Evolutionary Economics from a Radical Perspective

Abstract

David Hamilton's book, Evolutionary Economics: A Study of Change in Economic Thought, (1999) is a masterpiece of elegant writing and brilliant insights. I learned much when I read it several decades ago and perhaps even more from the present reading. Most of the book clarifies the main differences between institutionalism and classicism (Hamilton's term for both classical and neoclassical economics). In the first place, classicism is reductionist, concentrating on only one aspect of society, namely the psychology of consumerism-and even that psychology is so abstract in its assumptions that it cannot be empirically tested. Institutionalism sees the whole society as a unified set of relationships and processes, so it is called holistic rather than reductionist. Secondly, classicism focuses on equilibrium with and the adjustment to equilibrium, as if there were eternal laws of equilibrium. Institutionalism focuses on the process of change of history in an evolutionary approach in the tradition of Darwin. Third, classicism explains everything based on the psychology of individuals, as if they could be seen in isolation from society, while social laws derive from individuals. Institutionalism argues that individuals are always part of society, so one must begin with the actual institutions, which embody relationships between groups. Hamilton's theme is that both classicists and institutionalists do look at change, but they examine it quite differently. Classicism is Newtonian, so it examines the laws of change after an outside disturbance toward a situation of equilibrium. Institutionalists are Darwinian, so they examine the process of evolution. The process of evolution is explained by internal dynamics, as is biological evolution. That is very different from change solely due to external shocks, such as the physics of one billiard ball hitting another. Newton's was a machine universe run by natural law. Classical and neoclassical price theory is Newtonian. The switch from the labor theory to the utility theory