Organisations, Innovation and Complexity: New Perspectives on the Knowledge Economy

University of Manchester
9-10th September 2004

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Meso Economics: A Unified Concept for the Analysis of Complexity and Evolution

Professor Kurt Dopfer

Universität St.Gallen, Switzerland

Abstract

The last two decades have seen an extraordinary growth of theoretical studies in evolutionary economics, but a coherent theoretical framework that would allow the detailed theoretical results to be integrated is still in its infancy. It could be argued that from the detailed studies a general framework would gradually show up, but why should it? The fact is that we have, for instance, made enormous improvements in the micro foundations of economics by opening the black box of the firm, but we still have little understanding of how these results relate to the essential questions of economics: how are many individual activities in an economic system with a division of knowledge and labour coordinated spontaneously, and how does that system continuously generate change "from within". Economics is not management science and the results of the latter have to be made to fit economics. But how to do this without a coherent general framework?

The paper discusses essential features of a general theoretical framework for evolutionary economics on the basis of a unified rule theory. The analytical units are rule, carrier, and population of carriers adopting that rule. A rule is a deductive format for operations, such as production or market transactions. Carriers can be both subjects and objects; this all-encompassing scope makes the approach a unified one. Accordingly, rules are subject and object rules, a distinction that is associated with the one between agent and environment. Subject rules are "internal" to the subject, and comprise cognitive and behavioral rules, object rules are "external" and are stated in terms of organisational characteristics of the environment. The latter comprise social (organisation) rules and technical (organisation) rules. The causa movens of the model is a generic variant of homo oeconomicus - we call it homo sapiens oeconomicus - that creates or selectively adopts rules for operations.

The rule dynamics is dealt with by the concept of an evolutionary trajectory stated in terms of the three phases of origination, adoption and retention of a rule, say management strategy or technology. A rule can be adopted by many carriers, e.g. firms. A rule, its population of adopting carriers and the trajectory are called an evolutionary regime. We propose that an evolutionary regime be the basic theoretical unit for an evolutionary static and evolutionary dynamic economic theory.

The total economic system, in its analytical scope macro economics, is constituted of many adopted rules and the resultant operations. The prime theoretical focus of evolutionary economics is the rule or generic level. Since the concept of regime has both a rule and its adopting population as its constituents, the macro structure of the system has two levels: a "deep" (invisible) level of connected rules, and a "surface" (visible) level of connected carrier populations that have adopted those rules. The evolutionary regime is the component part of the macro system. Since its members are the micro units it represents the system's meso level; its analysis accordingly is meso economics. Evolutionary static economics is particularly concerned with rule complementarities, the fitting of rule components into the complex universe of rule structure. . .

Evolutionary dynamic economics has at its heart the concept of meso rule trajectory. Cognition and behavior of the micro units that relate to the trajectory phases, such as creative discovery, adaptation or selection, are interpreted in respect to the meso and the macro perspectives of the environment. Generic decision making in the latter perspective refers to the fitting of rules; its adaptive requirements call for efficacy of the decisions - largely ignored in neoclassical and frequently overlooked in evolutionary economics. The macro perspective is output-focused. In turn, a rule of a kind (that meets the demands for complementarity) can have many expressions that may be substituted for each other, for instance, low cost price for high cost price for a technology that is part of the division of labour. Rational generic decision making in substitution contexts call for efficiency. They refer to the input side of the process. Efficacy often calls for forms of cooperation, vertical integration, etc., while efficiency is basically the domain of competition The explanatory core of the dynamic model relies on neither a, say Austrian, subjectivism, nor a, say Marxian, objectivism, but highlights the co-evolutionary dynamics between subject rules and object rules as they unfold in a macro system that progressively meets the demands for complementarity among, and substitutability between, rules.

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