Evolutionary Theorizing in Economics

M odern economic analysis, oriented toward understanding the workings of economies that make extensive use of markets, came into existence with three guiding questions, all central in Adam Smith’s (1776 [1937]) The Wealth of Nations. One question concerned order. Without any central authority guiding and commanding action, how is economic activity coordinated? The second question was the challenge of explaining the prevailing constellation of prices, inputs and outputs. What explains the price of labor and the rent of land? The third question addressed the processes of economic progress, or development. Smith and other early economists clearly were impressed by the inventiveness, the energy and the growing productivity generated by the evolving market economy. How to understand its dynamics? The first two questions have defined continuing central concerns of the discipline of economics since they first were posed over two centuries ago. When not posed in the context of an economy that is understood as in the process of developing, they seem to pull the focus of theorizing toward equilibrium conditions. The third question, concerned with the processes driving economic progress, pulls the theorizing toward an evolutionary orientation. The question of economic development has waxed and waned in centrality to the discipline, as has the importance of evolutionary theorizing. During the first several decades of the twentieth century, evolutionary thinking and language was widespread in economics. But as one contrasts the economic