7. Development as an Evolutionary Economic Process

This chapter describes how economic development is viewed from the perspective of modern evolutionary economics. It lays out the basic conceptual view of economic activity and economic change provided by evolutionary economic theory, the central role played by technologies and their evolution in economic dynamics, and the key role of institutions in forging the evolutionary processes at work. At the same time, institutions themselves evolve. A central argument is that an adequate economic framework for analyzing long run economic change must recognize the rich set of institutions involved—not just firms, households, and markets, but also a wide range of private not-for profit and public organizations and structures—and also that the varied roles of government cannot be understood simply as responses to “market failure”. The proposition is developed that the key driving forces involved in development are the co-evolution of technologies and institutions.