Between Innovation and Evolution

Breakthrough has my second blog, on innovation and technological evolution. Is evolutionary economics worthwhile, or just more psuedo-scientific bunk?

Policy-makers seeking to ignite the engines of economic growth are turning to a new theory of "innovation economics," which focuses on technological evolution and its supporting institutions. However, the axiom that "innovation drives economic growth" derives mostly from the observation that conventional explanations of growth based on capital and population fail to explain differences in economic outcomes, not incontrovertible evidence. Failure and innovation seem to run hand-in-hand. Fantastically innovative technologies, from the SAGE air defense network, to the Concorde SST, and EV-1 electric car became technological turkeys when they failed in the market. Entrepreneurs have a failure rate approaching 80%. Neoclassic economics--the doctrine that innovation economics seeks to replace--grew up crippled because it borrowed from an incomplete model of equilibrium physics, using the First Law of Thermodynamics, but not the Second Law. Similarly, without a better understanding of the forces behind technological evolution, innovation economics will develop as a fundamentally flawed theory. There is a difference between faster evolution, and real improvements in quality of life. Read the rest.