nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2022‒10‒10
eleven papers chosen by
Matthew Baker
City University of New York

  1. The Agenda for Evolutionary Economics: Results, Dead Ends, and Challenges Ahead. By Giovanni Dosi
  2. Community, state and market: Understanding historical water governance evolution in Central Asia By Amirova, Iroda; Petrick, Martin; Djanibekov, Nodir
  3. What Feeds on What? Networks of Interdependencies between Culture and Institutions By Nadia von Jacobi; Vito Amendolagine
  4. Trust Institutions, Perceptions of Economic Performance and the Mitigating role of Political Diversity By Samba Diop; Simplice A. Asongu
  5. Cooperation, Competition, and Welfare in a Matching Market By Bester, Helmut; Sákovics, József
  6. Slavery and the British Industrial Revolution By Stephan Heblich; Stephen J. Redding; Hans-Joachim Voth
  7. Extending Cliometrics to Ancient History with Complexity By Laurent Gauthier
  8. United We Stand: On the Benefits of Coordinated Punishment By Vicente Calabuig; Natalia Jimenez; Gonzalo Olcina; Ismael Rodriguez-Lara
  9. The influence premium of monetary status By Andrea F.M. Martinangeli; Biljana Meiske
  10. Signaling Motives in Lying Games By Fries, Tilman
  11. The Emergence of Enforcement By Luca Anderlini; Leonardo Felli; Michele Piccione

  1. By: Giovanni Dosi
    Abstract: This essay outlines the evolutionary research agenda thoroughly explored in its microeconomic aspects in the forthcoming Manual, The Foundations of Complex Evolving Economies. Part One: Innovation, Organization and Industrial Dynamics, Oxford University Press, 2023. But is there an ''evolutionary paradigm'', in the first place? And if yes, what is it? In brief, in such a paradigm, the economy is interpreted as a complex evolving system. In that, a wide set of techno-economic phenomena are understood as emergent properties - outcomes of far-from-equilibrium interactions among heterogeneous agents - characterized by endogenous preferences, most often ''boundedly rational'' - but always capable of learning, adapting, and innovating with respect to their understandings of the world in which they operate, the technologies they master, their organizational forms, and their behavioral repertoires. All that involves some crucial properties. First, if the entities are genuinely evolving, new elements, new technologies, new organizational forms, new patterns of interaction are bound to appear along the course of evolution. Second, evolution is a multi-scale phenomenon. This is a fundamental property of biological evolution, and even more so is the evolution of economies and whole societies, nested in different institutions - possibly evolving at different paces, and coupled with technological and organizational changes. Third, but relatedly, economies are complex interactive systems. Interaction generally implies emergence. There is no isomorphism between macroscopic phenomena, say, the dynamics of industries, markets, and whole economies, on the one hand, and the behaviours of individual entities, on the other. More is different (Anderson, 1972). Fourth, complexity is intimately linked with non-linearities, and thus multiple possible dynamical paths. History counts. And this, even more so, in socio-economic environments characterized by knowledge accumulation. Knowledge builds upon itself, thus involving what economists in their jargon call dynamic increasing returns. As summarized in this essays Part One of the Manual addresses in the foregoing perspective, (i) Innovation and technological evolution; (ii) The theory of the firm in evolving environments; (iii) The formalization of learning processes; (iv) the theory of production; (v) consumption patterns; (vi) economic interactions and the working of markets; and, (vii) The ensuing structures and evolution of industries. Further in this essay we sketch some fundamental topics of the macroeconomic and developmental research ahead, which we mean to explore in Part Two of the Manual, in progress. At the same time the reader is warned against multiple risks of ''normalization'' by which 'evolution' is reduced to sheer 'innovation', and the latter is handled by standard econometric instruments, which are inevitably bound to largely neglect, among other features, the emergence of novelty, coupled dynamics, profound heterogeneities at all levels, and various forms of complementarities.
    Keywords: Economic evolution; complex systems; technological and organizational innovation; heterogeneity; market processes; bounded rationality; organizational capabilities; routines and heuristics; theory of production; industrial structures.
    Date: 2022–09–21
  2. By: Amirova, Iroda; Petrick, Martin; Djanibekov, Nodir
    Abstract: In Central Asia, community water governance institutions emerged and prevailed for a long time. By employing an analytical modelling approach using variants of the evolutionary Hawk-Dove game, we scrutinise three epochs' (pre-Tsarist, Tsarist and Soviet) coordination mechanisms and qualitatively compare them in the efficiency spectrum. We find that the pre-Tsarist community water governance setting, due to its synergetic and pluralistic aspects, was associated with higher efficiency than the Tsarist and Soviet periods' settings. The pre-Tsarist community arrangement linked irrigation duties with benefits. Our analytical model reveals how the Tsarist Russian regulation that replaced the election-sanctioning element with a de-facto system appointing the irrigation staff and paying them fixed wages corrupted the well-established pre-Tsarist decentralised water governance. We term this move the "Kaufman drift". Resulting inadequacies in the water governance could have been averted either by restoring the community mechanism's election-sanctioning attribute or else with an alternative approach such as privatising water resources. With the use of the "Krivoshein game," we produce an alternative scenario for the region where we envisage the potential consequences of the water privatisation. Modelling history might not disentangle the complex nature of water governance evolution fully, however, the heuristics we use in the analysis assist in guiding the diagnosis of the matter and its solution. This makes our study well-timed for contemporary Central Asia. The analyses assess current water management's chances to return to ancient principles of election-sanctioning and perspectives of private irrigation water rights.
    Keywords: Central-Asian water,self-governance,hierarchy,markets,evolution
    Date: 2022
  3. By: Nadia von Jacobi; Vito Amendolagine
  4. By: Samba Diop (Alioune Diop University, Bambey, Senegal); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: Several previous studies have explored the nexus between trust and socio-economic conditions but do not attempt to examine channels through which the relation operates. In this paper, we examine how political fractionalization mitigates the positive relationship between trust institutions and national economic performance in Africa. Using Round 7 data of Afrobarometer in over 1000 districts in 34 countries, we find that trust institutions positively and significantly affect economic performance. Nevertheless, the positive effect is attenuated in districts with a high level of political diversity. More specifically, a higher level of trust is associated with lower economic performance at a higher level of political fractionalization and vice versa, with a steady linear decrease of the estimated coefficients. Policy implications are discussed.
    Keywords: Trust institutions; economic performance; political diversity
    JEL: K00 O10 P16 P43 P50
    Date: 2022–09
  5. By: Bester, Helmut (HU Berlin and FU Berlin); Sákovics, József (University of the Balearic Islands and University of Edinburgh)
    Abstract: We investigate the welfare effect of increasing competition in an anonymous two-sided matching market, where matched pairs play an infinitely repeated Prisoner’s Dilemma. Higher matching efficiency is usually considered detrimental as it creates stronger incentives for defection. We point out, however, that a reduction in matching frictions also increases welfare because more agents find themselves in a cooperative relationship. We characterize the conditions for which increasing competition increases overall welfare. In particular, this is always the case when the incentives for defection are high.
    Keywords: cooperation; prisoner's dilemma; competition; welfare; matching; trust building;
    JEL: C72 C73 C78
    Date: 2022–07–21
  6. By: Stephan Heblich; Stephen J. Redding; Hans-Joachim Voth
    Abstract: Did overseas slave-holding by Britons accelerate the Industrial Revolution? We provide theory and evidence on the contribution of slave wealth to Britain’s growth prior to 1835. We compare areas of Britain with high and low exposure to the colonial plantation economy, using granular data on wealth from compensation records. Before the major expansion of slave holding from the 1640s onwards, both types of area exhibited similar levels of economic activity. However, by the 1830s, slavery wealth is strongly correlated with economic development – slave-holding areas are less agricultural, closer to cotton mills, and have higher property wealth. We rationalize these findings using a dynamic spatial model, where slavery investment raises the return to capital accumulation, expanding production in capital-intensive sectors. To establish causality, we use arguably exogenous variation in slave mortality on the passage from Africa to the Indies, driven by weather shocks. We show that weather shocks influenced the continued involvement of ancestors in the slave trade; weather-induced slave mortality of slave-trading ancestors in each area is strongly predictive of slaveholding in 1833. Quantifying our model using the observed data, we find that Britain would have been substantially poorer and more agricultural in the absence of overseas slave wealth. Overall, our findings are consistent with the view that slavery wealth accelerated Britain’s industrial revolution.
    JEL: F60 J15 N63
    Date: 2022–09
  7. By: Laurent Gauthier (LED - Laboratoire d'Economie Dionysien - UP8 - Université Paris 8 Vincennes-Saint-Denis)
    Abstract: Traditional cliometrics usually focus on economic data from the modern and contemporary periods, and do not have much to do with ancient history, mostly due to a lack of relevant data. Separately, the field of cliometrics and complexity, by looking at data in the light of complex systems analysis, gives access to a broader range of sources. Concentrating on the distinction between cliometrics and historical economics, we explore the epistemic gap between economics and history, which we reduce to two fundamental differences: the relationship to primary sources, and the presence of a nomothetic framework. Using this gap as a guide, we argue that a logical expansion of cliometrics and complexity, which do not have to be about the economy, but can operate on primary historical sources, could address a much broader set of periods, societies, and phenomena, leaning on microeconomic models. Redefining cliometrics in that way gives them access to the extensive corpora of historical material that digital humanities have produced. Working closer to primary sources contributes to bridging the epistemic gap between economics and history, and the systematic and explicit way in which cliometrics and complexity tackle data contributes to making historical research more scientific.
    Keywords: Cliometrics,historical economics,historical method
    Date: 2022–08–20
  8. By: Vicente Calabuig (University of Valencia); Natalia Jimenez (Universidad Pablo de Olavide); Gonzalo Olcina (University of Valencia); Ismael Rodriguez-Lara (Universidad de Granada and Economic Science Institute, Chapman University)
    Abstract: Coordinated punishment occurs when punishment decisions are complements; i.e., this punishment device requires a specific number of punishers to be effective; otherwise, no damage will be inflicted on the target. While societies often rely on this punishment device, its benefits are unclear compared with uncoordinated punishment, where punishment decisions are substitutes. We argue that coordinated punishment can prevent the free-riding of punishers and show, both theoretically and experimentally, that this may be beneficial for cooperation in a team investment game, compared with uncoordinated punishment.
    Keywords: Team investment game, coordinated punishment, uncoordinated punishment, freeriding, cooperation
    JEL: C9 D02 D03 D69 J01
    Date: 2022
  9. By: Andrea F.M. Martinangeli; Biljana Meiske
    Abstract: The transmission of adaptively valuable behaviours requires individuals who are more likely to possess them to have greater influence over others’ actions. The conferment of high status to the fittest is functional to this objective. We ask to what extent status recognition and the attribution of status privileges are hard wired in humans’ psychology, in a world in which status imperfectly signals underlying cognitive ability due to the accumulation and transmission of status sources. We find that randomly assigned high status grants individuals greater influence over others’ actions than randomly assigned low status. This finding does not emerge however when the advisor’s status is linked to their cognitive ability.
    Keywords: Inequality status social influence ability
    JEL: C91 D02 D31
    Date: 2021–07
  10. By: Fries, Tilman (WZB Berlin)
    Abstract: This paper studies the implications of agents signaling their moral type in a lying game. In the theoretical analysis, a signaling motive emerges where agents dislike being suspected of lying and where some types of liars are more stigmatized than others. The equilibrium prediction of the model can explain experimental data from previous studies, in particular on partial lying, where some agents dishonestly report a non payo
    Keywords: lying; image concerns; honesty; experiment;
    JEL: C91 D82 D90
    Date: 2021–01–14
  11. By: Luca Anderlini (Department of Economics, Georgetown University); Leonardo Felli (Department of Economics, University of Cambridge); Michele Piccione (Department of Economics, London School of Economics)
    Abstract: We ask how enforcement can endogenously emerge in a landscape in which only raw power iron fists, govern the interaction of agents. If two agents are ranked in terms of power, the more powerful one can expropriate, at a cost, the less powerful one. Alternatively, both agents can engage in surplus-augmenting cooperation (e.g. trade). If expropriation is not too costly and cooperation is not overwhelmingly productive, for any pair of ranked agents the possibility of expropriation prevents cooperation. The more powerful agent finds it profitable to expropriate the less powerful one. However, if expropriating agents who are net expropriators of others is cheaper, then a more powerful agent may endogenously become an ``enforcer" for lower ranked agents. In equilibrium, the more powerful agent expropriates the less powerful ones by smaller amounts, and the less powerful ones cooperate and refrain from expropriating agents below them. This is because if they do not the more powerful agent will find it cheaper to expropriate only them by a larger amount. Surprisingly, the details of the power structure are irrelevant for enforcement to emerge as an equilibrium phenomenon provided that the original jungle is inhabited by a sufficiently large number of agents and by one that dominates all others.
    Keywords: Jungle, Power Structures, Enforcement, Rule of Law
    JEL: C79 D00 D01 D31 K19 K40 K49
    Date: 2022–09–21

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