Population thinking, Price’s equation and the analysis of economic evolution

In this paper it is argued that evolutionary economics needs general statistical tools for performing the analysis of the aggregate effects of evolution in terms of the underlying population dynamics. These tools have been developed within biometrics, and they have recently become directly applicable to economic evolution due to the development of what may be called a general evometrics. Central to this evometrics is a method for partitioning evolutionary change developed by George Price into the selection effect and what may be called the innovation effect. This method serves surprisingly well as a means of accounting for evolution and as a starting point for the explanation of evolution. The applications of Price’s equation cover the partitioning and analysis of relatively short-term evolutionary change within individual industries as well as the study of more complexly structured populations of firms. By extrapolating these applications of Price’s evometrics, the paper suggests that his approach may play a central role in the emerging evolutionary econometrics.