SEER,Vol. 79, No.3,uly 200 I Review Article EvolutionaryEconomics J. L. PORKET Fowkes,Ben. 7TePost-Communist Era. Change andContinuity in Eastern Europe. Macmillan, Basingstoke, and St Martin's Press, New York, 1999. xiii + 236 pp. Appendix. Notes. Index. [42.50. Groenewegen, John, and Vromen, Jack (eds). Institutions andtheEvolution of Capitalism. Implications of EvolutionayEconomics.Edward Elgar, Cheltenham , and Northampton, MA, 1999. Xi+ 205 pp. Figures.Tables. Notes. Index. ?49 95 Hodgson, GeoffreyM. Evolution andInstitutions: OnEvolutionaiy Economics andthe Evolution of Economics. Edward Elgar, Cheltenham, and Northampton, MA, I999. x + 345 pp. Figures.Notes. Bibliography.Index. ?59 95 Loasby, Brian J. Knowledge, Institutions andEvolution in Economics. Routledge, London and New York, I999. xv + i68 pp. Bibliography.Index. [50o0o. EcONOMIC theory,the functionof which is to understand,explain, and predict economic reality, is affected by what economists perceive to be going on in this reality and, in turn, affects this reality by contributing to changes in economic policy and economic behaviour in general. Thus, it has both a positive dimension and, implicitlyor explicitly,a normativedimension. The task of economic theory is easier and its development slower when economic reality is stable and change imperceptible, so that regularitiesare noticeable and can be ascertained. Its task is much more difficult, though, when economic realityisnot stablebecause change israpidandwide-ranging. In such circumstances,predictabilityis reduced and uncertaintyincreased. I Since the I87os, economic thought has been dominated by neoclassical econormics.Its assumptionis that individualsare rational, utility-maximizing actors who pursue their own interestsin a perfectly competitive economy in equilibrium,and its focusis on the principlesgoverningthe optimalallocation of scarce resources among alternativeuses, i.e., on the problem of allocative efficiency in a static economy. It holds that change occurs via a change in relative prices in an impersonal, self-regulating market, which is the only institutionit takesinto account. Being by itsnaturedeductive, static,and ahistorical,neoclassicaleconomics is able to present a clear model of human behaviour and to formulate universally valid economic laws. At the same time, its nature inevitably determines its limitations. Despite these limitations, though, its methods and J. L. PORKET 489 axioms have been extended to the sphere of political science, sociology, and other social-science disciplines. Besides, it has shown itself remarkablyadept in accommodating phenomena that it had previouslyignored, without losing its internal logic. Neo-institutional economics, mostly remaining within or close to mainstream economics, is a case in point: it reintroduced into economics phenomena such as ethical norms, transaction costs, property rights,the firm,interestgroups,bureaucracy,and the state. Not surprisingly, the 'imperialism' of neoclassical economics and its accommodation of phenomena previouslyignoredby it raisean interestingas well as importantquestion. In brief,and without going into detail, it concerns the relationship between economics and the other social-science disciplines, because these two developments seem to weaken boundaries between individualsocial-sciencedisciplines. There is also the question of whether neoclassical economics is necessarily pro-market.According to GeoffreyM. Hodgson (pp. 31-33), it is essentially neither pro-market nor anti-market, but spans the conventional political spectrumfromthe extremepro-planningleft to the extreme pro-marketright. The reason is that it has no adequate theory of markets at all. It would be more accurateto say that it is blind to the real market,and consequentlyto its realvirtuesor itsvices. Besides neoclassical economics, Hodgson continues, non-neoclassical economics too makespossible a varietyof policy positions. He divideseconomists into eight types, basing his taxonomy on three criteria, namely, neoclassical orientation (NC) versus non-neoclassical orientation (N-NC), support for some degree of planning or other substantial public intervention in the economy (PL) versus inclination to favour or defer to free-marketpolicies (FM), and substantial use of mathematics (SM) versus limited or no use of mathematics (LM). To give a few examples, Paul Samuelson is classifiedas NC + PL + SM, Robert Lucas as NC + FM + SM, Milton Friedman and Lionel Robbins as NC + FM + LM, Karl Marx and Thorstein Veblen as NNC + PL + LM, and Friedrich Hayek and Joseph Schumpeter as NNC + FM + LM. In connection with this taxonomy it should be noted that Hodgson has a highly critical attitude towards mathematical formalism in evolutionary economics, contending that evolutionary economics suffersas a result of its excessive use. As put by him, in evolutionaryeconomics mathematicalrigour and elegance...