Economic Competition and Evolution: Are There Lessons from Ecology?

By Tisdell, Clem | Contemporary Economic Policy, April 2004 | Go to article overview

Economic Competition and Evolution: Are There Lessons from Ecology?


Tisdell, Clem, Contemporary Economic Policy


I. INTRODUCTION

Concepts of competition are central to most economic and ecological modeling (Eldredge, 1997; Hodgson, 1994), and in the case of ecology, competition, optimization, and evolution are closely linked. Although there is less emphasis on these combined aspects in economics, they are central to economic survival types of models of market development (Shepherd, 1987; Scherer, 1980, pp. 38-39, 93) and related models.

This centrality is clear from the observations of Nelson and Winter (2002). They point out that "many neoclassical economists seem to hold to the view that, an evolutionary theory of the firm and industry behavior really amount to the same thing" (Nelson and Winter, 2002, p. 25). This belief stems from Milton Friedman's view that competition will select for the survival of those firms that maximize their profit (Friedman, 1853, p. 24). Furthermore, Winter (1964, 1971), Nelson and Winter (1982), and Hodgson (1994) lent support to this idea by using models to show that (given particular theoretical conditions) a close correspondence exists between survival of businesses and their maximization of profit. But that correspondence relies on a static or stationary world (Nelson and Winter, 2002, p. 26). Clearly, as in ecology, important theoretical links are made in economics between competition, optimization, and evolution even though evolution has been less central to economic thought than ecological thought. This article is based on the view that by further exploring the common threads of ecological and economic theory, it is possible to improve understanding of economic processes.

Both in economics and ecology, a common thread is that competition between entities arises from their demands for limited resources. In addition, in economics, unlike in ecology, competition usually exists in market economic systems between businesses for their market access. Competition within groups of entities (intraspecific competition) and between groups of entities (interspecific competition) occurs both in economic and ecological systems. It is therefore not surprising that considerable cross-fertilization of ideas has occurred between economics and ecology as far as competition and its consequences are concerned, but there is room for further progress.

The purpose of this article is to assess this cross-fertilization of ideas and pay particular attention to intraspecific competition. In relation to intraspecific competition, particular consideration is given to the importance of diversity of individuals and environments for the sustainability of economic and biological groups of entities or populations. In addition, the consequence of the size of populations for whether their members are involved in mutualism or competition is explored, and implications for policy are highlighted.

II. COMPETITION

Economic thought has significantly influenced the development of ecological theory (Rapport and Turner, 1977; Hirshleifer, 1977; Worster, 1994). Worster (1994) suggests that Darwin's (1882) development of theory of evolution of species owes much to the views of T.R. Malthus (1798). In the opposite direction, Alfred Marshall (1898) was convinced that economic thought could obtain more inspiration from biological analogy than from physics. However, physics probably exerted a greater influence on economic thought than ecology or biology in the twentith century, notwithstanding increasing interest in evolutionary economics in the second half of that century.

Consequently, scope still exists for obtaining further valuable insights, especially in economics, by additional consideration of analogies between economics and ecology, as this article is intended to demonstrate. Consider now some general analogies between ecological and economic competition, evolution, and their interconnections before concentrating on intraspecific competition.

Concepts of competition are fundamental to both economics and ecology (Hirshleifer, 1977; compare Nelson and Winter, 2002).

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