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Information, Chance, and Evolution: Alchian and the Economics of Self-Organization

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  • De Vany, Arthur

Abstract

The strong invisible hand theorem says there is emergent order in human affairs. Adam Smith and F. Hayek described it; Armen Alchian gave the evolutionary proof. He showed that profit maximization is an emergent property of evolution when survival depends on positive profits. The author extends Alchian's argument to consider how evolution discovers and adopts successful organizational forms. Evolving organizations 'lock in' on inefficient equilibria. Noise and imitation--the evolutionary operators Alchian stressed--promote learning and adaptation to move the evolutionary dynamic off inefficient paths. Evolution is orders of magnitude faster than optimization; the relative time scales make the processes observationally distinguishable. Copyright 1996 by Oxford University Press.

Suggested Citation

  • De Vany, Arthur, 1996. "Information, Chance, and Evolution: Alchian and the Economics of Self-Organization," Economic Inquiry, Western Economic Association International, vol. 34(3), pages 427-443, July.
    • Handle: RePEc:oup:ecinqu:v:34:y:1996:i:3:p:427-43
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    Cited by:

    1. Daniel Klein, 1997. "Convention, Social Order, and the Two Coordinations," Constitutional Political Economy, Springer, vol. 8(4), pages 319-335, December.
    2. Roth, Timothy P., 1997. "Competence-difficulty gaps, ethics and the new social welfare theory," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 26(5), pages 533-552.
    3. Cassey Lee, 2004. "Emergence and Universal Computation," Metroeconomica, Wiley Blackwell, vol. 55(2‐3), pages 219-238, May.
    4. Daniel K. Benjamin, 2010. "Armen Alchian on Evolution, Information, and Cost: The Surprising Implications of Scarcity," Chapters, in: Ross B. Emmett (ed.), The Elgar Companion to the Chicago School of Economics, chapter 14, Edward Elgar Publishing.
    5. Furubotn, Eirik G., 2001. "The new institutional economics and the theory of the firm," Journal of Economic Behavior & Organization, Elsevier, vol. 45(2), pages 133-153, June.
    6. Denis, Andy, 2003. "Methodology and policy prescription in economic thought: a response to Mario Bunge," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(2), pages 219-226, May.

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