Articles

Basic Questions about Hodgson’s Paper

In Uncategorized on February 8, 2010 by Jenny

Because this week’s readings concern a field about which may of us are ignorant, it seems like a good idea to get straight on some of the terminology and ideas in economics that are central to evaluating the arguments from the readings.  To avoid overwhelming our experts with questions, I will focus on some of the economic ideas presented in the Hodgson reading.

In his paper, Hodgson notes that a big question regarding the application of evolutionary theory to economics is whether evolutionary theory is really necessary to account for economic explananda.  Another, more global and less problematic explanatory apparatus explains economic phenomena as well: self-organization.

However, it was unclear to me from the readings what exactly self-organization in economics meant and what exactly it was competing (or not competing, as Hodgson argues,) with evolutionary theory to explain?  To put my latter question more clearly, let me point out that I understand that self-organization is supposed to explain economic structures and systems, particularly change in and organization of economic structures and systems, but what sorts of structures and systems is Hodgson talking about?  I know that economics deals with firms, but I have only a faint idea of what a firm is.  Are they all alike?  If evolutionary analysis applies to one firm, does it apply equally as well to others?

A follow-up to this question has to do with how evolutionary theory is supposed to explain economic phenomena.  Hodgson writes that applying evolutionary theory to economics allows us to use concepts such as variation, inheritance, and selection to explain changes in and organization of economic structures and systems.  But he never explains how this is supposed to work.  For example, what does it mean for economic entities to inherit certain characteristics?  Is this meant as a metaphor for firms tending to be conservative with regard to making big changes?  I’m very confused, as you can tell.

A final question about the Hodgson reading is even more basic than the first three, but I suspect that it will be the hardest to answer.  That is, what do economists mean when they say “Darwinism” and “Neo-Darwinism”?  Is there any consensus?  I ask this question because it seemed from the reading, that Hodgson kept picking and choosing the aspects of Darwinism that would best support his conclusion.  When he wanted to emphasize the importance of causal explanation in evolution, he reported the importance of causes to Darwin.  When he wanted to deflect the potential worry that his form of evolutionary economics wouldn’t be satisfactorily explanatory in that it focused only on Newtonian-type causes, he hand-waved to Mayr’s interpretation of Darwin, where causes weren’t so important.  This flopping around by Hodgson seems like equivocation, and that is troublesome for obvious reasons.

Thank you, in advance, to those willing and able to help me be clear about these important ideas in evolutionary theory.

Jenny

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10 Responses to “Basic Questions about Hodgson’s Paper”

  1. Jenny,

    You should be asking these questions. I believe that many of the questions that are explicit and implicit in your post are the same as the ones we will examine over the course of the semester, but more often in the context of biology.

    First: self-organization. This is the sine qua non of complexity science. Simple behavioral rules of action and interaction in a system lead to unpredictable outcomes, but often to a dynamic equilibrium. As we have discussed in Darwinian theory, the inheritance of traits and chance-based survival occur at the level of the individual organism, but we look at population-level outcomes. God’s hand is not directing this. The numbers and distributions of organisms in the biosphere arise from a self-organizing process. Just like a market! The success of Apple, Inc is driven by their manufacturing choices and millions of individual consumption decisions each month. (The famous invisible hand of the market). So, self organization is a rule-based process (simple rules, but complex outcomes). Is that the same as, or different from, big D-Darwinism or small d-darwinism? What does Hodgson say?

    All firms are NOT alike — in practice. Economic theory may impose homogeneity as a simplifying assumption, and often does so. This is a convention in economic explanation and modeling. But an evolutionary model of economics will REQUIRE heterogeneity. Why?

    You ask the most important question that I will pose to the class tomorrow: If economics is an evolutionary science, and the evolution of economic systems is darwinian, what is being selected? In biology, are we selecting traits, individuals, species, or what? Do the forces of evolution act on genes or something bigger? In economics, we have firms which are heterogeneous, in populations (call them industries) that are heterogeneous. Does an evolutionary theory operate on the firm? the industry (=species?)? or some smaller thing that behaves like a gene?

    “For example, what does it mean for economic entities to inherit certain characteristics? Is this meant as a metaphor for firms tending to be conservative with regard to making big changes?”
    Jenny, there has been much written in organization theory about “inertia” – what you described as conservatism. To a large degree this is supposed to be a metaphor for darwinian “retention” — why firms don’t change/evolve rapidly. If we weren’t using a biological metaphor, we’d call this corporate culture: the widely held, long-lived identity of the organization that is socially constructed by the members of the organization and passed on to new members as they join. Then there would be some physical elements, such as location, equipment, buildings, and the like that are also part of the “retention” aspect of the paradigm.

    Finally, with regard to the use of Darwinism and Neo-Darwinism in economics, I’d offer one observation. Hodgson and Witt know the difference, in the same way we know the difference in evolutionary biology due to André’s discussions with us, but there isn’t a handful of other economists who could do so. Presume that economists conflate the two and rely upon selection and fitness as the only elements of evolutionary theory that matter.

    More about your questions on Tuesday.

    Randy

  2. Randy,

    Thanks for your reply.

    Let me see if I have this right. Self-organization occurs when behavioral rules of action and interaction lead to a dynamic equilibrium. Thus, Darwinism (or darwinism) is a type of self-organization because individual-level events lead to a higher-level stability. In economics, self-organization is when individual choices (e.g. manufacturing choices and individual consumption) lead to a stable market outcome (e.g. the success of Apple). Did I summarize you correctly?

    You ask whether Hodgson thinks that Darwinism is a type of self-organization, and I think the answer is no. While Hodgson agrees that self-organization and Darwinism are not mutually exclusive, he takes them to have different functional roles within a system. Darwinism (which, here, he seems to be equating with natural selection) gives us a way culling the weak (i.e. inefficient) entities from a system after the system has become self-organized. Thus, because Hodgson sees self-organization as having a different role than Darwinism in shaping a system or structure, it seems clear that he sees the two methods of organization as distinct.

    You also write that economics assumes the homogeneity of firms, and yet economic evolution requires heterogeneity, in that evolution can only come about through variation. While it is easy to point out the problems that may ensue due to this difference, I’m curious to know what sorts of solutions economists offer for this paradox. Do they think that the problem is insignificant, and thus can be ignored without difficulty? Or do they have any ways of resolving the issue?

    You say something else that peaked my curiosity. You write that “inertia” can be explained as a metaphor of darwinian “retention” or it can be explained in non-biological terms, as “corporate culture.” This makes me wonder to what extent economists need darwinism to explain economic change and organization. Can everything that evolutionary theory is supposed to explain in economics be explained by some other (perhaps less problematic) theory? If so, do we have any positive reason to think that darwinism gives us the best of all possible explanations, such that we would want to keep it despite its flaws?

    Thanks again for all of your help.

    Jenny

  3. Jenny said:

    “You also write that economics assumes the homogeneity of firms, and yet economic evolution requires heterogeneity, in that evolution can only come about through variation. While it is easy to point out the problems that may ensue due to this difference, I’m curious to know what sorts of solutions economists offer for this paradox. Do they think that the problem is insignificant, and thus can be ignored without difficulty? Or do they have any ways of resolving the issue?”

    I was thinking about something similar in the context of why memetics has apparently failed to launch. In order for darwinism to work, there has to be gradual differences between the traits you’re looking at. If your field scientists can only identify traits that are as obvious as “two-legged animal” vs. “four-legged animal,” then the darwinian model probably won’t work. You need to be able to identify more subtle differences, such as differences in coloration or something. Given this need for gradual differences in inherited or retained traits, it makes sense that evolutionary economists would pay attention to small differences that are treated as mere noise in classical economics. No paradox, just different perceptual instruments. Classical economists are taking the macro-view, evo-econ is taking a micro-view.

    Jenny said:

    “You write that “inertia” can be explained as a metaphor of darwinian “retention” or it can be explained in non-biological terms, as “corporate culture.” This makes me wonder to what extent economists need darwinism to explain economic change and organization.”

    It sounds like differential retention could explain why firms change over time, while cultural inertia could explain why they remain stable. Different questions, different explanatory tools?

  4. @Dan

    This is a little bit of a tangent, but you said something that struck me as odd, and I wonder if reframing it might open the discussion a bit more…

    You said that “in order for Darwinism to work, there has to be gradual differences between the traits you’re looking at.” While I think this is by and large how the evidence indicates that evolution does work, it’s not necessarily the case that it’s how evolution MUST work. As an example, look at Gould’s punctuated equilibrium model, in which relatively stable epochs are thrown out of balance and macromutation is the rule rather than the exception.

    There are many good reasons why this almost certainly isn’t the case biologically, most notably that things are more likely to go wrong when something mutates than they are to go right, so macromutation has an even greater chance to go REALLY wrong than produce something beneficial. But I don’t know that the reasons against macrumutation-based evolution apply outside of biology. If this is the case, I think your answer to Jenny’s question may still apply, but I wonder what other explanations might exist.

  5. In response to Jenny (above in this thread):

    “Let me see if I have this right. Self-organization occurs when behavioral rules of action and interaction lead to a dynamic equilibrium. Thus, Darwinism (or darwinism) is a type of self-organization because individual-level events lead to a higher-level stability. In economics, self-organization is when individual choices (e.g. manufacturing choices and individual consumption) lead to a stable market outcome (e.g. the success of Apple). Did I summarize you correctly?”

    Strictly speaking, stability and equilibrium are not necessary outcomes from self-organized processes. The most important issue is that there is no system-level, top-down regulation of the process. Outcomes emerge. The important element of the analogy between Darwinian evolution and market process is that behavior occurs at the level of the individual and whatever population-level outcomes are observed are a result, not a cause.

    “You also write that economics assumes the homogeneity of firms, and yet economic evolution requires heterogeneity, in that evolution can only come about through variation. While it is easy to point out the problems that may ensue due to this difference, I’m curious to know what sorts of solutions economists offer for this paradox. Do they think that the problem is insignificant, and thus can be ignored without difficulty? Or do they have any ways of resolving the issue?”

    In the 35 years that I have been behaving (more or less) as an economist, this is one of the issues that I see that defines the NATURE of research into organizations. The canon of neoclassical economics thrives on homogeneity and the practitioners do not care about the implications. Peter Klein’s outstanding blog Organizations and Markets often takes the economics profession to task for this, but Peter and his comrades are identified as heterodox economists for their insistence on heterogeneity, methodological individualism, and nonequilibrium approaches. This is a serious issue – the kind that I hope will be addressed by Michael Weisberg.

    “You say something else that peaked my curiosity. You write that “inertia” can be explained as a metaphor of darwinian “retention” or it can be explained in non-biological terms, as “corporate culture.” This makes me wonder to what extent economists need darwinism to explain economic change and organization. Can everything that evolutionary theory is supposed to explain in economics be explained by some other (perhaps less problematic) theory? If so, do we have any positive reason to think that darwinism gives us the best of all possible explanations, such that we would want to keep it despite its flaws?”

    This is a serious question. In fact, it is the kind of question that a “client” of Phil Sci (like me) expects to be at the center of any discourse about the role of analogy in explanation. The standard slam against metaphor goes something like “why not build theory and explanation from what is unique to the system that is being studied rather than relying on metaphor?” Well, yeah. But ANY theory is an abstraction. There are issues of what is being idealized, what is being omitted, and what is causal in one theory vis-à-vis another. So I need to know whether darwinism offers a superior platform for modeling or explanation than a theory based on a metaphor stolen from physics – like inertia.
    Great questions/comments, Jenny.

  6. Randy said:

    “So I need to know whether darwinism offers a superior platform for modeling or explanation than a theory based on a metaphor stolen from physics – like inertia.”

    It seems that economists can borrow terms from places other than Darwinian theory, and provide different account of the mechanisms of economic evolution. Since Witt and Hodgson are mainly talking about the role of Darwinism in evolutionary economics, my initial intuition is that Darwinian thoery is the only choice for evolutionary economics. Now I’m curious if economists have developed any non-Darwinian evolutionary theories to account for the specific mechnisms of economic evolution.

    Sheng

  7. What interests me a lot is the questions Jenny asked about the utility of the Darwinism metaphor.I’ve been wonrdering about the model or theory we have learned from the beginning of this class: natural selection, evolutionary theory, the Natural State Model, statistical thinking, and Universal Darwinism. Do they have limitations or problems? If they do, is it the problem about where you can apply those theories/models,or about the basic claims of the theories/models?

    In philosophy, we debate about which theory is the right one, testing whether the basic claims encounter any counterexamples. For example, when hedonism says that everything that has intrinsic value is pleasure and pain. Then, Nozick came along and told the story of the experience machine, reminding us that intrinsic value isn’t all about how we feel.

    It seems that what we’ve learned in phil. of science is quite different. If there is any problem with a theory/model, the problem is more to the application than the buildup of the theory/model. Dan commented on my question about Natural State Model, saying that the model is just some tools we use and whenever there is problem, it should be the problem of application. When Randy replied to Jenny’s question about the usage of Darwinism metaphor, he seems to imply the same thing: any theory is an abstraction; the issue is just the explanatory power of the theory for some phenomena.

    Do I understand it correctly? I am just puzzled that the theories/models we learn don’t seem to be refuted at all. Is it the case that whenever we have some data that can be well explained by the theories/models compared with the other alternatives, then the theories/models have merits?

  8. Randy, et al.,

    I’m going to change the direction of this conversation a bit and ask a set of questions that, I think, will help us gain some traction on what exactly the role of evolutionary theory is in economic explanations.

    The first question is for economists: what do you want evolutionary theory to explain? Now, it is not helpful to simply say, ‘well, lots of people answer that question differently. So no one can really say for sure.’ That’s a cop-out. Pick an explanandum; we can adjust it later if needs be.

    The second question is for philosophers: what would make evolutionary theory a good way of explaining the explanandum laid out by economists? What qualities should GOOD explanations have? What qualities should they not have? These seem to be fundamental questions that we need to answer before we can determine whether evolutionary theory does a good job or not.

    So let’s have at it! Let’s figure this out! What do you think?

    -Jenny

  9. Wenwen said:

    “It seems that what we’ve learned in phil. of science is quite different. If there is any problem with a theory/model, the problem is more to the application than the buildup of the theory/model. Dan commented on my question about Natural State Model, saying that the model is just some tools we use and whenever there is problem, it should be the problem of application. When Randy replied to Jenny’s question about the usage of Darwinism metaphor, he seems to imply the same thing: any theory is an abstraction; the issue is just the explanatory power of the theory for some phenomena.”

    I suppose that has to do with the difference between theories and models. A theory is a set of sentences in a scientific language. Because they are in a language, they can’t be directly applied to a different field. They are tied to the field by the meanings of the terms used. However, scientists can transfer some aspects of the theory by using analogies and metaphors.

    Models, by contrast, are language-independent semantic structures. They are also tautologies, in the sense that if the assumptions of the model are met, then it is necessary that these effects will happen. A model can be applied any place where its assumptions are fulfilled, and can be bolted into many different fields depending on what connecting hypothesis you use to link observables to the concepts used in the model. (Some of this I’m getting from the Sober chapter we read 1st week of class.)

    @Jake

    I was sorta thinking out loud,so now I have to figure out what I was thinking. I think the main reason was the one you mentioned. Any large random mutation is extremely likely to result in a non-viable organism, and has virtually no chance of being fitter than its parent. Small mutations are more likely to result in viable organisms, and have a small but not infinitesimal chance of making the organism more fit in some way. I think this will be true across all domains where a univeralized darwinism would apply. A large “mutation” that is “magically” viable is likely to be the result of intelligent design. If the well-adaptedness of a thing can be explained by intelligent design, then what do you need darwinism for?

    Of course, darwinism *is* compatible with somewhat unintelligent design. Darwinism works by moving the “brains” of well-adaptedness from the process that produces variation to the process(es) that do the selecting. The smarter the process that produces variation, the less explanatory work the selection process is doing. The line between darwinism and intelligent design is likely vague, and depends on how much foresight the designer is using. (Random mutation is maximally stupid.)

  10. To Sheng,

    Modern Darwinism uses the three variants (or the metahpors or them) to explain evolutionary phenomena: variances, fitness, and inheritance. You are right that when we talk about evolutionary theory, we usually invoke modern Darwinism. I think that the 2nd heurstic approach Witt discusses is non-Darwinism: novelty emergence and dissemination. This approach is much more general in terms of evolution. Is there any other non-Darwinism approach? I have no idea.

    To Jenny,
    The questions you summarized are quite illuminating. I totally agree with you.

    To Dan,
    The language dependent/independent distinction is quite interesting. I’ll interpret it as literal/metaphorical meaning. The basic concepts in a theory have literal meaning, e.g., ‘genes’ in biology. In contrast, the basic concepts in a model have metaphorical meaning, or meaning that needs to be filled in in different contexts. e.g., ‘variances’ in natural selection.

    Thank you for the comments. Those are quite helpful.

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