Evolutionary Game Theory and Thorstein Veblen's Evolutionary Economics: Is EGT Veblenian?
Villena, Mauricio G., Villena, Marcelo J., Journal of Economic Issues
One of the main criticisms of the "old" school of institutional economics is its lack of formality and of an operational approach that allows the replication of the institutional type of analysis by the academic economic community at large. Clearly this has been one of the reasons behind the seemingly little attention that this nontraditional approach to economics has received from a mainstream with an ever-increasing emphasis on mathematical models (see Rutherford 1994). Recently, however, some distinguished economists, recognizing the importance of the institutional context in economic analysis, have started to incorporate topics usually associated with old institutionalism in the debate of the mainstream of economic thought. This has given rise to the development of what is now known as "new" institutional economics, typically associated with the names of Ronald Coase, Douglas North, Mancur Olson, Richard Posner, Oliver Williamson, and others. (1) The main aim of this school has been to provide a formal approach to institutional analysis based mainly on neoclassical and utilitarian foundations (see, for instance, Hodgson 1993), thus leaving out of the study many of the basic principles behind the original tradition of institutional economics which push these foundations forward. Indeed, little has been done so far to formalize some of the main tenets and ideas of the "old" institutional economics approach as proposed by their main exponents, namely Thorstein B. Veblen, John R. Commons, and Wesley C. Mitchell. It is precisely in this context that this paper attempts to make a contribution. In particular, we attempt to link the work of Veblen on evolutionary economics with the recently developed approach of biological game theory, or evolutionary game theory (EGT) as it is best known within economics. EGT is a formal, mathematical approach within evolutionary economics, which thus far has been mainly applied to economics as a refinement of the Nash equilibrium concept.
Considering that the main developments in EGT have occurred in the field of theoretical biology, it is not surprising that until now no clear link between EGT and any of the economic approaches identified with the label "evolutionary economics" has been established. Indeed, EGT has so far been developed completely independently from evolutionary economics (Weibull 1998, 2). Nevertheless, whenever a methodological link has been suggested, EGT has been principally connected with the work of economists like Joseph Schumpeter, David Hume, Karl Marx, and Friedrich Hayek. (2) However, so far in the discussion one economist has been "conspicuous" by his absence: Veblen. To the knowledge of the authors, no specific work analyzes Veblen's contribution to the development of a theory of socio-economic evolution in relation to the potential application of EGT to the social context. This is quite extraordinary considering the rather Darwinian nature of EGT and the fact that Veblen was one the first economists to make a direct appeal to biological science for inspiration and certainly the first economist to propose explicitly an approach to economics based on Darwinian lines or, as he put it, a "post-Darwinian" economics. This is even more striking considering that some authors have argued that Veblen was relatively successful in establishing the basis of a Darwinian economics (Hodgson 1992, 1993, 1999).
Analyzing the connection between Veblen's evolutionary approach and that of EGT, we expect to shed some light on the potential contribution of Veblen's theory of socio-economic evolution to the discussion of the application of EGT to social environments. Similarly, we also investigate to what extent elements of EGT can be used to formalize some of the basic evolutionary principles proposed by Veblen. The paper has been structured as follows. The first section presents the methodological imperatives laid down by Veblen, defining an evolutionary approach. …