"Thorstein Veblen and Post-Darwinian Economics".
By

Geoffrey M. Hodgson. Economics and Evolution. Chapter 9, pp 123-24.

Polity Press,1993.

In a famous article originally published in 1898, Thorstein Veblen (1919, p.56) asked: 'Why is economics not an evolutionary science?' The term 'evolutionary' was subsequently adopted by institutional economists, but often in broad or developmentalist terms, and with only slight attention to the more precise mechanisms of natural selection as developed in biology. Veblen's knowledge of biological science was remarkably up-to-date, yet evolutionary theory has developed enormously since his death, leaving many of his institutionalist followers well behind. Veblen made a direct appeal to biological science for inspiration; but subsequently, and until very recently, this example has rarely been replicated. Accordingly there has been remarkably little detailed exploration, informed by biology, of what Veblen precisely meant by an 'evolutionary' science, and of the character of the 'post-Darwinian' economics that he attempted to build.

Like Alfred Marshall, Thorstein Veblen saw that the appropriate metaphor for economics was to be found in biology. In particular, Veblen saw the evolutionary metaphor as crucial to the understanding of the processes of technological development in a capitalist economy. But unlike his English colleague, he did not care to develop a static, equilibrium analysis as a prelude to the dynamic. He characterized his own economics as post-Darwinian, and argued that economics should embrace the metaphor of evolution and change, rather than the static ideas of equilibrium that had been borrowed by the neoclassical economists from physics.

However, after rebutting a mechanical prelude to economic dynamics, Veblen was faced with a biology at a stage of development at which the mechanisms of evolution were only partly understood. Consequently, and given his own personal aversion to intellectual 'symmetry and system-making' (Veblen, 1919, p. 68), there was little chance that Veblen would be able to build an economic theory on the Marshallian scale.

Instead, he leaves us with plentiful hints and insights, many brilliant, several contradictory. He writes in a style which is often dazzling and illuminating, but also sometimes evasive or unclear. Partly for the latter reason, and partly because he did not provide us with a systematic theoretical legacy, his significance for evolutionary economics in particular, and economics in general, still remains underestimated to this day.

Importantly, Veblen had a keen and perceptive understanding of the relationships and connections between the social and the physical sciences. In this chapter it will be shown that Veblen had two primary reasons for the adoption of a Darwinian and evolutionary metaphor. One relates to the idea of cumulative causation and an opposition to depictions of the economic process that are consummated in equilibrium. The other is based on the formation of analogies to both the gene and the processes of natural selection in the social world.

As noted in chapter 3, Darwinian natural selection involves several component principles. First, there must be sustained variation among the members of a species or population. Without such variation, natural selection cannot operate. Second, there must be some principle of heredity or continuity, through which offspring resemble their parents more than they resemble other members of their species, due to some mechanism by which individual characteristics are passed on from one generation to the next. Third, natural selection operates either because better-adapted organisms leave increased numbers of offspring, or because the genotypes that are preserved bestow advantage in struggling to survive. The latter is the principle of the struggle for existence. The application of the metaphor of natural selection to economics should be on the basis of analogous principles. It is argued here that Veblen was relatively successful in this regard.

The author argues that in spite of Veblen's failures,

Item 1: he left us with many brilliant insights.

"Thorstein Veblen and Post-Darwinian Economics".
By

Geoffrey M. Hodgson. Economics and Evolution. Chapter 9, pp 123-24.

Polity Press,1993.

In a famous article originally published in 1898, Thorstein Veblen (1919, p.56) asked: 'Why is economics not an evolutionary science?' The term 'evolutionary' was subsequently adopted by institutional economists, but often in broad or developmentalist terms, and with only slight attention to the more precise mechanisms of natural selection as developed in biology. Veblen's knowledge of biological science was remarkably up-to-date, yet evolutionary theory has developed enormously since his death, leaving many of his institutionalist followers well behind. Veblen made a direct appeal to biological science for inspiration; but subsequently, and until very recently, this example has rarely been replicated. Accordingly there has been remarkably little detailed exploration, informed by biology, of what Veblen precisely meant by an 'evolutionary' science, and of the character of the 'post-Darwinian' economics that he attempted to build.

Like Alfred Marshall, Thorstein Veblen saw that the appropriate metaphor for economics was to be found in biology. In particular, Veblen saw the evolutionary metaphor as crucial to the understanding of the processes of technological development in a capitalist economy. But unlike his English colleague, he did not care to develop a static, equilibrium analysis as a prelude to the dynamic. He characterized his own economics as post-Darwinian, and argued that economics should embrace the metaphor of evolution and change, rather than the static ideas of equilibrium that had been borrowed by the neoclassical economists from physics.

However, after rebutting a mechanical prelude to economic dynamics, Veblen was faced with a biology at a stage of development at which the mechanisms of evolution were only partly understood. Consequently, and given his own personal aversion to intellectual 'symmetry and system-making' (Veblen, 1919, p. 68), there was little chance that Veblen would be able to build an economic theory on the Marshallian scale.

Instead, he leaves us with plentiful hints and insights, many brilliant, several contradictory. He writes in a style which is often dazzling and illuminating, but also sometimes evasive or unclear. Partly for the latter reason, and partly because he did not provide us with a systematic theoretical legacy, his significance for evolutionary economics in particular, and economics in general, still remains underestimated to this day.

Importantly, Veblen had a keen and perceptive understanding of the relationships and connections between the social and the physical sciences. In this chapter it will be shown that Veblen had two primary reasons for the adoption of a Darwinian and evolutionary metaphor. One relates to the idea of cumulative causation and an opposition to depictions of the economic process that are consummated in equilibrium. The other is based on the formation of analogies to both the gene and the processes of natural selection in the social world.

As noted in chapter 3, Darwinian natural selection involves several component principles. First, there must be sustained variation among the members of a species or population. Without such variation, natural selection cannot operate. Second, there must be some principle of heredity or continuity, through which offspring resemble their parents more than they resemble other members of their species, due to some mechanism by which individual characteristics are passed on from one generation to the next. Third, natural selection operates either because better-adapted organisms leave increased numbers of offspring, or because the genotypes that are preserved bestow advantage in struggling to survive. The latter is the principle of the struggle for existence. The application of the metaphor of natural selection to economics should be on the basis of analogous principles. It is argued here that Veblen was relatively successful in this regard.

The author argues that Veblen

Item 3: wanted to reduce economics to a pure biological science.

Através de uma política cultural, o Governo pretende incentivar o retorno das pessoas aos cinemas. Após alguns estudos, chegou-se à conclusão de que a elasticidade-renda da demanda per capita de cinema é constante e igual a 1/4 e a elasticidade-preço é também constante e igual a -1. Os consumidores gastam, em média, R$ 200,00 por ano com cinema, tem renda média anual de R$ 12.000,00 e cada bilhete custa atualmente R$ 2,00.

Item 2: A elasticidade-renda igual a 1/4 implica que, se a renda média aumentasse R$ 1000,00, o número médio de sessões de cinema por consumidor aumentaria em 250 por ano.

Indique se a afirmativa é verdadeira ou falsa:

Item 3: Se !$ f: [0,1] \rightarrow [0,1] !$ é continua em !$ [0,1] !$, existe !$ x ∈ [0,1] !$ tal que !$ f(x) = x !$. (Sugestão: desenhe um gráfico).

Tight Money
By

Robert Heilbroner and Lester Thurow. Economics Explained. Chapter 12, pp. 158-159. Touchstone Book. Simon and Schuster, 1994.

That bring us, of course, back to square one. If we cannot easily introduce deep institutional changes and if the use of controls promises quick relief but no permanent cure, how do we cope with the inflationary propensities that continue to lurk within modern capitalism?

The answer is very likely to be continued reliance on the one medicine that has brought inflationary fever down: tight money. As we have seen, if we are willing to tighten money ruthlessly, and to keep it tight until unions quit asking for higher wages and corporations are forced into price wars to win markets, then inflation will come to an end.

The problem with tight money is twofold. The first, obvious, problem is that the cure is so severe it threatens the health of the patient, even though it rids him of his immediate ailment. The recession that stopped inflation in the early 1980s was the worst economic catastrophe that afflicted the capitalist world since the Great Depression itself. No one wants to go through that experience again.

The second problem with tight money is certainly not an equitable, and likely not an effective anti-inflationary policy unless it is imposed with Draconian severity. Suppose a tight-money policy brings unemployment up to, say, 8 percent. That does not mean that every worker is laid off for 8 percent of the year. It means that some workers are unemployed for long periods of time. Over 50 percent of the total number of weeks of unemployment is typically borne by individuals who are unemployed for more than half of the year. Almost half of those who suffer long spells of unemployment end up not with a job, but by withdrawing from the work force.

Thus if a relatively mild recession is the way we decide to fight inflation, we should recognize that the honor of being designated as an inflation fighter is rather selectively awarded. It does not mainly go to those whose recruitment into the brigade of the unemployed would be most effective in bringing down wage rates, namely the group of prime-age white males. Rather, enlistment in the ranks of inflation fighters is predominantly that of younger workers, age 16-24, of women, of blacks and of Hispanics. These groups share two characteristics: they tend to be relatively unskilled, and they tend to lack political clout. Thus their impact on the trend of the national wage rate is small. The brigade is not only inequitably chosen, but is ineffective.

The authors argue that

Item 1: the burden of the anti-inflation policy falls more on the younger labor force.

Indique se cada afirmativa é verdadeira ou falsa.

Seja: !$ f: \Re \rightarrow \Re !$ dada por !$ f(x) = x^3 + 3x^2 + 2 !$.

Item 3: !$ f(x) !$ possui um mínimo local e um máximo local.

Canadian Economic Nationalism
By

Paul Krugman. Geography and Trade. Chapter 3, pp. 90-92. Leuven University Press and The MIT Press, 1991

In 1873, when the various British colonies north of the United States were gathered under a single government, it looked likely that the whole nation would become part of the North American periphery to the already coalescing U.S. manufacturing belt. We are used to thinking of Canada, like the United States, as being a great immigrant nation. In its early years as a nation, however, Canada attracted few immigrants from abroad--and Canadians, especially from impoverished Quebec, were migrating in substantial numbers to the United States. There was little manufacturing in Canada and seemingly little prospect that any would arise. Agricultural expansion was proceeding westward into the prairies, much as it was in the United States, but as in the United States it was not pulling manufacturing and urbanization west with it.

If one had made a guess in 1870, one would probably have predicted an agricultural Canada of perhaps 5 or at most 10 million people--a sort of oversized Nebraska. Most of those people would have been fairly prosperous, much as most U.S. farmers are; but there wouldn’t have been much of a nation.

What happened instead, of course, was a deliberate policy of delinking from the U.S. economy. In 1878 Canada introduced the so-called National Policy, which had two main elements; a tariff wall that in effect forced the Canadian agricultural sector to turn to domestic producers rather than established U.S. suppliers, and a national railway that in effect subsidized East-West traffic in opposition to the natural North-South direction.

Isn’t this simply a standard kind of infant-industry, import-substitution policy, of the kind that has gotten such a bad name in the past forty years? Not quite. Until the 1920’s, Canada and the United States were in a fairly unusual situation with respect to one another: in effect labor mobility between the two was nearly perfect. The reason is that both countries were the targets of large-scale, economically motivated immigration, and so on the margin were competing for workers.

But what that means is that Canadian import substitution could do something that similar policies elsewhere cannot: by protecting the domestic market, they could also enlarge it. Because Canadian farmers were forced to buy Canadian, there were more Canadians than there would otherwise have been and hence a larger Canadian market. In principle, that market would eventually be large enough to be self-sustaining. That is, the Canadian market would eventually become large enough to make it efficient to locate manufacturing there to serve the market even without protection. At that point the economy could throw away its crutches and accept free trade without fear of becoming peripheralized. This is not so much an infant-industry as an infant-country argument for protection.

Was this policy a success? Presumably that depends on one’s objectives. What seems clear is that the policy did more than create a hothouse industrial sector that would die off as soon as it was exposed to the winds of international competition. Canada now is strong enough industrially to accept free trade with the United States without fearing that it will be peripheralized. (Well, okay, some Canadians still fear it, and they could even be right; but they are a minority and are probably wrong.) It seems reasonable to argue that Canada’s nationalistic economic policies were the key factor in creating this strength.

The author argues that

Item 1: free trade would harm the Canadian industry.

Comparando os resultados dos modelos de oligopólio de Cournot, Stackelberg, e Bertrand vemos que:

Item 2: No modelo de Bertrand, o preço resultante é menor e a quantidade produzida maior que em Cournot.

Seja X uma variável aleatória contínua com função de densidade f e com média e variância finitas. Podemos afirmar que:

Item 5: A padronização da variável aleatória X elimina efeitos de origem, mas não necessariamente elimina efeitos de escala.