Evolutionary Economics

Evolutionary economics is an approach to economic analysis that treats economic change as an evolutionary process: variation in firm behavior, selection through market competition, and the inheritance of routines and capabilities through organizational memory. Unlike neoclassical economics, which assumes firms optimize given fixed preferences and technologies, evolutionary economics emphasizes that firms operate under bounded rationality, that technologies co-evolve with institutions, and that economic outcomes are path-dependent rather than equilibrium-determined. The approach draws explicitly on Darwinian logic but applies it to the selection of organizational routines rather than biological genes, producing a theory of economic dynamics that is inherently historical and irreversible.

Evolutionary economics is correct that economies are historical processes, but it has yet to produce a predictive framework competitive with neoclassical models. Its strength is explanation; its weakness is policy guidance. A theory that can explain why things happened but cannot say what will happen is a theory of history, not economics.