On Innovation-Driven Economic Change as an Evolutionary Process

Innovation is the key driving force for economic system change. As contrasted with the randomness of mutation in biological evolution, economic innovation is, to a very considerable extent, the result of planned and focused activity of the economic actors involved, often employing very sophisticated bodies of knowledge to guide what they do. While innovation-driven economic change differs in many ways from evolution in biology, other Schumpeterians and I argue that it aids thinking about the processes involved to see the process as evolutionary in the broad sense of that term. The economic progress we have experienced has been very uneven across economic sectors. Understanding the reasons why progress has been so uneven and how to achieve better progress in key areas where progress to date has been very slow is a major challenge for Schumpeterian economists, policymakers, and all of our countries and requires that we get away from thinking of the economy in aggregative terms. Today, all relatively successful modern economies use a variety of different mechanisms and institutions not only to generate innovations but also in the way they organize and govern economic activity more generally to meet their multiple and diverse range of wants and needs.