rffrydr
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Joined: 30 Oct 2005
Posts: 16932
Location: Sunny California
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 Posted: Wed Feb 06, 2008 6:40 pm Post subject: Evolution and Market Theory |
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Check out that last name. Indians have made into the highest corporate ranks, have created some of the strongest corporations, have infiltrated many chief analysts positions and clearly are there at the highest level in economic theory:
| Quote: | LETTERS TO THE EDITOR: Claims on evolutionary processes in economics challenged
Financial Times
Published: Dec 20, 2007
From Prof K. Vela Velupillai.
Sir, Niall Ferguson's article "The great dying" (December 14) is marred by several infelicities.
His claim that "evolution certainly offers a better model for understanding financial change than any other we have" is careless. Moreover, there are at least three approaches in the theorising of evolutionary processes in economics. Of these, in the non-linear dynamic approach, path-dependencies and computational universality ensure self-reproduction, replication and emergent evolution in real and financial economic structures. Neither of the other two variants of evolutionary modelling in economics implies self-reproduction and self-replication - in senses made precise by Turing, in work straddling both computability theory and morphogenesis, and von Neumann - and, therefore, many of Prof Ferguson's claims are vacuous. Moreover, the non-linear dynamic approach does not rely on any kind of Darwinian mechanism for its evolutionary underpinnings.
Second, Prof Ferguson claims: "What matters in evolution is not your size or your complexity." This is false. No evolutionary economic model would be capable of self-reproduction unless a threshold of "complexity" could be hurdled. Size may not be important but "complexity" is.
This is best illustrated in the non-linear dynamic models of evolution. In his penultimate paragraph he conflates a quotation from Schumpeter's monograph on the Theory of Economic Development with "creative destruction", that much-maligned notion, introduced 30 years later. It was not "creative destruction" that entailed the disappearance of "those firms which are unfit to live", but a "measure of selection".
Prof Ferguson's startling assertion that "companies in non-financial industries are neither so fundamental to the economy, nor so critical to the livelihood of the consumer", must dismay the ghost of Schumpeter, whose "swarms of innovating entrepreneurs' were almost entirely devoted to activities in "non-financial industries".
Finally, his claim that "over the long run, financial innovation begins at a common trunk" must surely be challenged, biologically after Carl Woese's fundamental results on the large-scale structure of the tree of life. Economically, is Prof Ferguson seriously suggesting that the origins of the Zaibatsu in Japan and the activities of the Fuggers of Augsburg were from "a common trunk"?
But, above all, Prof Ferguson's uncritical appeal to variations of Darwinian selection mechanisms displays a lack of appreciation of work at the frontiers of biology, where models of evolution without adaptation are increasingly important.
It is fashionable to invoke Schumpeter in all kinds of contexts, and Prof Ferguson does not resist the temptation to do so, even if out of context. There is no doubt that Schumpeter's imaginative insights have been of great benefit to the economist and the financial historian. But he - like Marx - was almost singularly incorrect in almost all of his predictions about the capitalist system and its survival and revival capabilities. Not even "creative destruction", according to Schumpeter, was going to save the ultimate demise of the capitalist system. How much more wrong could he have been - or is it "too soon to tell" ?
K. Vela Velupillai,
Fellow and College Lecturer,
Girton College, Cambridge and
John E. Cairnes Professor of Economics,
National University of Ireland |
Change is clearly as important as valuation.
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Today is the Tomorrow you worried about Yesterday! |
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