8.4 Evolutionary Thinking in Economics

Traditional economic thought has been dominated by an equilibrium approach in which an economic system is viewed as being in equilibrium. The French physiocrats advocated working out the law of nature in its economic bearing toward the highest welfare of the human race. The law of nature, in their view, is immutable and irrefragable. It is a propensity working to an end, the accomplishment of a purpose (1).

The physiocrats' British counterpart, Adam Smith, put the traditional economic view in a theistic context. He envisaged the Creator as being very restrained in the matter of interference with the natural course of things. The guidance of His invisible hands takes place not by way of interposition but through a comprehensive scheme of contrivances established from the beginning of creation. Humans are considered to be consistently self-seeking. This economic person is part of the mechanism of nature, and the self-seeking endeavor is but a means by which general welfare is worked out (2).

The classic economic model was accommodated by Social Darwinists. They maintained that natural selection is the law of nature that favors the strongest and fittest in self-seeking traffic. Therefore, this eventually leads to the inevitable progress of society (3).

The major contending school of thought was developed around the turn of the century by Thorstein Veblen (1857-1929). He systematically applied the evolutionary concept of change in formulating his economic theories. According to Veblen, society is a process and not a static system. It develops an existence of its own that is independent of individuals and groups functioning within the society or culture.

Veblen believed the factor that causes society to be emergent is technological change. The cultural process is not teleological, for it does not move toward any predetermined end. Veblen held that human beings can contribute little to provide guidance for social evolution, for it seems to be a matter of drift. [283]

Social institutions are the key element of human culture. They are the end products of individuals who seek to satisfy their instinctive drives by using reason and following customary and habitual ways of behaving. Institutions develop over time as aids for people to organize and control individual and social behavior in order to satisfy their wants.

Veblen categorized institutions into two types: serviceable and disserviceable. Serviceable institutions involve human workmanship and parental instincts for race survival. Disserviceable institutions are the products of human predatory and acquisitive drives that elevate the individual over the community. Therefore, the economic system develops from the dichotomy of the serviceable and disserviceable human drives in culture and in institutions and classes (4). Veblen's evolutionary thinking has inspired the inception of an influential school of economic thought, neoinstitutionalism. This view finds favor among such prominent contemporary economists as Clarence E. Ayes, John Kenneth Galbraith, Gunnes Myrdal, and Gerhard Colin, to name but a few.

Neoinstitutionalists differ from convential economists in their treatment of the social system. They contend it is an evolving open system rather than a static closed system. Neoinstitutionalists favor comprehensive governmental involvements and national control in economic development. However, the conventional economists fight against complicated fiscal and monetary control to preserve free market competition.

References 8.4

1. Stromberg, R. N. Intellectual history of modern Europe. New York: Appleton-Century-Crofts; 1966: 156.

2. Ibid., 157.
3. Hofstadter, R. Social Darwinism in American thought. Rev. ed. New York: G. Braziller; 1965.
4. Gruncy, A. G. Contemporary economic thought. New York: Auguste M. Kelley; 1974: 20.