Crypto Predictions: What to Expect in 2019 ① What is Evolutionary Economics?
#1 Evolutionary Algorithm
In Evolutionary Economics, economics is interpreted as an evolutionary principle. Evolution itself is simply the replication and slight variation of a coded sequence, and of course, only those species that adapt their DNA most effectively to their surrounding environment, thrive. In the same way that evolution selects traits for survival, so too do consumers ‘selects’ their companies to survive through their purchases. Creatures breed more offspring to ensure survival, and companies sell as many products as possible by ensuring their products can survive the environment of competition. Charles Darwin (1809–1882) published in 1859 Origin of Species the theory of Evolution which said that ‘Survival of the Fittest’ was the rule of law in nature. Economics is no different.
Of the 10 million living species on Earth, as well as the hundreds of millions of life species that have existed, originated from a single organism. Humans, Cockroaches, E. coli, earthworms, anemones, dandelions and butterflies all share a common ancestor. We are all brothers, in a way. DNA double helix makes proteins by making hundreds or thousands of chains of amino acids. Muscles, enzymes and antibodies made of amino acid chains play a crucial role in body composition and metabolism.
Tawny RNA, the single ancestor of all life forms, has undergone a number of duplications during the three billion years of replication. As the number of objects increases due to cloning, variations and choices are repeated, and the variety increases. Various bacteria, viruses, plankton, grass and trees appeared, mosquitoes, fish, frogs, snakes, dinosaurs, rabbits, monkeys and humans appeared one by one.
Richard Dawkins (1941-), in his 1976 book The Selfish Gene, presented the view that all living things are tools for the survival and reproduction of the embryonic genes that were born three billion years ago. So how does this relate to economics?
#2 Evolutionary economics
Evolutionary economics is an evolutionary algorithm that explains economic phenomena. Just like in evolution, it is economic development that produces better products in the process of constantly repeating reproduction, variation and selection. In the process of inventing and developing the wheel, the carriage, the steam engine, the internal combustion engine, the automobile, the generator, the motor, the plane and the electric vehicle, all of which the consumer selected and companies mass produced.
More products are produced (replicated) when a better product is developed (changed) and consumers are heavily used (selected). In the meantime, better products are coevolved. Consumers’ preferences change as tastes and trends change, resource prices change, and new technologies are combined. Corporations aren’t so different from people, in that they have to adapt to the environment of consumer demand and competition to survive. Evolution inevitably creates a new order, often referred to as the “Fit Order”. Over time evolution constitutes a more complex order and produces lower entropy. Complex order reduces the waste of resources and makes it possible to respond precisely to the environment.
From an evolutionary economic point of view, value comes from the “appropriate order”. In classical economics, it is believed that value comes from a labor, a land and invested capital, but a hypothesis that value comes from in proportion to the labor is a rather narrow viewpoint. A Car made in North Korea by 100 factory workers over the course of a month, could be made in South Korea by 10 workers utilizing robots over the course of 10 days. In ancient times, it could take scholars over an hour for some complex calculations than a college student could perform in under a minute on a calculator. Evolutionary economics explains reality better than classical economics, where value is produced in proportion to the factors of production. This theory was an expansion of Charles Darwin’s Origin of Species when applied to economics by Eric Beinhocker in his book ‘The Origin of Wealth’. Beinhocker explained that origin of value is evolution of order and Fit Order is the Origin of wealth.
#3 Evolution of Digital Platform
Computer concepts were developed by Alan Turing that later evolved into the Personal Computer we know today by Bill Gates and Steve Jobs through IBM’s mainframe. During that same time came the introduction of transistors and semiconductors, all the while wired communications turned to wireless communications. As a result, the Internet was popularized in the 1990s as a result of evolving co-evolutionary phenomena in which hardware, communications, and software interacted to make what we know today.
Now the era of smartphones, and advances in Cryptocurency are changing the way we do business, and will bring about another source of value for digital platforms. Six of the world’s top ten companies created their value based on a digital platform. Apple, Amazon, Google, Facebook, Alibaba, and Tencent were small and nonexistent 15 years ago, but now they are all top 10 companies in terms of market cap in the world. How do you explain this in terms of the capitalist theory of classical economics and the input theory of labor value theory?
Looking back at the last fifty years of economic evolution, several inadequate orders have disappeared, in large part due to the companies or technologies not being able to adapt. Sony’s Walkman took advantage of memory changes, but failed to deliver an MP3 player when the market shifted. Nokia failed on multiple counts to adapt, Kodak film missed the digital revolution, Yahoo, Mainframe Computer companies, typewriter companies, mostly all failed to adapt to the change, and we either need to take conservation efforts (government subsidies, loans, etc.) to keep them alive, or they must eventually adapt or die.
If we look at the characteristics of an extinct species that has not adapted to the evolution process, those that are extinct are firstly most likely due to poor energy conservation. Likewise, changes in technology and products that cannot co-evolve are extinct, or just as a partner’s unselected life leaves no offspring and is eliminated from the evolution process, products that are not chosen by the consumer or fail to adapt technology or to social and political change become extinct.
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