Economic Evolution

The new institutional economics offers one of the most exciting research agendas in economics today. The book looks at the differences and similarities between the three main approaches.
Institutional economics offers one of the more interesting agendas in economics - the economic analysis of the evolution of institutions. This text focuses on three of the approaches which are central to institutional economics: the theory of the firm, with particular emphasis on Oliver Willamson's transaction cost economics; evolutionary economics, taking the work of Nelson and Winter as the benchmark; and game theoretical accounts of the spontaneous evolution of conventions and institutions inspired by Hayek. The analysis shows that attempts to group these approaches under the same broad heading conceals many differences. Not the least of these are the different meanings given to such key concepts as "institution" and "evolution". Despite these differences, the book does identify two evolutionary mechanisms that govern processes of economic change in each of the approaches which is discussed. Drawing on recent work in biology and philosophy of science, the author identifies some unresolved issues in attempts to transfer the concepts of evolutionary biology.