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Evolutionary macroeconomics: a research agenda

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Abstract

In this article, the goal is to offer a new research agenda for evolutionary macroeconomics. The article commences with a broad review of the main ideas in the history of thought concerning the determinants of economic growth and an introduction to the evolutionary perspective. This is followed by a selective review of recent evolutionary approaches to macroeconomics. These approaches are found to be somewhat disconnected. It is argued that the ‘micro-meso-macro’ approach to economic evolution is capable of resolving this problem by offering an analytical framework in which macroeconomics can be built upon ‘meso-foundations’, not micro-foundations, as asserted in the mainstream. It is also stressed that the economic system and its components are complex adaptive systems and that this complexity must not be assumed away through the imposition of simplistic assumptions made for analytical convenience. It is explained that complex economic systems are, at base, energetic in character but differ from biological complex systems in the way that they collect, store and apply knowledge. It is argued that a focus upon stocks and flows of energy and knowledge in complex economic systems can yield an appropriate analytical framework for macroeconomics. It is explained how such a framework can be connected with key insights of both Schumpeter and Keynes that have been eliminated in modern macroeconomics. A macroeconomic framework that cannot be operationalized empirically is of limited usefulness so, in the last part of the article, an appropriate methodology for evolutionary macroeconomics is discussed.

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Notes

  1. See Silverberg and Verspagen (1998) and Silverberg and Verspagen (2005, pp. 220–224), for reviews of some earlier literature on evolutionary macroeconomic modeling of economic growth.

  2. Studies of innovation diffusion and associated logistic trajectories at the firm level deal, almost exclusively, with the successes, not the failures.

  3. This is often thought of in terms of ‘replacement’ and ‘net’ components of investment expenditure but, as Scott (1989) stressed, this can be misleading because ‘replacement’ often involves the simultaneous upgrading of productive structure and output.

  4. As we have noted, evolutionary economic trajectories that are non-equilibrium in nature and rarely have analytical solutions. Therefore, their properties have to be discovered through simulation and calibration. Simulation models are generally, ‘bottom up’, starting at the level of microeconomic behaviour and, frequently these days, agent based simulation techniques are employed. However, there are well known problems with the simulation approach, particularly when calibration is employed in the presence of free parameters (Werker and Brenner 2004). This suggests that we need more than an inductive approach to discovery, but without recourse to timeless, abstract theorising in the standard manner. This is the goal here, as it has been in some careful ‘history friendly’ firm level studies (see, for example, Malerba et al. 2001).

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  1. School of Economics, University of Queensland, Brisbane, Australia

    John Foster

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Correspondence to John Foster.

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An earlier version of the paper was presented at the International J.A. Schumpeter Society Conference in Rio de Janeiro, Brazil, June 2008. I would like to thank all participants who offered comments and criticisms and the very helpful comments of two anonymous referees. The usual disclaimer applies.

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Foster, J. Evolutionary macroeconomics: a research agenda. J Evol Econ 21, 5–28 (2011). https://doi.org/10.1007/s00191-010-0187-z

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