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Building systems


  • Brian Loasby



A system is a set of elements which are connected in particular ways. The formal general equilibrium model is an extreme case in which every element is directly connected to every other and in which all potential external connections, including connections from the future, are incorporated in the data. The foundational assumption of this paper is that viable systems must be selectively connected, and that viable large systems are highly-decomposable assemblies of smaller systems. As Simon argued, quasi-decomposability has made evolution possible from the beginning of the universe. Economies are evolutionary systems, in which human intentionality is a novel feature which modifies but does not supersede the processes of novelty generation, selection and diffusion. The microfoundations for this study are found in the characteristics of the human brain as a system of selective connections. Human knowledge consists of domain-limited patterns imposed on events. Organization—selective connections—is thus basic; but the potential for human knowledge is greatly enhanced by specialisation between domains, combined with variation within each. Co-ordination and development, so often separated in economic theory, are interconnected; they are both ordered processes—not states, in which markets (alongside many other institutions) are prime sources of order. Copyright Springer-Verlag 2012

Suggested Citation

  • Brian Loasby, 2012. "Building systems," Journal of Evolutionary Economics, Springer, vol. 22(4), pages 833-846, September.
  • Handle: RePEc:spr:joevec:v:22:y:2012:i:4:p:833-846
    DOI: 10.1007/s00191-012-0288-y

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    References listed on IDEAS

    1. Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542.
    2. Richardson, G B, 1972. "The Organisation of Industry," Economic Journal, Royal Economic Society, vol. 82(327), pages 883-896, September.
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    Cited by:

    1. Elsner, Wolfram, 2017. "Policy and State in Complexity Economics," EconStor Preprints 158766, ZBW - German National Library of Economics.
    2. Félix-Fernando Muñoz & María-Isabel Encinar, 2014. "Intentionality and the emergence of complexity: an analytical approach," Journal of Evolutionary Economics, Springer, vol. 24(2), pages 317-334, April.

    More about this item


    Evolution; Decomposability; Process; Order; B52; D83; L26; O12; O31;

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives


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