Wednesday, April 8, 2009

Evolutionary Economics

If I had to sum up where economics has gone wrong, I think the simplest explanation would be that it mistakenly modeled itself on physics instead of biology.  Incorporating a more evolutionary perspective into economics would improve both economics and evolutionary biology; capitalism is an animal behavioral pattern which we have collected extensive quantitative data on. 

Of course, I'm hardly the only one thinking this, as a quick glance at Galbraith's Predator State book Taleb's FT editorial illustrates:

Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the "Nobel" in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.

Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news.

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