DIVERSITY AND ECONOMIC EVOLUTION: FAILURES OF COMPETITIVE ECONOMIC SYSTEMS

This paper has two themes. First, diversity of relevant attributes driving the dynamics of socioeconomic systems, including industrial systems'is often needed to increase their likelihood of transiting to a superior state. However, systems left to their own devices do not always evolve to states where they possess sufficient or optimal diversity for further evolution or growth to a superior state. Evolutionary market mechanisms can be of this nature. Structural adjustment policies and globalization seem to be adding to industrial and other types of uniformity. Hence, real danger exists that global industrial structures influenced by field effects will become "piled up" and reduce the likelihood of the global economic system evolving to a superior economic state. Furthermore, diversity is an important driving force in other growth processes, e.g., those adding to the stock of knowledge. Second industrial diversity of techniques and behaviors may be potentially Paretian valuable as a means of optimal adjustment to continual technological change and as a manifestation of specialization according to differences in individual abilities and in those of organizations. Insofar as attempts at benchmarking try to ensure uniform adoption of "best practice" in industry, they are likely to be doubly damaging because short-run potential Paretian benefits are forgone, and in stifling industrial diversity they may also undermine industrial diversity as a source of future economic growth. (JEL D00, D89, O30, 014)