I read a book a couple of days ago which linked Darwinian theory to Smith.* Linking Darwin's theories to any social issue has never been a particularly good idea before - has to do with the fact that we are not finches, or any other wild animal. Indeed, derivatives of Darwinian theory have often been used to defend horrible policies, most notably ethnic cleansing and eugenics.
The idea here in this book was that nature achieves good solutions to problems on its own, simply by a few principles, as Darwin described them: Scarcity, imperfect procreation, and data retention. You need scarcity because there has to be a selection procedure: if there are endless resources, there will be endless solutions, many of them far from optimal. In order for the system to become "adaptive", it needs to have some optimum to strive for; that optimum depends on the conditions of the environment, to which the thing has to adapt. I will come back to that later.
Imperfect procreation means that in the process of multiplication, there need to occur "errors". Faults in the DNA, in natural theory, produce anomalies which may or may not outperform the other creatures in some slight way, and if there is enough scarcity, the inferior creatures without the "error" will slowly be replaced, over several generations, by their more successful peers.
Lastly, there has to be data retention, which means that solutions of one generation must pass on to the next. In natural theory, we have found DNA to do this job of retaining all useful "errors", adding gradually but surely to the complexity and adaptiveness of creatures.
The author recognized similar patterns in economies. First, there is scarcity on the planet. We can't have everything we want. So, there is also a scarcity of income. Income is used to distribute the resources we have, and the products we make with them, according to individual merit. More merit is more income is more products.
But there's also the producers, who have products to sell to people with non-infinite incomes. So the producers are also battling other producers over a scarce resource: the consumer's wallet.
Prices and wages in this system would fulfil the function of data retention. And "errors" would be any experiments with setting them higher or lower. Presumably, it would take into account product quality and job quality as well, somewhere. But they are also steady until someone messes around with them. And once we have these principles in place, all we need to wait for are millions of consumers making billions of choices on whether or not they are going to buy those products. And similarly, we will have thousands of producers making millions of choices on wages. And if we wait for a while, it will reach a near-optimal solution, because the laws of natural selection make sure the parameters converge to a solution on their own devices: no central plan is needed.
That is a conclusion that Hayek would surely subscribe to, and probably he is inspired by Darwin. In fact, Hayek says you can only mess it up by trying to centrally meddle with these natural laws of economies.
Well, and those natural laws require multiple types of finches to compete for resources. One of them will be more adapted to its environment and survive the selection process. I guess in economics, higher adaptation translates to "more efficient resource distribution", where efficient is entirely unclear in its meaning. And it is interesting that this is probably all about distribution, not use: focusing on more efficient use would be good given that the earth's population is growing, while many resources are finite. But whether it is one or the other aside...
It is clear that anywhere these naturalist ideas are introduced - simply by stripping away all centralized regulations - the result seems to be that "efficient" becomes defined as "favouring the rich". It suggests that natural selection is not that great at providing the right type of order for economic and political questions. The reason, I think, is quite nicely explained by this story I heard one time (I think in a discussion about regulation on the BBC): It is required to wear helmets during ice hockey matches. When polled, the vast majority of players thought that was a good idea in general: you can get seriously injured at those speeds when you fall. However, when asked if they would wear the helmet if they had a choice, many of them would say they would not wear it, because it hinders movement and sight: you have some competitive advantage playing without a helmet. Other players would choose not to wear the helmet if other players on the field were also not wearing a helmet: they do not like to be at competitive disadvantage. Soon after you'd make a helmet a choice in ice hockey matches, you would get loads of easily preventable skull injuries and deaths. Here we see that top-down regulation is favoured, because everybody gains from it: Not getting badly injured is arguably better than winning an extra game or 2, because you could turn your head a fraction of a second faster - assuming that the opposition didn't discover this advantage yet.
Since, in economics, there is no evidence of the natural selection approach converging to an acceptable solution state, there's absolutely no reason to believe Hayek.** There really is a reason we invented politics.
*I was reading "Emergence" by Steven Johnson, and it quotes "The Nature of Economies" by Jane Jacobs: "Adam Smith, back in 1775, identified prices of goods and rates of wages as feedback information, although of course he didn't call it that because the word feedback was not in the vocabulary at the time. But he understood the idea.... In his sober way, Smith was clearly excited about the marvellous form of order he'd discovered, as well he should have been. He was far ahead of naturalists in grasping the principle of negative feedback controls."
** In fact, evolutionary systems rarely outperform reasoned thinking. For example, there is an evolutionary selection simulator that produces cars. Boxcar2d
http://boxcar2d.com/index.htmlIf you look at the high scores, most of the top-performing cars are manual adaptations of the random vehicles created by the natural selection procedure, or they are entirely hand-crafted. That, or they take an insane amount of generations to get near hand-crafted results. That being said, I love the simulator and I'm a fan of evolutionary systems. They produce surprising results and it is fun to watch something evolve from extremely unlikely to pretty efficient at whatever the task is you assign them to do.
