Title: Technological regimes and paradigms: a core concept of evolutionary economics
1Technological regimes and paradigms a core
concept of evolutionary economics
- ESST Module 4 Unit 2
- Andreas Reinstaller
2Remember? 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.
3Evolutionary 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
4The 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
5Technology as a complex system well behaved
production sets vs. rugged technological
landscapes
A rugged (evolutionary) technology landscape
Fitness
Fitness
A smooth (Neoclassical) technology landscape
6Technological 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.
7Technological 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.
8Generating 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.
9Generating 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)
10Generating 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).
11On 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
12The 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...)
13Operationalising 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.
14Technological 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
15Assessing 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
16Relating 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
17Relating Evolutionary Economic Theory to SCOT, II
By Marc Dijk (2001), A generic process-model
of science and technology development, ESST
2001, term paper, Maastricht.
18General 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.