George Gilder on the Evolutionary Metaphor

5 July 2006 at 9:44 am Peter G. Klein 4 comments

| Peter Klein |

Returning to our previous discussion of teleology in social-science explanation, the current issue of National Review has an essay by George Gilder, co-founder of the pro-ID Discovery Institute, summarizing his complaints about the neo-Darwinian model. (The electronic version is behind a subscription firewall, but a copy is here.) This passage caught my eye:

Turning to economics in researching my 1981 book Wealth & Poverty, I incurred new disappointments in Darwin and materialism. Forget God — economic science largely denies intelligent design or creation even by human beings. Depicting the entrepreneur as a mere opportunity scout, arbitrageur, or assembler of available chemical elements, economic theory left no room for the invention of radically new goods and services, and little room for economic expansion except by material “capital accumulation” or population growth. Accepted widely were Darwinian visions of capitalism as a dog-eat-dog zero-sum struggle impelled by greed, where the winners consume the losers and the best that can be expected for the poor is some trickle down of crumbs from the jaws (or tax tables) of the rich.

In my view, the zero-sum caricature applied much more accurately to socialism, which stifles the creation of new wealth and thus fosters a dog-eat-dog struggle over existing material resources. (For examples, look anywhere in the socialist Third World.) I preferred Michael Novak’s vision of capitalism as the “mind-centered system,” with the word itself derived from the Latin caput, meaning head. Expressing the infinite realm of ideas and information, it is a domain of abundance rather than of scarcity. . . . Ultimately capitalism can transcend war by creating rather than capturing wealth — a concept entirely alien to the Darwinian model.

Leaving aside that Darwin copied Spencer, rather than vice-versa (though Spencer may have been misinterpreted), Gilder correctly notes an analogy between evolutionary explanations in biology — in which outcomes are the result of blind, purposeless forces — and evolutionary models in economics and sociology, in which human agency, too, seems to get short shrift. Gilder’s target in the passage above appears to be general-equilibrium models of the 1970s, but the same arguments could be applied, a fortiori, to the evolutionary and capabilities models popular today. As Nicolai and Teppo Felin have argued, the (rational-choice) microfoundations of evolutionary models are quite weak.

As Penrose noted over fifty years ago:

The characteristic use of biological analogies in economics is to suggest explanations of events that do not depend on the conscious willed decisions of human beings. . . . We have no reason whatsoever for thinking that the growth pattern of a biological organism is willed by the organism itself. On the other hand, we have every reason for thinking that the growth of a firm is willed by those who make the decisions of the firm and are themselves part of the firm, and the proof of this lies in the fact that no one can describe the development of any given firm or explain how it came to be the size it is except in terms of decisions taken by individual men.

Entry filed under: - Klein -, Entrepreneurship, Management Theory, Methods/Methodology/Theory of Science.

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4 Comments Add your own

1. Fabio Rojas | 5 July 2006 at 12:15 pm

If you were to really think hard about how evolutionary models fit into economics and sociology, you might say:

1. Economic theories of firms tend to focus mostly on design, while management/sociological theories of firms tend to focus on evolution. Think about it – economists see firms in terms of contracts, principle/agent problems and transaction costs to be controlled by firm owners. Other researchers focus on networks, firm culture, informal norms and institutional environments.

2. Micro-economics tends to see the world as the outcome of disaggregated agents making choices. The actors don’t really affect each other, except via the price mechanism. Very little sense that financial institutions evolved, except in economic history and institutional economics.

3. Macro – which I know little about – seems split over the design issue. Obviously, Keynesians wish to depict the economy as easily affected by top level decisions, while RE tends to see the economy as out of control from top level decision makers.
2. brayden | 5 July 2006 at 1:01 pm

It seems that this argument wouldn’t apply very well to economists and sociologists working in the Schumpeterian tradition.
3. Peter Klein | 5 July 2006 at 1:08 pm

Brayden, it depends what you mean by the Schumpeterian tradition — that’s become a fairly broad term. Does it include Nelson and Winter? The argument would seem to apply to thier notion of routines, which are hard to interpret according to strict methodological individualism.
4. Nicolai Foss | 5 July 2006 at 1:14 pm

I frankly think Gilder’s statements make no sense (while my co-bloggers attempt to come to Gilder’s rescue makes more sense).
First, there just wasn’t any room for evolution in economics in 1981. The neo-Scumpeterian revival hadn’t started (it began the year after with Nelson and Winter 1982). The then predominant GE paradigm is about as far as one can get from evolution at all.
Second, the “Darwinian visions of capitalism as a dog-eat-dog” — even if there ever were such a “vision”– is not a “zero-sum struggle.”
Another thing: While Penrose was a deep thinker, I think she misunderstood the role of evolutionary metaphors in economics. Granted, there ARE those — such as Sidney Winter — who are apparently close to denying that intention matters at all. But strictly speaking, all that an evolutionary theory of, say, industries need to assert is that firms exhibit differential growth rates (metaphorically, some capabilities/genes become more important in the “population” over time ( = “evolution”). In that light, Penrose’s own theory of firm growth was entirely consistent with the evolutionary story told by the target of her paper, Armen Alchian.