they differ in their underlying processes for creating and sharing these resources. The most fundamental differences arise from the impact of entrepreneurship, social capital and network patterns on the cluster's configuration.     

Monetary equilibrium and price stickiness reconsidered: A reply to Bagus and Howden

Bagus and Howden (Review of Austrian Economics 24(4): 383?C402, 2011) argue that price stickiness is a poor justification for advocating a flexible money supply through the issuing of fiduciary media under central or free banking. They view the contraction in output following an exogenous increase in money demand as an optimal response, worry about redistribution effects from the issuance of fiduciary media, and claim a changing money supply complicates economic calculation. Accepting their view that the contraction in output is an optimal response to an exogenous change in money demand, we still find a potentially beneficial role for monetary policy (under central banking) or fractional reserve note issue (under free banking). We show that even if all prices were perfectly flexible, changes in the money supply to offset changes in money demand might still be desirable. We point out several errors and mischaracterizations in their article, justify our decision to disregard wealth transfers, and discuss how a flexible money supply might facilitate economic calculation.     

Schumpeter's theory of economic evolution: a Darwinian interpretation

A general Darwinian framework is employed to arrive at an interpretation of Schumpeter's work that brings out clearly its specific evolutionary aspects. Schumpeter's theory of economic evolution is seen to be still highly relevant to evolutionary economics, because it sheds light on some fundamental issues: the relationship between evolutionary theory and equilibrium analysis, the usefulness of Darwinian theory for economics, and the precise nature of the evolutionary forces at work in economic systems.     

The origin of utility: Sexual selection and conspicuous consumption

This paper proposes an explanation for the universal human desire for increasing consumption and the associated propensity to trade survival opportunity off conspicuous consumption. I argue that this desire was moulded in evolutionary times by a mechanism known to biologists as sexual selection, whereby an observable trait – conspicuous consumption in this case – is used by members of one sex to signal their unobservable characteristics valuable to members of the opposite sex. It then shows that the standard economics problem of utility maximisation is formally equivalent to the standard biology problem of the maximisation of individual fitness, the ability to pass genes to future generations, and thus establishes a rigorous theoretical foundation for including conspicuous consumption in the utility function.     

The denominations of US coins: a case of institutional evolution

Abstract. The system of denominations of US coins, which the paper treats as a quasi-genetic trait of the US monetary system, has not been constant since inception but rather has evolved over time in the sense of being subject to innovation and selection. However, all the innovations have disappeared, as have a number of the original denominations. Abstract theories of optimal systems of denominations provide a good explanation of one selection factor, but other important influences include limiting the number of separate denominations and accommodating the requirements of decimal counting. However, even some innovations that ultimately disappeared survived for decades.     

On reading Hayek: Choice, consequences and The Road to Serfdom

The basic thesis in The Road to Serfdom is that the lure of socialist ideology has the unintended and undesirable consequence of economic depravation and political tyranny when countries follow its policy agenda. Socialist planning requires economic planners to assume a level of responsibility for economic life in a country which is both cumbersome to the point of impossible, and powerful beyond any reasonable limit that could be safely trusted to any one individual or group of individuals. The papers in this symposium provide a critical reading of the Hayek's thesis on socialism. While many strong points are made in the discussion, the critical reading of Hayek offered must ultimately be judged unsatisfactory. The issues of choice and consequences are not addressed, and as a result the basic argument presented in The Road to Serfdom is never adequately engaged.     

Interrogating Sickonomics,from Diagnosis to Cure: A Response to Hodgson

Hodgson's review of our books argues against us that marginalism neither adopted methodological individualism nor excluded the social from economics. Thus, he finds a partial solution to sickonomics in abandoning the term methodological individualism and using both structures and individuals as analytical starting point(s), revisiting Marshallian marginalism dressed up in socio-institutional clothing. He also denies any relationship between the current malaise in economics and the marginal revolution, as we claim, focusing exclusively on institutional developments since the Second World War. We show Hodgson is either partial or wrong on all of these counts. Firstly, his alternative to methodological individualism is untenable. Secondly, institutions, although implicitly present in Marshallian and Walrasian economics, play no substantive analytical role and as such are superfluous. Finally, although institutional factors help explain the sickness of modern economics (in addition to socioeconomic, ideological, political, and intellectual factors), the intellectual roots of this decay lie in the conceptual framework established around the marginal revolution.     

Firm selection and industry evolution: the post-entry performance of new firms

A dynamic framework based on the process of firm selection and industry evolution is used to analyse the post-entry performance of new firms. In particular, it is hypothesized that, based on the stylized fact that virtually all new firms start at a very small scale of output, firm growth and survival are shaped by the need to attain an efficient level of output. The post-entry performance of more than 11,000 U.S. manufacturing firms established in 1976 is tracked throughout the subsequent tenyear period. Firm growth is found to be negatively influenced by firm size but positively related to the extent of scale economies, capital intensity, innovative activity, and market growth. By contrast, the likelihood of survival is identified as being positively influenced by firm size, market growth, and capital intensity, but negatively affected by the degree of scale economies in the industry. When viewed through the dynamic framework of firm selection and industry evolution, the empirical results shed considerable light on several paradoxes in the industrial organization literature, such as the continued persistence over time of an asymmetrical firm-size distribution consisting predominantely of suboptimal scale firms, and the failure of capital intensity and scale economies to substantially deter the entry and start-up of new firms.     

The pigeon breeders' cup: a selection on selection theory of economic evolution

Both the evolutionary literature in economics and the competitive advantage literature in business strategy point to the importance of a firm's replication/selection mechanisms in developing and sustaining inimitable organization capabilities, competencies, competitive advantage and economic rents. This mechanism can be conceived of as a hierarchy of organization processes where primary, added-value processes are nested within control processes, which are nested within deployment processes, that are nested within learning processes. The evolution of this organization of processes and their complementary assets along the added-value chain within the firm and among firms is the result of the legacy of the past process-thinking skills of the firms in the added-value chain and their present thinking skills. Served and factor markets select on the dynamic effects and products of these processes and, hence, ultimately on the phenomenon that create the processes (process thinking). This selection on selection (SoS) theory is used to explain Schumpeterian ?creative destruction? at a new level of analysis, extend the satisficing principle, and identify a new stream of potentially promising empirical research.JEL Classification: A1, B31, B52, D21, M1Comments by Geoffrey M. Hodgson, Alan J. Malter, Paul W. Miniard, Paul W. Farris, and an anonymous reviewer on earlier drafts of this paper are gratefully acknowledged. The editing of Kathryn Morris is also appreciated.     

The Road to Serfdom symposium.: Comment on papers by Rosser and by Levy, Peart, and Farrant

The paper reviews the history of the socialist calculation debate leading up to the publication of Hayek's The Road to Serfdom, and then uses that information to address various claims made by Rosser and Levy, Peart, and Farrant in their symposium papers.     

Interpreting Ricardo: a further reply to Sraffians

The paper contains a further defence of those aspects of theinterpretation of Ricardo advanced in Peach (1993) that havebeen subjected to criticism by writers of a Sraffian persuasion.It is argued that the latest criticisms, from Heinz Kurz andGary Mongiovi, serve best to illuminate the problems with theSraffa-derived view of Ricardo.     

The evolution of a technological system: the case of CNC machine tools in Korea

Focusing on a product, this paper reconstructs the concept of technological systems first introduced by Carlsson and Stankiewicz (1991) in this Journal. Based on the model, we analyze the evolution process and performance of Korea's technological system for computer numerically controlled (CNC) machine tools as a catching-up case. The study shows that the length of 'learning period' for the system was substantial, even in a catching-up case. Especially, in the Korean case, the government played a 'macro-entrepreneurial' role in the molding of the technological system by giving legitimacy to the system, by mobilizing a nation-specific industrial organization of Chaebol system, and by enhancing the academia-industry-research institution links.JEL Classification: L52, L61, O30We thank two anonymous referees for very helpful comments and suggestions.Correspondence to: B. Carlsson     

Advances in evolution and genetics: Implications for technology strategy

Genetic and evolutionary principles are of great importance to technology strategists, both directly (as in the forecasting of genetic engineering technologies) and as a source of metaphor and perspective on socio-technical change. Recent rapid progress in the molecular sciences have revealed new genetic mechanisms of evolution, and introduced new controversies of interpretation. How do these recent developments affect technology forecasting and our view of technological evolution? This paper provides a quick primer for TFSC readers on several new developments in evolution and genetics, comments upon a number of common misconceptions and pitfalls in evolutionary thinking, and critically describes some controversies and open questions, introducing key readings and sources. It relates genetic and evolutionary knowledge, analogies and metaphors to areas of interest to researchers in technology forecasting and assessment, noting possible future directions. The paper concludes with an overview of the other papers in this special section.