From Witt’s (2008) discussion of the emerging field of evolutionary economics:
Supported by attempts at extending the Darwinian theory universally beyond the domain of evolutionary biology (Dawkins 1983), three principles of evolution have now become increasingly popular as a heuristic for evolutionary theorizing: blind variation, selection, and retention (Campbell 1965). These have been derived by abstract reduction of some key elements of the Darwinian theory of natural selection, and have been applied to conceptualizing the evolution of technology, science, language, human society, and the economy (Ziman 2000; Hull 2001; Hashimoto 2006; Hallpike 1985, 1986; Nelson 1995, respectively). . .
Consider something that evolves, be it the gene pool of a species, a language spoken in a human community, the technology and institutions of an economy, or the set of ideas produced by the human mind. Although such entities can change over time in response to exogenous, unexplained forces (“shocks”), their genuinely evolutionary feature is that they are capable of transforming themselves endogenously over time. The ultimate cause of their endogenous change is the capacity to create novelty. The way in which this happens varies greatly across different domains. In the biological domain, for instance, the crucial processes are genetic recombination and mutation. These are very different from, say, the cultural processes by which new grammatical rules or new idioms emerge in the evolution of a language. Both these cases differ, in turn, from the invention of new production techniques or the emergence of new institutions in an economy.
In all these cases, the generic feature that transcends the disciplinary domains is the endogenous emergence of novelty. Yet this is not all. While novelty can be the trigger of qualitative change in the evolving entity, the actual process of transformation also depends on whether and how the novelty created disseminates and, by doing so, transforms the entity. The dissemination of novelty—the twin concept that characterizes evolution generically—is usually contingent on many factors and comes in many forms. Among them are multilevel competitive diffusion processes, like natural selection in the biological sphere, or successive adoption processes resulting from a non-selective imitation behavior as is often the case in the dissemination of human thought,
practices, and artifacts. “Evolution” can thus be characterized generically—in a way that is not domain-specific—as a process of self-transformation whose basic elements are the endogenous generation of novelty and its contingent dissemination (Witt 2003, Chap.1). The generic concepts of novelty emergence and dissemination provide an overarching heuristic for interpreting problems and inducing hypotheses in the evolutionary sciences.
Witt then directs specific attention to evolutionary approaches to economic study:
In Nelson and Winter (1982), the heuristic based on Darwinian metaphors is the inspiration for an idea that has become a core concept of the neo- Schumpeterian approach: the organizational routine as a unit of selection in economic contexts. . . Based on the assumption of bounded rationality, Nelson and Winter (1982, Chap. 5) argue that, in their internal interactions, firm organizations are therefore bound to use rules of thumb and develop organizational routines. Production, calculation, price setting, the allocation of R&D funds, etc. are all represented as rule-bound behavior and organizational routines.
Informed by a heuristic based on the selection metaphor, Nelson and Winter interpret organizational routines as sufficiently inert to function as the unit of selection. Accordingly, the firms’ routines are taken as the analogue to the genotypes in biology. The specific decisions resulting from the routines applied are taken as the analogue to biological phenotypes. The latter are supposed to affect the firms’ overall performance. Different routines and different decisions lead to differences in the firms’ growth. On the assumption that routines which successfully contribute to growth are not changed, the firms’ differential growth can be understood as increasing the relative frequency of successful “genes-routines”. In contrast, routines that result in a deteriorating performance are unlikely to multiply, so that their relative frequency in an industry decreases. . .
Hayek distinguishes between three different layers where human society evolves. A first layer is that of biological evolution during human phylogeny where primitive forms of social behavior, values, and attitudes became genetically fixed as a result of selection processes. These imply an order of social interactions for which sociobiology provides the explanatory model. (Once genetically fixed, these attitudes and values continue to be part of the genetic endowment of modern humans, even though biological selection pressure has now been largely relaxed.) At the second layer of evolution, that of human reason, evolution is driven by intention, understanding and human creativity resulting in new knowledge and its diffusion. The crucial point of Hayek’s theory is, however, that between these two layers of evolution, i.e. “between instinct and reason” (Hayek 1971), there is a third layer of evolution. This is a layer at which rules of conduct are learnt and passed on in cultural rather than genetic transmission. The process is often not even consciously recognized. Accordingly, the emergence of, and the changes in, the rules of conduct that shape human interactions and create the orderly forms of civilization are not deliberately planned or controlled. . .
Compared to rational game theory, the distinctive features of evolutionary game theory are special assumptions about how strategies are determined and, as a consequence, special solution concepts. These assumptions follow from, and are designed to meet, the explanatory requirements of evolutionary biology, particularly sociobiology (Trivers 1971; Wilson 1975; Maynard Smith 1982). . . Because of the special assumptions built into evolutionary game theory, such applications are indeed not easy to find (Friedman 1998). These assumptions make sense in sociobiology when arguing how certain forms of genetically determined social behavior, e.g. altruistic forms, can emerge under natural selection. It is not evident, however, what kind of economic behavior is supposed to meet the assumptions of evolutionary game theory.