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INFORMATION, CHANCE, AND EVOLUTION: ALCHIAN AND THE ECONOMICS OF SELF‐ORGANIZATION
Author(s) -
Vany Arthur De
Publication year - 1996
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1996.tb01387.x
Subject(s) - economics , punctuated equilibrium , imitation , profit maximization , mathematical economics , neoclassical economics , evolutionary economics , argument (complex analysis) , property (philosophy) , profit (economics) , microeconomics , sociocultural evolution , epistemology , sociology , philosophy , evolutionary biology , psychology , biology , social psychology , biochemistry , anthropology
The strong invisible hand theorem says there is emergent order in human affairs. Smith and Hayek described it; Alchian gave the evolutionary proof. He showed that profit maximization is an emergent property of evolution when survival depends on positive profits. I extend Alchian's argument to consider how evolution discovers and adopts successful organizational forms. Evolving organizations “lock in” on inefficient equilibria. Noise and imitation—the evolutionary operators Alchian stressed—promote learning and adaptation to move the evolutionary dynamic off inefficient paths. Evolution is orders of magnitude faster than optimization; the relative time scales make the processes observationally distinguishable.