The Evolutionary Analysis of Economic Policy, edited by Pavel Pelikan and Gerhard Wegner. Cheltenham, U.K.: Edward Elgar. 2003. ISBN 1843762250, $100.00. 269 pages.
What policy prescriptions fit an economy with individuals bounded in cognition? Does the evolving economy require a special policy approach? Does an evolutionary policy-making perspective even exist? The contributors to the volume strongly argue for an affirmative answer.
An opening paper by Pavel Pelikan is a prime illustration of the point. Pelikan distinguishes the evolution of production and organizations under given institutions (a topic of established institutional economics) from the evolution of institutions (i.e., the institutional change topic elaborated in North, Buchanan, and Vanberg). Then he examines similarities and differences between the two. His comprehensive "structural model of an evolving economy" is particularly useful because various failures are put into a single framework (blocked, excessively wasteful, and misdirected evolutions, p. 31); most importantly, policy instruments have been accordingly classified in the evolutionary framework. An obvious qualification is only that the framework must be filled with the data to provide judgment for concrete cases.
Gerhard Wegner challenges "top-bottom" approach to regulation by reference to evolutionary advantages of "bottom-up" approach (i.e., self-regulation). Unfortunately, empirical evidence of the bottom-up approach he offers is anecdotal. He also neglects the core literature in the field (economic theory of regulation) and does not specify the origin and limits of innovative changes. Finally, what is the point in stopping an argument by recommending "additional assessment of institutional policy from an evolutionary point of view" (p. 54), providing no guide whatsoever?
Michael Wohlgemuth, a pioneer of evolutionary public choice, consistently applies an evolutionary method in political economy. When he elaborates crucial distinctions between private, democratic political, and non-democratic political markets, he refers to their differing abilities to stimulate innovation. Wohlgemuth's analysis is illuminating, well structured and scholarly; the only weakness is that some conclusions are premature: Can social isolation indeed motivate citizens not to be ignorant? Does an increase in freedom of speech a la Larry Flynt improve opinion making?
A crucial methodological note: Some formalization would...