BridgeFrom 1982
Complexity and evolutionary economics
What if the economy is an evolving system that is never in equilibrium?
The 30-second version
The economy as an evolving ecosystem rather than a machine in balance. Small accidents get locked in, networks matter, and innovation keeps destroying and recreating industries. Brilliant at explaining tech platforms; hard to test and weak at forecasting.
Big questions it works on
Go deeperKey ideas, thinkers, evidence and where it stands today
Key ideas
- Firms run on routines that evolve through selection (Nelson and Winter, 1982).
- Path dependence: early accidents lock in outcomes, like the QWERTY keyboard (David, 1985).
- Increasing returns and network effects (Brian Arthur).
- Creative destruction: innovation destroys old firms and creates new ones (Schumpeter, 1942).
Key thinkers
Richard Nelson, Sidney Winter, Brian Arthur, Paul David; Joel Mokyr, Philippe Aghion and Peter Howitt (Nobel 2025)
What it got right
Path dependence and network effects explain platform markets well. Aghion and Howitt brought Schumpeter's creative destruction into mainstream growth theory.
Main criticisms
Agent-based models have many parameters and are hard to validate. Their forecasting record is limited.
Evidence worth knowing
Hausmann and Hidalgo's Atlas of Economic Complexity predicts growth from the range of products a country can make.
Where it stands today
Strong in innovation studies and at the Santa Fe Institute and Oxford's INET.
Family line
Reacting against equilibrium thinking; borrows from biology and physics.