Competition as an evolutionary process
Mark Blaug and evolutionary economics
Keywords:evolutionary economics, institutions, competition, theory of the firm, realism, formalism, abstraction, theoretical modeling
Mark Blaug and I agree that if there is a realist interpretation of economic behavior to be discerned in Friedman (1953), it is to be found not in Friedman's belief that the profit motive overrides other possible motives, but in his belief that a selection mechanism is working in competitive markets. Our joint sympathy for evolutionary economics is largely based on a conviction that the conception of competition as a dynamic evolutionary process is rather plausible. We disagree, however, on two issues: first, how important the evolutionary conception was for Friedman's overall argument; and, second, whether we can learn something about the real world from rigorous formal analytical models. In this article, I explain and argue for my position on these two issues, and use Nelson and Winter's (1982) theory of evolutionary economics to support an illustrate my argument.