evolutionary algorithm

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complexity economics wealth creation creative destruction evolutionary economics pluralism evolutionary organization theory firm theory of feedback-based adaptive technologies mechanisms of variation variation unjustified variation organizing process

Definition

The evolution, as defined by the algorithm below, is at the heart of evolutionary economics, the economics of creative destruction, and complexity economics. The algorithm is both descriptive, in explaining what actually happens to populations of firms, and prescriptive in what firms must do in order to evolve and prosper vs. being destroyed by the forces of creation in the business ecosystem.

Weick's organizational view -- See organizing process for the equivalent algorithm in the context of organizing by intelligent agents.

The evolutionary algorithm is a compelling explanation of how complex systems are changed and new ones created. This algorithm comes in many forms, but has the basic characteristics of a driving force which creates variation that is selected and applied for successful adaptation and advantage of the system involved.

This algorithm serves to explain economics (see complexity economics and the ever changing competitive landscape. Schumpeter's creative destruction, the ever increasing development of new technologies by entrepreneurs which destroys the economic value of what become legacy technologies.

The algorithm's driving force --
Technological change arising from intelligent actions taken by people who respond to market incentives (Romer, 1990).

The wealth accelerator --
Knowledge is an asset with increasing returns, the more there is the more knowledge that is generated. This knowledge is applied to ever increasing technological innovation and wealth creation.

The evolution steering wheel --
The intentional investment decisions made by profit maximizing agents.

The algorithm --

  1. Variation -- New technology variations, new technological possibilities, are produced in hopes of their selection to produce wealth. See unjustified variation.
  2. Selection -- The technologies fit for a purpose are selected to generate wealth through increasing order and complexity. See selection.
  3. Retention -- Fit designs are replicated. The more fit they are the more broadly they are replicated, throughout an organization, an industry, and diverse businesses. This replication stimulates the development of more variations

Economic change, growth and development, is explained by an evolutionary algorithm, the generation of an ever increasing variety of new technologies, their selection, and broad application.