One of the main criticisms of the "old" school of institutional economics is its lack of formality and of an operational approach that allows the replication of the institutional type of analysis by the academic economic community at large. Clearly this has been one of the reasons behind the seemingly little attention that this nontraditional approach to economics has received from a mainstream with an ever-increasing emphasis on mathematical models (see Rutherford 1994). Recently, however, some distinguished economists, recognizing the importance of the institutional context in economic analysis, have started to incorporate topics usually associated with old institutionalism in the debate of the mainstream of economic thought. This has given rise to the development of what is now known as "new" institutional economics, typically associated with the names of Ronald Coase, Douglas North, Mancur Olson, Richard Posner, Oliver Williamson, and others. (1) The main aim of this school has been to provide a formal approach to institutional analysis based mainly on neoclassical and utilitarian foundations (see, for instance, Hodgson 1993), thus leaving out of the study many of the basic principles behind the original tradition of institutional economics which push these foundations forward. Indeed, little has been done so far to formalize some of the main tenets and ideas of the "old" institutional economics approach as proposed by their main exponents, namely Thorstein B. Veblen, John R. Commons, and Wesley C. Mitchell. It is precisely in this context that this paper attempts to make a contribution. In particular, we attempt to link the work of Veblen on evolutionary economics with the recently developed approach of biological game theory, or evolutionary game theory (EGT) as it is best known within economics. EGT is a formal, mathematical approach within evolutionary economics, which thus far has been mainly applied to economics as a refinement of the Nash equilibrium concept.
Considering that the main developments in EGT have occurred in the field of theoretical biology, it is not surprising that until now no clear link between EGT and any of the economic approaches identified with the label "evolutionary economics" has been established. Indeed, EGT has so far been developed completely independently from evolutionary economics (Weibull 1998, 2). Nevertheless, whenever a methodological link has been suggested, EGT has been principally connected with the work of economists like Joseph Schumpeter, David Hume, Karl Marx, and Friedrich Hayek. (2) However, so far in the discussion one economist has been "conspicuous" by his absence: Veblen. To the knowledge of the authors, no specific work analyzes Veblen's contribution to the development of a theory of socio-economic evolution in relation to the potential application of EGT to the social context. This is quite extraordinary considering the rather Darwinian nature of EGT and the fact that Veblen was one the first economists to make a direct appeal to biological science for inspiration and certainly the first economist to propose explicitly an approach to economics based on Darwinian lines or, as he put it, a "post-Darwinian" economics. This is even more striking considering that some authors have argued that Veblen was relatively successful in establishing the basis of a Darwinian economics (Hodgson 1992, 1993, 1999).
Analyzing the connection between Veblen's evolutionary approach and that of EGT, we expect to shed some light on the potential contribution of Veblen's theory of socio-economic evolution to the discussion of the application of EGT to social environments. Similarly, we also investigate to what extent elements of EGT can be used to formalize some of the basic evolutionary principles proposed by Veblen. The paper has been structured as follows. The first section presents the methodological imperatives laid down by Veblen, defining an evolutionary approach. In particular, we outline here the main characteristics of an evolutionary science as understood by Veblen, and the reasons why he thought that the economics of his time was not one. In addition, some key characteristics of a Veblenian evolutionary economics approach are put forward. The main idea in this section is to provide an analytical framework that allows the evaluation of EGT in terms of Veblen's evolutionary approach. To better understand the main principles and rationale behind EGT and how it can be applied as a tool for analyzing issues on the diversity, interaction, and evolution of social systems (as opposed to biological evolution, for which EGT was originally developed), the second section presents a discussion of this nontraditional approach and its basic concepts. In particular, we present and discuss the concepts of evolutionary stable strategy (ESS) and replicator dynamics (RD), providing some simple economic examples. In the third section, we contrast the main characteristics of EGT with Veblen's principles outlined in the first part of the paper. In particular, we examine EGT on two accounts: is EGT consistent with Veblen's notion of an evolutionary science? and can Veblen's main evolutionary tenets be useful in the discussion on EGT? and vice versa. Finally, some concluding remarks are offered.
Veblen's Evolutionary Economics
The analysis of Veblen's evolutionary economics is centered here principally on methodological work presented in his seminal 1898 article in the Quarterly Journal of Economics (QJE) on "Why Is Economics Not an Evolutionary Science?" Although much of Veblen's theoretical work on evolutionary economics was developed later in his first three books, The Theory of the Leisure Class (1899), The Theory of Business Enterprise (1904), and The Instinct of Workmanship (1914), it was in this essay where he formulated the methodological basis that guided his research work over the subsequent twenty-five years (Rutherford 1998, 464).
The work presented by Veblen in this article was essentially a manifesto for an evolutionary economics, a methodological outline which according to some authors can be considered not only as one of the key founding works of institutional and evolutionary economics but also as the beginning of a major paradigm shift in economic thought (Hodgson 1998, 398; Wisman 1989, 1). Indeed Veblen, after recognizing that economics "stands in need of rehabilitation" (1898, 373), attempted to show the way forward in the field by proposing an alternative methodological perspective. In Veblen's opinion economics was not a "modern science" because it was not evolutionary, and he proposed instead what he called a "post-Darwinian" economic science (374-75). Veblen accordingly claimed that economics should adopt the metaphor of evolution and change rather than the static ideas of equilibrium that had been borrowed by neoclassical economists from physics (Hodgson 1992, 286).
While reviewing Veblen's work regarding evolution in all its extension is far beyond the scope of this paper, we address here two main points: first, the main characteristics of an evolutionary science according to Veblen and why he thought that economics of his time was not one and, second, Veblen's main proposals in terms of what he thought an evolutionary economics approach should be all about)
Veblen's Conception of Evolution: A Taxonomic versus an Evolutionary Science
For Veblen, while economics could be considered close to an evolutionary science in some respects, the underlying principles behind the analysis and the formulation and interpretation of the facts were somehow different from that of scientists embracing an evolutionary science. In particular, Veblen claimed that the evolutionist, or "the modern scientist" as he called it, would be unwilling to depart from the "test of causal relation or quantitative sequence" when analyzing the problem at hand. According to him evolutionists would insist on an answer in terms of cause and effect, this type of analysis being their last recourse. At this point he suggested that this last recourse had been made available in his time "for the handling of schemes of development and theories of a comprehensive process by the notion of a cumulative causation" (1898, 377-378). Here Veblen went one step further and pointed out that this notion of cumulative causation implied that in order to explain any economic process the analysis should be carried out only in terms of cause and effect and that therefore economists should leave out of the analysis any search for "higher grounds for their ultimate syntheses."
The kind of analysis proposed by Veblen, based mainly in terms of cause and effect, omitted any consideration or assumption about the normal state of things or about the tendencies of events to develop in a particular way toward a predetermined end. In consequence, the scientist should not have a predetermined view about where the system goes or where it should go. Scientific inquiry, therefore, should be based on an analysis of the facts alone and the potential relationships between these facts and past situations which could cause or affect them. From this type of analysis it is clear that according to Veblen history should matter in economics and that the future is open and uncertain. Indeed, it can be argued that Veblen's discussion on cumulative causation involves a clear idea of path dependency. (4)
The idea of the concept of cumulative causation is also a clear indication of Veblen's commitment to a Darwinian conception of economics. Indeed, Darwin's conception of evolution was materialist, and he explicitly recognized that evolution is not guided by a "law of necessary development" (Edgell and Tilman 1989, 1005). Hence, it is clear that Veblen's concept of cumulative causation follows Darwin's theory of evolution in the sense that it is free of any preconception regarding inherent tendencies or controlling principles which...