Abstract
An evolutionary perspective on the nature of economic activity requires a theory of human behavior and cognition that highlights human creativity and innovativeness, while at the same time recognizing that in many arenas of economic life change is slow and more routine aspects of behavior obtain. It is proposed that Herbert Simon’s conception of human behavior as largely “bounded rational” is capable of suiting both aspects. However, to be able to encompass the enormous advances humans have achieved over the years in their ability to meet a variety of wants, a theory of behavior and cognition suitable for evolutionary economics needs to recognize the evolving cultural context of economic behavior and cognition.
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Notes
For a fine broad review of behavioral economics see Diamond and Vartianen 2007
Perhaps the best general reference is Simon 1957
Giovanni Dosi has urged me to state clearly that the conception of bounded rationality I am endorsing here must not be interpreted as implying that there is something that could be interpreted as fully rational behavior that bounded rationality is not quite up to achieving. Under the perspective I develop here truly fully rational behavior is simply impossible, often even to define, much less achieve, except under tightly defined and controlled contexts that are quite unlike the contexts actually faced by economic actors.
The argument that a theory of economic behavior and cognition needs to recognize the cultural basis of human action and thought of course was a central premise of the American Institutional Economists who were an important part of the academic economic community from the beginnings of the twentieth century until after World War II. For a survey of their perspective, see Mazzoleni and Nelson 2013
For a very interesting discussion see J. C. Spender’s Industry Recipes, 1989
For a history of what happened see the introduction by Hodgson and Stoelhorst 2014, to the special issue of the Journal of Institutional Economics concerned with the future of institutional and evolutionary economics.
These two different modes of action taking were built into most of the models developed in Nelson and Winter 1982
There is good reason to believe that Dewey would agree with me on this.
For a fine review of the literature on organizational routines, see Becker 2004
This is Herbert Simon’s concept of “satisficing”
Donald (1991) provides a splendid discussion of these and related matters
There is some evidence that certain other animals have this capability, but to a very limited degree.
Other species have the capability of spreading the effective behaviors learned by one individuals to others in the community, but not of building further and cumulatively from that.
See Mazzoleni and Nelson 2013, for a discussion of that tradition of economic research. The December 2014 special issue of the Journal of Institutional Economics reviews the state of both evolutionary and institutional economics and considers their connections. See in particular the opening essay by Hodgson and Stoelhorst
Formal proofs of important aspects of this argument can be found in chapter 7, “Firm and Industry Response to Changed Market Conditions” in Nelson and Winter 1982
Fro a more elaborate discussion see Nelson 2012)
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Nelson, R.R. Behavior and cognition of economic actors in evolutionary economics. J Evol Econ 26, 737–751 (2016). https://doi.org/10.1007/s00191-015-0431-7
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DOI: https://doi.org/10.1007/s00191-015-0431-7