Douglass North on “Understanding the Process of Economic Change”

Economic change is a process, and in this book I shall describe the nature of that process. In contrast to Darwinian evolutionary theory, the key to human evolutionary change is the intentionality of the players. The selection mechanisms in Darwinian evolutionary theory are not informed by beliefs about the eventual consequences. In contrast, human evolution is guided by the perceptions of the players; choices — decisions — are made in the light of those perceptions with the intent of producing outcomes downstream that will reduce uncertainty of the organizations — political, economic, and social — in pursuit of their goals. Economic change, therefore, is for the most part a deliberate process shaped by the perceptions of the actors about the consequences of their actions. The perceptions comes from beliefs of the players — the theories they have about the consequences of their actions — beliefs that are typically blended with their preferences.

From Understanding the Process of Economic Change, Princeton University Press, 2005.

2 thoughts on “Douglass North on “Understanding the Process of Economic Change”

  1. I would say DN doesn’t understand both intentionality and evolutionary theory. For one, Darwinian mechanisms have an “aboutness” and “looking forward” component, because organisms choose actions that are “about” survival. Intentions do the same, but in a more complex way, so the idea that intentions are somehow special to humans doesn’t fly. Two, having intentions does not rule out Darwinian mechanisms. It would just be Darwinian mechanisms operating on intentional systems. Also, in many cases, non-intentional systems can, and do, co-exist besides intentional ones. So the strict distinction DN is pushing does not exist. There are also other views on the nature of beliefs, for instance the eliminative materialist idea that they don’t exist, and the related view that they are rationalisation efforts generated after the fact. It has been shown that hypnotists can make people do weird things (like dancing or flapping their hands when the hypnotist snaps his fingers), and if you ask people why they did it, they will confabulate all kinds of weird rational-sounding reasons involving beliefs. (I suspect economists do this as well!:)

    Choices and decisions are separate from beliefs, and happen at the evolutionary level as well, and it has been shown that the mechanisms humans use to make choices and decisions are not all that different from the ones animals use.

    The underlying view DN is pushing, that man, particualrly economic man, is somehow special in terms of the mechanisms he uses for decision-making, is believed only by economists. The consensus view everywhere else is that there is a difference in degree, but not in category.

    As for free will, no one really knows what that is. Ramachandran is not exactly the best person to shed light on that issue, Dennett would be closer. Check out his book Elbow Room and the new one (Freedom Evolves).


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