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Evolutionary Theory and Economic Policy with Reference to Sustainability

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  • John Gowdy

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Abstract

The policy recommendations of most economists are driven by a view of economic reality embodied in Walrasian general equilibrium theory. Ironically, the Walrasian system has been all but abandoned by leading economic theorists. It has been demonstrated to be theoretically untenable, its basic assumptions about human decision making have been empirically falsified, and it consistently makes poor predictions of economic behavior. The current revolution in welfare economics offers opportunities on two related fronts for an evolutionary perspective on human behavior to reshape economic theory and policy. The first opportunity is to incorporate empirically-based information about human behavior to the study of human wants and their formation. This includes information about the evolution of the genetic component of decision making as well as the cultural dimensions of behavior. Expanding the role of economic analysis beyond stylized market behavior to focus on well-being (real utility) has far-reaching consequences for microeconomic policy. Secondly, abandoning the Walrasian model also means rethinking the microfoundations approach to the economic analysis of sustainability. This opens the door for economists to engage with the growing body of research on the evolution of whole societies. One link between the evolution of human behavior and the evolution of human societies is the psychological phenomenon of considering sunk costs. Understanding and overcoming the sunk cost fallacy may be the key to creating a sustainable society.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s10818-006-7213-0
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Bibliographic Info

Article provided by Springer in its journal Journal of Bioeconomics.

Volume (Year): 8 (2006)
Issue (Month): 1 (04)
Pages: 1-19

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Handle: RePEc:kap:jbioec:v:8:y:2006:i:1:p:1-19

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Web page: http://www.springerlink.com/link.asp?id=103315

Related research

Keywords: behavioral economics; sunk costs; welfare economics; N0; O5; P0; Q2;

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Cited by:
  1. Kevin Maréchal & Hélène Aubaret-Joachain & Jean-Paul Ledant, 2008. "The influence of Economics on agricultural systems: an evolutionary and ecological perspective," Working Papers CEB 08-028.RS, ULB -- Universite Libre de Bruxelles.
  2. Ulrich Witt, 2013. "The Future of Evolutionary Economics: Why Modalities Matter," Papers on Economics and Evolution 2013-09, Max Planck Institute of Economics, Evolutionary Economics Group.

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