The Origin Of Wealth: Evolution, Complexity, and the Radical Remaking of Economics

by Eric D. Beinhocker

off—remember, the number of good designs in a design space is, to use Dennett’s phrase, “vanishingly small.”

weight our random jumps toward smaller jumps (the longer the jump, the lower its probability of occurring). This

we have a dispersal of our bets, with some hikers fanning out farther from the center, and a few scouts taking real fliers and searching quite far from the main group.

each interactor (or in biology, organism) can be considered a hiker.

as noted, there are always more ways down than up.

dispersal of bets created by differentiation is critical not only for discovering new ways up in fitness, but also for increasing the odds that some hikers will survive if the landscape changes.

evolution manages what John Holland calls the tension between exploration and exploitation.

When things are good, when evolution has found a high plateau, evolution will devote proportionally more population resources to exploiting. But when things are bad, when the population is down in the valley, proportionally more resources will be devoted to exploring.

Evolution is a gambler, but one that plays the odds very well.

the laws of thermodynamics dictate that all biological creatures must have some kind of boundary between themselves and the rest of the world to provide a barrier between their low-entropy interior and the high-entropy outside world.

A third and final consequence of fitness landscape topography is path dependence,

random jumps are both random in where they take you and weighted toward smaller jumps).

the fish is a prisoner of its history. Its particular path led to the cul-de-sac on its particular peak, and its options for the future are limited by its past.

There is a design space of possible designs.

It is possible to reliably code those designs into a schema.

There is some form of schema reader that can reliably decode schemata and rende...

schemata code for the building of thei...

Interactors are made up of modules and systems of modules that are coded for by buildi...

The interactors are rendered into an environment. The environment places constr...

A particularly important constraining factor is competition among interactor...

the constraints in an environment create a fitness function whereby some interactor...

the algorithmic process of variation, selection, and replication is conducted recursively on the population, with output from one round acting as the input for the next round.

All evolutionary processes operate in open systems, so in effect the algorithm harnesses energy to decrease local entropy and turn randomness into order.

The evolutionary process accumulates knowledge over time.

Schemata are like the hard drives of the evolutionary process; they fill up with information over time.

Growth in resources devoted to successful designs.

Evolution employs parallel search. In effect, each member of the population is an individual experiment in design, so there are many hikers out looking for high peaks.

Stuart Kauffman’s Origins of Order not

game theory is used to study situations in which one can define a set of players (e.g., the two prisoners), a goal (getting rewards or avoiding jail time), a decision (to testify or not), and a set of rules that map the decisions to a set of payoffs for the players.2

Tit for Tat, and its first move was to cooperate, and from then on, it simply looked at the last move its opponent made and repeated the opponent’s move.

The overall structure of Lindgren’s model actually combines two games: the Prisoner’s Dilemma and the Game of Life.

each cell following a simple rule: Count how many neighboring cells are ON. If the number is exactly two, then the center cell will stay in its current state (whether ON or OFF) in the next round.

If the number is exactly three, then the center cell will be ON in the next round, regardless of its current state. Under all other conditions, the cell will be OFF in the next round.

in general, more memory is a big advantage, and new strategies that were successful began to emerge and reproduce. For

Highly successful strategies today might be real losers in a hundred years, and the most successful strategies in a century might be ones that were only modestly successful today, or don’t even exist yet.

sooner or later, a small innovation would appear and gather momentum, and suddenly the whole board would turn into a seething froth of change as the old order was wiped out and a new order was built to replace it.

we can see that there are certain tuning parameters for the model. These include the mutation rate, the error rate, and the relative payoffs in the game, all of which affect the game’s macro behavior.

The notion of design spaces contains a paradox: on the one hand, they are finite, but on the other, they are unbounded and can

grow, as mentioned earlier, like the surface of a balloon.

Any design that is physically rendered in the real world therefore must have a finite schema, and a finite schema means a finite design space.

Business Plans play the critical role of melding Physical and Social Technologies together under a strategy, and then operationally expressing

a common feature of evolutionary systems is that an innovation evolved for one purpose may become co-opted for another, a process called exaptation.

the combination of fashioning tools and transmitting that knowledge to peers and the young is something uniquely human—

Economies rely on the existence of two factors: Physical Technologies to enable people to create products and services that are worth trading, and Social Technologies that smooth the way for cooperation in creating and trading those products and services among nonrelatives.

Physical Technologies (PTs) are methods and designs for transforming matter, energy, and information from one state into another in pursuit of a goal or goals.

A PT is not the thing itself (the hand ax, the software, or the massage), but rather, it is both the design for the thing, and the instructions and techniques for making it.

if knowledge cannot be captured in any way, then neither can it be transmitted. We will call such knowledge art and exclude it from the library.

Any PT can be thought of as coding for both components and an architecture.

The number of SKUs added by an innovation climbs exponentially with the complexity of the artifact.

a key impact of new inventions is not only do they add actual new SKUs to an economy, but they also open up the space of potential SKUs as well.