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History of Political Economy 32.1 (2000) 175-176
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An Enquiry into the Foundations of New Institutional Economics
Economic Evolution: An Enquiry into the Foundations of New Institutional Economics. By Jack J. Vromen. London: Routledge, 1995. viii; 245 pp.
Vromen provides a most careful reading and interpretation of the by-now-extensive literature on evolutionary approaches in economics. The subtitle may be misleading--there is much in the new institutional economics that is not explicitly or necessarily evolutionary--but the book nevertheless is an invaluable guide to the evolutionary arguments found in economics. It should be required reading for anyone interested in evolutionary economics.
The first part of the book deals with evolutionary arguments and the theory of the firm. Vromen nicely unpacks the arguments provided by Machlup, Alchian, Friedman, and Becker in their defense of the profit-maximizing theory of the firm. He argues that the Alchian/Friedman/Becker "ultimate claim" that "natural selection" leads to efficiency at the industry level regardless of the motives and deliberations of individual firms is unconvincing. Vromen then discusses the new theories of the firm of Alchian and Demsetz, Jensen and Meckling, and Williamson.
The third chapter in this part deals with Nelson and Winter's explicit modeling of the evolutionary argument. Vromen makes important critical points concerning the unit of selection (routines, not organizational forms) and the problem in reconciling the notion of stable routines with the view of firms as satisficers.
Part two of the book turns to the issue of functional explanation. Elster, Ulmann-Margalit, and others form the basis of the discussion of functionalism in the evolutionary arguments previously outlined. The key point made by Vromen here is that natural selection models face problems both in specifying what is "selected for" and in providing a "credible specification of the replication mechanism."
The last part of the book discusses issues of altruism and cultural evolution. Again, a central issue is the unit of selection: the gene, the individual, or the group. Evolutionary game theory is discussed and the characteristics of evolutionarily stable strategies and culturally stable strategies are outlined. In terms of cultural evolution, Vromen stresses the issues surrounding the definition of the strategy set, and changes to the strategy set through trial and error, learning, or imitation. Vromen also provides a useful discussion of the costs of various simplifications required by the application of game-theoretic approaches to cultural evolution.
Vromen's concluding chapter addresses the need to investigate the nature of adaptive learning and the sensitivity of evolutionary processes to the specific conditions that are assumed to obtain. I can only applaud Vromen's conclusion that evolutionary theory does not provide an escape from the investigation of psychological and historical [End Page 175] conditions, and that what is required is a "more profound and detailed analysis of the workings of adaptive learning under a wider variety of conditions."
University of Victoria