Evolution and Institutions: On Evolutionary Economics and the Evolution of Economics

Published by EH.NET (September 2000)

Geoffrey M. Hodgson, Evolution and Institutions: On Evolutionary Economics

and the Evolution of Economics. Cheltenham, UK and Northhampton, MA: Edward

Elgar, 2000. x + 345 pp. $30.00 (cloth), ISBN: 1-85898-813-6.

Reviewed for EH.NET by Anne Mayhew, Department of Economics, University of

Tennessee.

This has been a frustrating book to read and to review. There are passages of

great insight and importance intermixed with long passages that are little more

than an annotated bibliography of works that have interested Hodgson. A basic

source of the problem is revealed by Hodgson when he tells the reader that the

book “. . . synthesizes several essays drafted in the years 1991-95. . . [but]

is not essentially a second installment of collected works. An aim has been to

recast the essays so that they form a relatively integrated narrative and

reveal a common set of motifs.” (p. ix)

The reader who is familiar with Hodgson’s work over the years since the

publication of his very good Economics and Institutions will be able to

find that loosely integrated narrative and common set of motifs by remembering

three ideas that have driven all of Hodgson’s work: (1) the importance of

biology and the idea of evolution for an understanding of human society; (2)

the need for a revitalized and reformed evolutionary/institutional economics

that would be built upon the salient features of biological evolutionary

theory; and (3) the importance and the difficulty of achieving this goal in a

discipline that does not prize pluralism in thought, and in which status and

prestige often override logic and good sense in determining the acceptance of

ideas.

It helps in reading the book to begin with proposition (3), and indeed this is

where Hodgson begins as he identifies the loss of pluralism that has

characterized economic thought in the twentieth century as dangerous to the

future of the discipline. However, what will also help the reader is to

recognize that the sense of reading a somewhat randomly constructed annotated

bibliography derives from Hodgson’s own pluralistic approach and from

his recognition that acceptance for his own heterodox views requires attention

to status that can be achieved by association with more acceptable ideas.

Consider, for example, Chapter 3, “A Case Study: The Fate of the Cambridge

Capital Controversy.” It is not immediately clear why this chapter sits between

one (“False Antagonisms and Doomed Reconciliations”) in which the effort is to

isolate the characteristics of neoclassical economics that are fundamentally

antagonistic to an evolutionary approach, and another (“Metaphor and Pluralism

in Economics” in which the importance of competing metaphors is described. Nor

would it be at all clear to the casual reader why the article about the

Cambridge Capital Controversy has as a central focus the frequency of citations

to Piero Sraffa’s Production of Commodities by Means of Commodities ,

nor why the chapter on metaphor and pluralism is followed by an appendix in

which a paid advertisement drafted by Hodgson, Uskali Maki and Deirdre

McCloskey and signed by 44 economists is reproduced. All does become clear,

however, when it is recognized that Hodgson is, in the case of the Cambridge

Capital Controversy, identifying (correctly or not is another question) reasons

why Sraffa’s argument that there can be no independent measure of capital

abstracted from distribution and prices faded from importance and consideration

by economists after a flurry of attention from the mid-1970s to the 1980s.

Though he finds part of the explanation in the failure of the “constructivist

Sraffians” to develop ideas that would have made their approach a more

attractive alternative to neoclassical theory, he also finds it in the

political climate (radical approaches had appeal in the late 60s and early

70s), and in the citation game. When Sraffa’s ideas were taken seriously in a

leading US journal, the Quarterly Journal of Economics, by high status

economists such as Paul Samuelson, the number of citations to Sraffa’s work

rose rapidly. When the high-status economists lost interest, the citations fell

and Sraffa ceased to matter to most.

This is Hodgson’s dilemma and the dilemma for the reader. Hodgson has a very

clear understanding of the shortcomings of modern economic analysis, and he

sees clearly the importance of evolutionary ideas. Yet, it is only by careful

mixing of evolutionary ideas with the dominant and high-status, but thoroughly

non-evolutionary, neoclassical core that evolution can be incorporated into

economics without loss of status. Hodgson understands with great clarity that

incorporation of the idea of evolution into economics means that the whole of

economic systems must be understood to be subject to change (as is true in

phylogenetic evolutionary theory). Nonetheless, and in confusing manner, he

focuses in the last part of the book on work that is, in his own terms,

“asymptotic to an ontogenetic form” (Hodgson, 1993, p. 45). That is, Hodgson

focuses (and with approval on evolutionary theory that is seriously watered

down by being understood to take place within a relatively rigid set of

constraints on change) where those rigid constraints are dictated by the need

for congruence with neoclassical theory.

The work of Ronald Coase, Oliver Williamson, Edith Penrose, and even in its

more phylogenetic and critical manifestations, that of Sydney Winter and

Richard Nelson is surely “asymptotic” to an ontogenetic form of evolutionary

analysis. By that I mean that “the firm” which is at the center of their

analyses is implicitly assumed to be unchanging in many respects, and

especially in its place and connections within the larger economic system. This

assumption is convenient for analysis but it also avoids the necessity of

asking questions that might threaten the status of the investigator in a

discipline that, as Hodgson has persuaded us, is anti-pluralistic.

Hodgson’s intellectual commitment is to the more radical phylogenetic

approaches of such as Thorstein Veblen; his sense of the discipline is that the

only way to make such an approach acceptable is by citation and discussion of

far less radical ways of offering partially evolutionary analysis. This

strategy, never spelled out, makes this collection of essays seem less than

cohesive, but if you realize that Hodgson is using a strategy that he has

derived from his own study of the evolution of economics, it makes a certain

sense.

Because there is a semi-hidden agenda, the book is hard to follow, and readers

who are historians of economic thought are also likely to be irritated by

assertions that do not seem adequately supported. To pick a fairly minor

example: in the chapter on Sraffa, Hodgson asserts that a low level of

citations to Production of Commodities for ten years after its

publication, was an unusually long lag “given the theoretical significance of

the work” (p. 49). Is this a long lag as compared to other works? A more

important example to me was Hodgson’s treatment of the decline of the “Old

Institutionalism” in the interwar period. This is a complicated topic and

Hodgson’s assertions about a shift in “the prevailing conception of scientific

methodology (p. 105),” and the secondary sources that he cites to support his

conclusions do not seem adequate to the task.

In spite of my reservations about this work, I do recommend that those who have

not read Hodgson’s work do so. Start with Economics and Institutions and

then read more. There is much there that is brilliant, and those who have

already read that fine work will find much to enjoy here as well.

References:

Hodgson, G.M. Economics and Institutions: A Manifesto for a Modern

Institutional Economics. Cambridge, UK: Polity Press and Philadelphia:

University of Pennsylvania Press, 1988.

Hodgson, G.M. Economics and Evolution: Bringing Life Back into

Economics. Ann Arbor, MI: University of Michigan Press, 1993.

Anne Mayhew has written extensively on the history of institutional economic

theory and the history of institutional thought. Recent publications include

“On the Difficulty of Evolutionary Analysis,” in a special issue on Veblenian

Evolutionary Economics in the Cambridge Journal of Economics (Vol. 22,

no. 4, July 1998) and “How Economists Came to Love the Sherman Antitrust Act,”

in Mary S. Morgan and Malcolm Rutherford, editors, From Interwar Pluralism

to Postwar Formalism, Annual Supplemented to History of Political

Economy (Durham and London: Duke University Press, 1999).