This set of essays comes in three parts, of which only the first really focuses on Darwin and Marx. The second deals with the defects of critical realism as applied to economics – which may be a rather abstruse debate for many SBE members – and the third with the nature of rules, habits and institutions. Each section is interesting in its own terms and if we take firm hold of the evolution thread at the beginning, there are some common themes. But it is best to read these essays as individual contributions to institutional and evolutionary economics, to which Hodgson has been committed for a number of years.
The essays dealing with Darwin and Marx culminate in a debate between Hodgson (for Darwin) and Alex Callinicos (for Marx). I must express an interest here. I attended this debate a la recherche du temps perdu, since I was an undergraduate with Alex and shared at the time his political persuasions. My chief recollection is that for most of the audience the history and lessons of the intervening thirty years had passed them by and they were quite prepared to continue fighting the sectarian battles of our student days – it did take me back! The protagonists themselves agree largely about the importance of institutional and legal structures in shaping economic outcomes. What they disagree about is the importance of variety in shaping innovation and evolution and how to interpret the outcomes of the capitalist process. If you had any involvement in student politics in the 1970s and 1980s, this is fascinating stuff.
The second set of essays are polemical, attacking the theories of a group of philosophers and economists grouped around Roy Bhaskar, known as critical realists and arguing (as I understand it) that it is necessary to identify a number of hidden structures within society and understand them before any empirical work or partial modelling can be attempted. The theme of the essays here can be summarised as attacking the credentials by which the group claim to be socialist; some attempts to apply the theory; and the claim that formal modelling cannot be undertaken. The polemical style is enjoyable but you do have to be interested in the works of the critical realist group to find them useful. I suspect for most of us Hodgson is destroying straw men.
The third set of essays is the most interesting and challenging to how we do day-to-day economics. This set looks at how we think about institutions, rules and habits. It includes the presentation of a model which looks at how the rule of the road – left or right – might emerge from the behaviour of drivers and whether this requires more than just risk analysis and mistakes by drivers. The model gives a role to the force of habit in enforcing a stable rule of the road, without which the side of the road that drivers use can switch or there can be regular swathes of deaths. With ‘habit’, which can be interpreted as the establishment of an institution, the rule becomes better embedded and effective. The model provides an interesting way of thinking about what we mean by rules and habits and illustrates the potential importance of these properties and constraints in our activities. These are easy to leave out of models which rely only on price as the information that drives a market solution. In practice, there may be many limitations on how signals are interpreted and reacted to.
As always with Hodgson’s work, it is erudite and well referenced to a huge range of authors. His interest is in philosophy and the history of ideas as much as in applications and policy. Some readers may find this frustrating, but the willingness to consider how modelling strategies could take on board some of his insights might widen the application of the results we achieve.
Evolution implies that something new can emerge as a result. Variation, adaptation and selection are evolutionary processes by which innovation can become embedded in business as usual and then the whole process can start again. Modelling innovation and change in economic structures is still not very well done. It is in many ways remarkable that the key feature of capitalism is that it has enabled growth in incomes and many other indicators of well being to levels that humanity had never before reached. Yet growth tends to be tacked onto the end of macroeconomic analysis rather than a place to start. It is a pity that, as Hodgson points out, evolution and Darwinism have been tarred with a brush of eugenics and taken to imply that the weak have no right to survive. Such judgements have distracted economists from more careful consideration of how the biological models of evolution can add insight into our approach to innovation, growth, the role of the firm and competition.
Bridget Rosewell
Volterra Consulting |