Evolutionary Economics

Evolutionary economics is a school of economic thought that applies concepts inspired by evolutionary biology, variation, selection and innovation-driven change, to understand how economies develop over time. It treats economic development as an ongoing, disequilibrium process rather than a movement toward a fixed equilibrium, emphasizing innovation, complex interdependencies, self-evolving systems and bounded rationality as the true drivers of change, against the perfect information and perfect rationality neoclassical models assume. The term itself is traced to Thorstein Veblen, whose 1898 essay asked why economics was not itself an evolutionary science and argued that social institutions are subject to a Darwinian-style selection process; Joseph Schumpeter later studied entrepreneurship and innovation-driven change under the same term, though in a different sense from Veblen's own. The field took its modern, most influential form after Richard R. Nelson and Sidney G. Winter's 1982 book An Evolutionary Theory of Economic Change, which modeled firms as carriers of evolving routines rather than as perfectly rational optimizers.