conclusion: evolution and history


Hayek contrasts the `spontaneously evolved' price system with the artificiality of conscious attempts to control the economic process, a contrast that he feels is to the disadvantage of the latter. At best, this is no more than the maxim that one is better to `hold tightly onto nurse for fear of meeting something worse'. At worst it degenerates into a Panglossian complacency about the existing order of things. Voltaire's rejoinder on earthquakes---these too are spontaneous---is apposite. But while we can hope to do no more than forecast earthquakes, it fallacious to think that we are forced endure their economic equivalent with the same stoicism.

By writing of spontaneous evolution, Hayek surreptitiously slips in connotations from biology, with its associations of fitness of form to function. But the analogy of a market economy with a naturally evolved order is superficial, with regard both to its operation and genesis. If we consider the operation of a market economy as the procedural search for an optimum, it obvious that while there is a great deal of parallelism going on---lots of people making decisions at the same time---it remains the case that the whole search is single-threaded. Taken as a whole, the state space of the economy is a Cartesian product of the state spaces of its components, and within this total state space the economy is located at a unique point at every moment in time. As such, it can only visit a small proportion of the possible set of solutions, and for it to progress towards anything other than a local optimum presupposes a particular and very simple topology to the space.

In this sense, the movement of a market economy differs from the process of biological evolution. A species evolves towards increasing adaptation to its environment by a highly parallel process. The state space in this case consists of the genetic code. But a species is not in one position in this space at any one time: it is at as many positions as there are individual members of the species, each with a unique combination of genes. A species represents a neighbourhood in gene space. It applies a parallel search procedure: millions of alternative designs are produced and compared each generation. Although a market economy can to some extent emulate this in the area of product development within individual competitive markets, the economy as a whole acts as a single processor.

It equally invalid to treat the genesis of the capitalist world system as an evolutionary outcome. It is an historical outcome, but history and evolution are not the same thing. Evolutionary adaptation is impossible without variation, competition and selection. To apply evolutionary concepts one would have to hypothesise a substantial population of simultaneously existing international economic systems. In fact there is only one. For a while there were two, of which only one has survived. That is not a statistically valid sample. To say that one economic order was evolutionarily better adapted than another, one would need a large enough ensemble for stochastic effects to cancel out---an ensemble including instances where the market system was restricted to one poor and backward economy surrounded by an industrialised socialist world.

The logic of the analogy with evolution, contra Hayek, is to let a hundred flowers bloom.