Can Evolutionary Economics Make a Billion $ Difference for 60 Percent of the World's Poor in Asia?
20 Pages Posted: 3 Sep 2001
Date Written: August 18, 2001
Abstract
The use of evolutionary and institutional economics in the analysis of increasing returns, transaction costs, and agglomeration and network effects is important because of their determining impacts on the processes of trade, growth and development. Institutional analysis facilitates definition of the role of governments, and of international agencies, in the design of projects and provision of services in sectors such as transport, communications, and financial services. The application of institutional methods and evolutionary models that relate positive externality and linkage effects to actual representations of institutional and physical infrastructures results in a powerful tool for the economic development of financial sectors and trade corridors. The question posed is how powerful is the evolutionary approach compared to the conventional ones. That is, would wide application of institutional and evolutionary methods yields higher payoffs for growth, equity, and poverty reduction? If institutional analysis is powerful enough, why is it not more commonly used? The cases of Nepal's financial sector reform, and of the design of West Bengal's trade and transport corridor, show the huge difference evolutionary economics can make. It is worth the effort. The case of financial sector investment shows that an institutional, transaction cost approach can be put to good use. A new family of evolutionary models provides a much more targeted approach to transport analysis. Why is evolutionary analysis not employed more often? The answer appears to lie in unfamiliarity with the methods and results. This chapter provides two vivid illustrations of successful applications. The paper ends with practical suggestions as to how evolutionary and institutional economics could become a household tool for multilateral development institutions, since it could make a significant difference for the 60 percent of the world's poor living in Asia. The paper calls upon the evolutionary economics profession to step forward with applicable theoretical concepts, relevant measurement indicators, and increased and extended resource networks.
JEL Classification: A11, B25, F14, G14, O10, R11
Suggested Citation: Suggested Citation