Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics

"It’s important because it adopts the organic, evolutionary perspective we have just been describing; it doesn’t see economics being a purely mechanical system divined by optimisation models. I rather regard it as being similar to my own book The Truth About Markets , which I was far too modest to put on my list. This book emphasises the way that an understanding of the operation of markets has to be embedded in a social context and that complexity, agent-based modelling and evolutionary thinking are every bit as important to understanding the way economies and businesses develop as the models of the standard neo-classical paradigm of economics. What’s good about this book in particular is that he understands that these traditional paradigms of economics are not wrong, just that they are only a part of the story. And that I think is critical because there is quite a lot written that is critical of mainstream economics but it tends to be ‘all that stuff is rubbish, I have this other story about how economies work that is different and better.’ For me, that misses the point that there isn’t a single story. The way we understand economics and economies is by learning from lots of sources and thinking about them in lots of different ways. It’s understanding that the economic world, like parts of the physical world, is described by non-linear dynamic systems in which outcomes are heavily influenced by quite small changes in initial conditions. So there is no equilibrium, but just constant evolution and change. The whole mathematics of complexity, which has mushroomed over the last 30 years, has been about understanding the development of these types of systems. Yes it is. What’s good about it is that it is eclectic. I initially picked it up to write a review and was planning to do a hatchet job given that it had a ludicrously ambitious title and was by a McKinsey consultant. I then discovered it was actually very good. Support Five Books Five Books interviews are expensive to produce. If you're enjoying this interview, please support us by donating a small amount . The development of firms and economies is fundamentally an evolutionary process that has the characteristics that evolutionary natural selection has of adaptation, replication and selection. All of these are characteristics of the way economies and businesses evolve. That doesn’t mean you do what some people have done and try quite literally to translate mathematical models developed to describe biological evolutionary processes into economic terms, but it does mean that kind of thinking and kind of mathematics is as relevant to economics as it is to biology."