The Economy: Clockwork or Ecosystem?

Описание: This briefing synthesizes a critical analysis of competing economic theories, contrasting the dominant mainstream equilibrium model with the dynamic frameworks of evolutionary and institutional economics. Mainstream economics, built on physics-inspired concepts of equilibrium and rational actors, uses tools like supply-and-demand and ceteris paribus assumptions to model price determination and macroeconomic stability. However, this approach faces significant criticism for its static nature, empirically questionable behavioral assumptions, and its tendency to abstract away from the complexities of a constantly changing world.

In response, evolutionary and institutional schools of thought propose that the economy is a non-equilibrium system, better understood through principles inspired by evolutionary biology. This perspective, pioneered by thinkers like Thorstein Veblen and Joseph Schumpeter, emphasizes that the economy is transformed from within by processes of innovation, competition, and adaptation. Central to this view is the concept of "circular and cumulative causation," which posits that economic events create self-reinforcing cycles, rather than settling into a stable state. This framework integrates the roles of institutions, technology, power structures, and cultural norms—factors largely omitted from standard equilibrium analysis. The black market, a global system employing 1.8 billion people, serves as a potent real-world example of economic activity that operates entirely outside formal, state-regulated systems, driven by complex motives that defy simple equilibrium models.