Understanding and Maximizing America’s Evolutionary Economy

WASHINGTON (October 2, 2014) – The U.S. economy is best understood as a constantly evolving system. Unfortunately, the two major economic doctrines that guide U.S. policymakers’ thinking—neoclassical economics and neo-Keynesian economics—are rooted in static machine models of the economy and therefore generate flawed policy solutions.

Understanding and Maximizing America’s Evolutionary Economy, a new book published by the Information Technology and Innovation Foundation (ITIF), argues we need a new theoretical foundation for economic policy based on evolutionary economics. The book defines evolutionary economic theory and contrasts it with conventional economics. It then analyzes the three main sources of U.S. economic evolutionary change over the last decade (geographic shifts in production, technological change, and demographic/cultural/governmental change) and assesses their impacts on the economy. It then presents eight key principles that should guide economic policy:

• Support global economic integration based on firms’ market-based choices, rather than governments making political choices.
• At the same time, work to slow traded-sector industry rate of loss.
• Don’t impede natural evolutionary loss.
• Limit government barriers to evolution.
• Foster a culture that embraces evolution, including natural evolutionary loss.
• Enact policies to spur organizations to act in ways that drive evolution.
• Support policies to speed economic evolution, especially from technological innovation.
• Develop a deeper understanding of the process of U.S. economic evolution.

“Economic policy should be focused on accelerating the rate of economic evolution in all parts of the economy, both through strengthening ‘Darwinian’ evolutionary forces but also supporting ‘intelligent design’ where smart government policies play an active role in driving innovation and evolution,” says Robert Atkinson, President of ITIF and author of the book. “Unfortunately, the United States remains wedded to a strictly Darwinian economic ideology and rejects ‘intelligent design’ on an almost religious basis. In the new, more competitive and innovation-driven global economy, this is a distinct weakness for America.”

Read the book.