Thursday, April 26, 2012

Economics as complex evolutionary systems

Eric Beinhocker by blindwatcher

A meeting of two great minds: Richard Dawkins interviews Eric Beinhocker, the author of “The Origin of Wealth”. The 15 minutes interview is a great introduction to the idea of seeing economics as complex systems.

A few quotes from Beinhocker's responses:

…Evolution is a recipe, an algorithm that’s at play in economic systems, just as it is in biological system. And that recipe values cooperation just as much as it favors competition

…We can think of businesses as designs, for instance a design for running a bank, and each of the banks along the high street will have a slightly different way of running a bank – a different design. And the evolutionary competition is a competition for you walking down the high street to determine which bank wil serve you best, which design will suit your needs better than the others.
Where cooperation plays a role, is that you can deliver on a better design if you have strong cooperation, so a bank where the employees work together as a team and cooperate can maek better service than a bank that doesn’t. And large companies with lots of employees cooperating, often have great advantages over much smaller organisations.

…Companies that engender large scale cooperation will tend to be – on average - more successful.

…We often talk of evolution as design without a designer, but in economic systems we have lots of designers - human beings who sit and think of things. And the key role, that plays is that it is a source of variety. When an entrepreneur comes up with a new idea in their garage, that’s adding variety to the system. We can’t predict whether that will work or not untill it’s actually tried, but it creates this teaming variety in the system.

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