Supposedly, Darwinian model of economics flawed for firms

What can the theory of evolution tell us about how the economy works? A lot. But probably not what you think it does.

Famous economists such as Joseph Schumpeter (author of the notion of ''creative destruction'') and Milton Friedman, and the contemporary economic historian Niall Ferguson, have viewed economies as Darwinian arenas: competition among firms reflects the ruthless logic of natural selection. Firms struggle with each other, with successful firms surviving and unsuccessful ones dying.

Supposedly, Darwinian model of economics flawed for firms Art_w_gltoon_2812-620x349

Supposedly, Darwinian model of economics flawed for firms Art_w_gltoon_2812-620x349

Thus evolution seems to support three pillars of the conventional, neoclassical model of the economy. First, that ''economic actors'' are self-interested, second, that self-interest works to the good of the public (propelling Adam Smith's ''invisible hand'') and, third, that together these lead the market to deliver the community ideal outcomes (''optimisation'').

But there's a basic fault in this contention, as Dominic Johnson, of Oxford University, Michael Price, of Britain's Brunel University, and Mark van Vugt, of Amsterdam's VU University, point out in their paper, Darwin's Invisible Hand.

Read more: http://www.smh.com.au/business/darwinian-model-of-economics-flawed-for-firms-20131227-2zzns.html#ixzz2oihuanqh

Supposedly, Darwinian model of economics flawed for firms

Supposedly, Darwinian model of economics flawed for firms

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