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

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Eric D. Beinhocker, "The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics" Summary:

 

Harvard Business School Press | 2006 | ISBN: 157851777X | 543 pages | siPDF | 11.2 MB

 

Over 6.4 billion people participate in a $36.5 trillion global economy, designed and overseen by no one. How did this marvel of self-organized complexity evolve? How is wealth created within this system? And how can wealth be increased for the benefit of individuals, businesses, and society? In The Origin of Wealth, Eric D. Beinhocker argues that modern science provides a radical perspective on these age-old questions, with far-reaching implications. According to Beinhocker, wealth creation is the product of a simple but profoundly powerful evolutionary formula: differentiate, select, and amplify. In this view, the economy is a "complex adaptive system" in which physical technologies, social technologies, and business designs continuously interact to create novel products, new ideas, and increasing wealth. Taking readers on an entertaining journey through economic history, from the stone-age to the modern economy, Beinhocker explores how "complexity economics" provides provocative insights on issues ranging from creating adaptive organizations, to the evolutionary workings of stock markets, to new perspectives on government policies. A landmark book that shatters conventional economic theory, The Origin of Wealth will rewire our thinking about how we came to be here—and where we are going. What is wealth? How is it created? How can we create more of it for the benefit of individuals, businesses, and society? These are the fundamental questions that Eric Beinhocker asks in this groundbreaking book. According to Beinhocker, the field of economics is in the midst of a revolution that promises to overthrow a century of conventional theory and profoundly change our thinking about economic growth and innovation. In provocative and entertaining fashion, The Origin of Wealth surveys the cutting-edge ideas of leading economists and scientists who are reshaping economics and brings their work alive for a broad audience. Beinhocker argues that the economy is a "complex adaptive system," more akin to the brain, the Internet, or an ecosystem than to the static picture presented by traditional theory. Building on these new ideas, Beinhocker shows how wealth is created through an evolutionary process. Modern science views evolution not just as a biological phenomenon, but as a general-purpose formula for innovation. It is this evolutionary formula, acting on technologies, social institutions, and businesses, that has taken us from the Stone Age to the enormously complex $36.5 trillion global economy of today. If Adam Smith provided the inspiration for economics in the twentieth century, Charles Darwin is providing it in the twenty-first. By understanding the evolutionary origins of wealth, we can also answer the question "How can we create more of it?" Beinhocker describes how new research is turning conventional wisdom on its head in areas ranging from business strategy and the design of organizations to the workings of stock markets and the world of politics and policy. Accounting for the creation of wealth has long challenged humanity's best minds. For business readers and academics, Beinhocker is a zealous and able guide to the emerging economic paradigm shift he calls the "Complexity Economics revolution." A fellow of the economic think tank McKinsey Global Institute, he rejects traditional economic theory, based on a physics model of closed systems, in which change is an external disruptive shock. Instead, he outlines an open, adaptive system with interlocking networks that change organically, reflecting the interaction of technological innovation, social development and business practice. Wealth is created to the degree that this interaction decreases entropy in favor of "fit order" that meets human needs, desires and preferences. Beinhocker is sufficiently comfortable with this evolutionary model to advocate a comprehensive redesigning of institutions and society to facilitate it. He argues for corporate policies that favor many small risks over a few big ones and recommends restructuring financial theory to favor growth and endurance rather than short-term gains. Though he asserts that complexity economics can reduce political partisanship and increase social capital, Beinhocker stops short of saying that it cures sexual dysfunction. By the end, the concept emerges as a great idea that the author tries to make a panacea.

 

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