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Title: Technological regimes and paradigms: a core concept of evolutionary economics


1
Technological regimes and paradigms a core
concept of evolutionary economics
  • ESST Module 4 Unit 2
  • Andreas Reinstaller

2
Remember? The three central question in economics
and how Neoclassical economics approaches them
  • Central questions
  • How is economic activity coordinated?
  • What explains prices?
  • How is wealth created and redistributed?
  • Neoclassical approach
  • Coordination Markets coordinate. Is a market in
    equilibrium all production and consumption plans
    correspond. There is perfect coordination
  • Prices Utility and profit maximization under
    full information leads that prices embody all
    information on intrinsic evaluation of goods by
    consumers and production costs
  • Growth Economy as a whole is in a continued but
    moving equilibrium which is brought about by the
    coordination mechanisms.

3
Evolutionary Economics Competition as an
evolutionary process
Biology Economics
Fitness Profitability
Genes Routines
Phenotypes Firms
Selection Competition
Cross-over Learning, innovating
Mutation Inventing
  • Coordination frequency adjustment on the
    population level. Firms that are not adapted to
    the social environment/market on which they act
    will leave the industry, while others may enter.
  • Prices reflect intensity of competition on the
    market, costs, accumulation levels and the growth
    of demand of the market
  • Growth Competition drives the innovation
    process, which in turn generates growth.
  • Unit of Selection Firm
  • Bounded rationality firms and other
  • economic agent may act rationally, but
  • within limits.
  • Technologies are complex systems

4
The representation of technological and
organizational learning rational and bounded
rational choices
logical Incrementalism (evolutionary)
cognitive representations (evolutionary)
Off-line
local experimentation (evolutionary)
Evaluation
rational (neo-classical) model
On-line
Location on the fitness landscape
Local
Distant
Limited
Set of technological alternatives
Extensive
From G. Gavetti and D.Levinthal (2000),in ASQ,
vol. 45, p. 116
5
Technology as a complex system well behaved
production sets vs. rugged technological
landscapes
A rugged (evolutionary) technology landscape
Fitness
Fitness
A smooth (Neoclassical) technology landscape
6
Technological interdependence Local search and
lock-in
Implication Even if a firm would know all
available routines and dispose over all
possible skills, technological interdependence
may lead to solutions that from a purely
technical and economic standpoint are
suboptimal.
From Reinstaller and Hölzl (2002), The Babbage
Principle after Evolutionary Economics On the
complex roots of labour displacing technical
change, submitted paper.
7
Technological Paradigms the core concept of
evolutionary economics
  • What is a paradigm?
  • A model and a pattern of solution of selected
    technological problems, based on selected
    principles derived from natural sciences and on
    selected material technologies, Dosi (1982),
    p.152
  • Within a paradigm problem solving behaviour is
    developed The selected principles generate
    routines, heuristics (more later). Together they
    constitute relevant knowledge.
  • Technological regimes Depending on the selection
    environment and the underlying technology
    industrial sectors will show specific patterns of
    development (more later)
  • Technological trajectories. Once a paradigm is
    chosen, the technological artefacts developed
    within this paradigm are improved. This
    improvement pattern is a technological trajectory.

8
Generating new Knowledge. How did the economic
mainstream try to overcome some of the
shortcomings of its Growth theory? A recap of
Endogenous Growth theory.
  • Remember the variable A in previous lecture.
  • Human capital models explain A, through
    previously accumulated human capital of a nation
    -gt explains growth differentials between
    developed and less developed countries.
  • R D models same as above, but instead of
    having fuzzy human capital we have quality ladder
    due to R D countries investing more in R D
    have higher growth
  • Learning by doing models past levels of
    investment (accumulation) trigger a learning
    effect.
  • Critique
  • Human Capital The notion of Human Capital alone
    does not take into account the complex dynamics
    of learning and knowledge creation. If we want to
    understand the process of growth we need to look
    at learning processes
  • R D linear STI model (see later)
  • Learning by doing just a small extension to
    Solow model. But does not remarkably improve
    the empirical performance of the model.

9
Generating new knowledge. What is knowledge? A
definition.
  • Knowledge is structured information on a system
    or a subset of its elements that allows to
    predict the behaviour of that system. This
    entails a process of structuring information
    during which elementary pieces of information on
    the system are put into causal relation with each
    other, and a hierarchy of causal relations is set
    up.

From A.Reinstaller (2002), The use of Genetic
Programming in Evolutionary Economics by Bernd
Ebersberger and Andreas Pyka. A note.,
manuscript (referee report)
10
Generating new knowledge. What is knowledge?
Different types.
  • Aristotles knowledge taxonomy Knowledge has
    been at the centre of analytical interest from
    the very beginning of civilisation.
  • Epistèmè knowledge that is universal and
    theoretical "know-why."
  • Technè knowledge that is instrumental,
    context-specific and practice-related
    "know-how."
  • Phronesis Knowledge that is normative,
    experience-based, context-specific and related to
    common sense "practical wisdom."
  • Knowledge has been divided into four categories
    (Lundvall and Johnson, 1994)
  • Know-what knowledge about facts.
  • Know-why knowledge about principles and laws of
    motion in nature, in the human mind and in
    society.
  • Know-how skills i.e. the ability to do
    something.
  • Know-who involves information about who knows
    what and who knows what to do (network knowledge).

11
On the location of knowledge
  • Embedded in individuals
  • Embedded in organisations and institutions
    (shared codes of communication, shared routines,
    shared methods for problem solving and searching)
    .
  • Knowledge is tacit or codified
  • Tacit knowledge cannot be easily transfered. -gt
    No Blueprint character.
  • Even codified knowledge cannot always be easily
    transfered -gt absorptive capacities
  • Person
  • Substantive and procedural
  • Skills
  • Formal knowledge
  • Organizational routines and heuristics
  • Combination of
  • They are the genes of the evolutionary process

12
The characteristics of technological knowledge
  • Technological knowledge has characteristics of a
    public good, i.e. non-rivalry and
    non-excludability make it easily accessible to
    others
  • Uncertainty it is difficult to assess further
    developments and market opportunities
  • Cumulativeness it builds on previous knowledge
  • This has also an advantage it generates
    externalities and spillovers (i.e. the social
    rate of return is higher than the private one)
  • The disadvantage is that it may lead to
    underinvestment, hence some protection is needed
    (attained by patent protection, industrial
    secrecy...)

13
Operationalising the concept of technological
paradigms technological regimes and
trajectories, or whats the effect on an industry?
  • A Technological Regime is a particular
    combination of
  • opportunity conditions (scarce or pervasive)
  • appropriability conditions (high or low
    appropriability)
  • cumulativeness (dependence on previous
    technological achievements)
  • knowledge base (degree of taciteness and
    complexity, i.e. relieance one or several
    different sciences and knowledge bases)
  • These factors determine development path, the
    technological trajectory, of each single
    technology in the regime.
  • This gives rise to specific development patterns
    of industries, as it has an influence on
  • Competition in that industry
  • The Market structure in that industry
  • Technical change in that industry
  • A technological regime is the manifestation of
    technological paradigms.

14
Technological regimes The extreme cases
Schumpeter Mk. I, Schumpeter Mk II
  • There are roughly two distinct regimes that are
    distinguished
  • Schumpeter Mark I
  • high opportunity
  • low appropriability
  • low cumulativeness
  • example machine tool or mechanical industries
  • Schumpeter Mark II
  • high opportunity
  • high appropriability
  • high cumulativeness
  • example chemicals, electronics

15
Assessing EE and Scot Characteristics of
evolutionary processes
  • Processes which generate variation in the pool of
    characteristics in a population
  • Processes which restrict and guide possible
    patterns of variation in behaviour
  • Processes which change the relative frequency of
    different entities within the population
  • Processes which determine the rate at which the
    above three processes change
  • Processes which determine the overall direction
    of evolutionary change

Source Metcalfe, J.S. (1998), Evolutionary
Economics and Creative Destruction, London, p. 23
16
Relating Evolutionary Economic Theory to SCOT, I
  • SCOT
  • Unit of analysis social actors (individual,
    company, institution, government) grouped into
    relevant social groups for the development of a
    technology
  • Inducement to engage into research problems in
    society
  • Generation of variety different technological
    communities produce solutions, or facts that
    are channeled into the pool of possible solutions
  • Selection mechanisms value set of a society
    (e.g. religion) in filtering relevant problems,
    relevant social groups select the final design.
  • Main conclusion technologies are socially
    constructed
  • EE
  • Unit of analysis business firm grouped into
    industries
  • Inducement to engage into research technological
    opportunity need is the mother of invention
    view is partially rejected.
  • Selection mechanism market. Firms that are
    better adapted to social circumstances (embodied
    in characteristics of demand) survive. (genotype
    routines, phenotype firm)
  • Main conclusion economic development is a
    evolutionary process in which better adapted
    firms survive. What makes it better adapted is
    left open -gt SCOT is here complementary

17
Relating Evolutionary Economic Theory to SCOT, II
By Marc Dijk (2001), A generic process-model
of science and technology development, ESST
2001, term paper, Maastricht.
18
General conclusion comparison SCOT - EE
  • The two approaches are complementary, as both are
    evolutionary! SCOT explains parts of the problem
    which are not explained by EE, i.e. it provides
    an accurate description of the selection
    environment in which business firms and
    industries act. EE explores how the evolutionary
    selection mechanism actually acts upon business
    firms. The focus of EE is narrower as it lies on
    the exploration of the dynamics of the creation
    of wealth, and is not interested in problems of
    wider concern.
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