Kenneth Boulding's Evolutionary Perspective - Criticism of Mainstream Economists

Criticism of Mainstream Economists

Boulding is widely known for his criticism of mainstream economists' use of equilibrium analysis and, in particular, for the profession's acceptance of what Boulding calls "Samuelson's dynamics" (originating with the Foundations (1947)). To appreciate his position, it is important to reflect on the different time scales in biological evolution and what Boulding calls social or societal evolution. With the advent of the human capacity for developing complex images (1950), social evolution has proceeded orders of magnitude faster than biological evolution. Changes, for example, in the size of the human brain have occurred orders of magnitude more slowly than social and economic changes in the last ten millennia.

Yet slower than biological evolution is the time scale of astronomical change. The relations among the celestial bodies of the solar system were first depicted mathematically by Newton. The precision with which the field of celestial mechanics is able to describe the movements of bodies of the solar system is due to the incredibly slow time scale of astronomical, evolutionary change. Boulding's longstanding concern was that equilibrium analysis, market dynamics and growth theory as practised in conventional economics are based on the mathematics of difference and differential equations, as found in celestial mechanics.

Along with his critique of equilibrium analysis, he has the following critique with the profession's methodological emphasis on prediction as being the criterion of good theory:

Prediction of the future is possible only in systems that have stable parameters like celestial mechanics. The only reason why prediction is so successful in celestial mechanics is that the evolution of the solar system has ground to a halt in what is essentially a dynamic equilibrium with stable parameters. Evolutionary systems, however, by their very nature have unstable parameters. They are disequilibrium systems and in such systems our power of prediction, though not zero, is very limited because of the unpredictability of the parameters themselves. If, of course, it were possible to predict the change in the parameters, then there would be other parameters which were unchanged, but the search for ultimately stable parameters in evolutionary systems is futile, for they probably do not exist.... Social systems have Heisenberg principles all over the place, for we cannot predict the future without changing it.

There is a fundamental theorem in information theory that says information has to be surprising. Equilibrium can't exist in a system in which information is an essential element. The parameters are always changing. I describe econometrics as the attempt to find the celestial mechanics of non-existent universes. (1991)

Biological evolution gives considerable emphasis to the ability of organisms to adapt to unpredictable change—their survival value. In his words,

...the perception of potential threats to survival may be much more important in determining behavior than the perceptions of potential profits, so that profit maximization is not really the driving force. It is fear of loss rather than hope of gain that limits our behavior.

Boulding's observation or conjecture was made prior to widespread adoption of the same idea by economists in the eighties following work done in psychology in the seventies for which a Nobel prize was awarded in 2002.