Linking Information, Knowledge and Evolutionary Growth: A Multilevel Interplay between Natural Selection and Informed Intervention

85 Pages Posted: 19 Feb 2014

See all articles by Martin Hilbert

Martin Hilbert

University of California, Davis

Date Written: April 15, 2013

Abstract

This article illustrates a formal link between economic growth and longstanding quantitative measures of information and knowledge. The link is found by relating two concepts from evolutionary theory, namely the Price equation and bet-hedging (stochastic switching). The first part of the article uses a Price-equation like evolutionary multilevel decomposition to conceptualize the fact that that uncertainty about the future environment is a main impediment for growth. The second part of the article illustrates how knowledge and information about the uncertain future environment can be used to overcome this constraint. Fisher’s-, Shannon’s-, Kolmogorov’s-, Massey’s- and Kullback-Leibler’s information metrics emerge naturally from our evolutionary equations. These longstanding, renowned and formal metrics allow us to turn the amount of information into a quantifiable ingredient of growth. The amount of information about the uncertain future is exactly equal to the achievable increase in the long term growth rate. The result is a Maxwell’s demon-like logic in which information about the environment can be used to extract fitness. A fourth-digit classification of international trade items of ten large exporting economies is employed to empirically quantify these notions on multiple levels of economic activity. It is shown how growth can be optimized through a mix of informed intervention (often on lower levels of multi-level populations) and blind natural selection (often on more uncertain higher levels).

Keywords: evolutionary growth, information, international trade, bet hedging, fitness decomposition, knowledge

JEL Classification: B25, B52, C02, D80, D81, D92, F14, G11, O43

Suggested Citation

Hilbert, Martin, Linking Information, Knowledge and Evolutionary Growth: A Multilevel Interplay between Natural Selection and Informed Intervention (April 15, 2013). Available at SSRN: https://ssrn.com/abstract=2397751 or http://dx.doi.org/10.2139/ssrn.2397751

Martin Hilbert (Contact Author)

University of California, Davis ( email )

One Shields Avenue
Apt 153
Davis, CA 95616
United States

HOME PAGE: http://www.martinhilbert.net

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