Buchenbach 2001: the evolution of an institution

Fifth graduate workshop co-organized by the Max Planck Institute and Marco Lehmann-Waffenschmidt (Dresden)

With financial support from the Volkswagen Foundation

Buchenbach is the name of a little Black Forest village hardly known to the outside world. In the German-speaking community of evolutionary economists, however, Buchenbach is the well-known synonym for a series of graduate workshops. Marco Lehmann-Waffenschmidt The series was started by Ulrich Witt back in the early 1990s when he still was at the nearby University of Freiburg; it has later been organized by the Max Planck Institute. Like most repeated events (may we use the term "institutions"?) the Buchenbach workshops evolve over time, and each new workshop is a blend of tradition and novelty. When the fifth Buchenbach workshop took place in May 2001, the effects of evolution were particularly easily discerned. Marco Lehmann-Waffenschmidt and his team from the University of Dresden had for the first time joined in the organization of the workshop, with the effect of a program reorientation toward a more pronounced summer school character. In addition, an entire afternoon was dedicated to a panel of three prominent evolutionary economists (Stan Metcalfe from Manchester, Viktor Vanberg from Freiburg, and Ulrich Witt from Jena) discussing their perspectives on some of the essentials of evolutionary economics. With this discussion, an attempt was made to clarify some unsettled questions of evolutionary economics, such as the methodological status of the variation-selection-retention scheme adopted from evolutionary biology and the question of what entity actually evolves in economic processes. And finally, as another innovation, the academic program of the workshop was extended well into the late evening. In doing so, two rather unusual talks had been scheduled for the evening sessions. Rainer Flik Rainer Flik, an economic historian at the University of Jena, discussed the development of the book market and problems of intellectual property rights during the German classical period (late 18th and early 19th century). Matthias Klaes from Keele University discussed the apparent paradoxes in the reception and citation history of Ronald Coase's famous articles on "The nature of the firm" and "The problem of social cost", an instance which he showed to bear some lessons in the sociology of science also for present-day academics.

In spite of the changes, the latest Buchenbach workshop resembled its predecessors in that it provided a welcome opportunity to trace the development of research interests among younger evolutionary economists. Contributions to Buchenbach workshops are traditionally solicited with an open call for papers, so that the emerging program indicates what issues scholars are currently working on. At the 2001 workshop, main focuses included issues of economic policy and the normative side of evolutionary economics, as well as the question of whether and how to relate evolutionary economics to the genetic endowment of human beings. In addition, more traditional fields of interests of evolutionary economists, such as the economics of innovation as well as conceptual and methodological work, completed the set of issues covered.

Particularly in the camp of German evolutionary economists, policy issues have often been taken up only reluctantly (although there have always been some prominent exceptions to this, in particular in the St. Gallen school) . In part, the reluctance may be traced back to the Hayekian tradition with its pronounced policy skepticism and its outspoken opposition to "constructivist" attempts to interfere with evolutionary market processes. During the 2001 Buchenbach workshop, however, it became clear that evolutionary economists do have a word to say on policy issues, and that their perspective differs significantly from more standard economic policy advice. Moreover, as was stressed by Stan Metcalfe, the need for an evolutionary counterpart of welfare economics, from which normative statements can be derived, is implied by the very interest that evolutionary economics takes in economic change. After all, change (or progress) inherently results in uneven outcomes, which in turn gives rise to the problem of how to compare gains and losses of different agents. And finally, so the reminder by Stefan Okruch from the Bonn-based Max Planck Project Group on the Law of Common Goods, the capability of advising and evaluating policy making is a traditional part of the raison d'être of the field of economics (formerly known as political economy).

Two presentations focused on the general characterization of the process of policy making. Raimund Bleischwitz (Wuppertal; discussant: Matthias Klaes) proposed the formulation of open goals for economic policy, arguing that openness of goals allows for flexibility of policy making and for the possibility of revising specific goals if they turn out to be fallacious, while on the other hand providing some degree of orientation to the agents and to their innovative search for best responses to the institutional framework established by the policy process. Matthias Klaes In a similar vein, Stefan Okruch (discussant: Jan Schnellenbach, St. Gallen) argued in favor of experimental policy making. According to Okruch, the traditional distinction between Ordnungspolitik and Prozesspolitik (policies modifying the institutional setting of the market process and policies intervening in the actual market process, respectively) is of little use from an evolutionary point of view. In complex, evolutionary economic systems, attempts of steering the market process are fallible, no matter on which of both types of policies they are based. As a way out of the difficulties of policy making, the approach of "democratic experimentalism" was advocated, i.e. the deliberate design of policy measures as experiments whose monitoring and potentially revision is a genuine part of the policy taken.

The presentation by Rüdiger Wink from Bochum (discussant: Uta-Maria Niederle, MPI Jena) investigated a specific instance of the coevolution of technical knowledge and institutional framework: the rapidly developing field of human genomics giving rise to novel political and ethical problems. Wink demonstrated how scientific progress in genomics created coordination requirements for the allocation of basic scientific knowledge, applied knowledge and knowledge on risks involved in modifications of the human DNA. His comparative study of developments in the U.S.A. and in Germany indicated differences in the institutional evolution in both countries, which Wink attributed to differences both in institutional histories and in cognitive framing effects. Martina Eckardt (Rostock, discussant: Jörg Jasper, Hannover) presented a general model of the evolution of law by means of innovations in legislation and in judicial decision-making. Both may be triggered by externalities caused by technological change. Christian Schubert (Bonn, discussant: Dirk Fornahl, MPI Jena) extended the discussion of institutional evolution into the spatial dimension. His presentation focused on the coevolution of spatial structure and economic activities, and on the potential of public law to improve upon the coordination of individual activities. Two presentations discussed problems of innovation policy. Wolfgang Gick (University of Jena, discussant: Rainer Voßkamp, Chemnitz) related the evolutionary concept of adaptive policy making to an information-economic model. He stressed the importance of designing incentive-compatible mechanisms for the implementation of innovation policies.Jan Nill Jan Nill (Berlin, discussant: Max Keilbach, Mannheim) discussed problems of changing the developmental path of specific technologies by means of innovation policies. Specifically, Nill argued that there are "windows of opportunity" for technological policies: the same policy measure will be differentially effective depending on the stage of technological development in which it is enacted.

Yet another approach to the problem of economic policy was presented by Gerhard Wegner (Erfurt) in his keynote lecture on the legitimization of systems competition. Wegner adopted the perspective of contractarian constitutionalism in the Buchanan-Vanberg tradition to evaluate potential requirements for political intervention which may arise from the effects of globalization and the reduced national capabilities of steering the market process. While Wegner's analysis lead to a rejection of most arguments for the need of limiting the effects of globalization, he argued that the contractarian view is fundamentally limited by the fact that its normative criterion - consensus of all involved agents at least at the level of abstract rules - cannot actually be realized; whereas substitutes such as hypothetical consensus are insufficient to legitimize normative statements.

As was mentioned above, the nature of human behavior and the potential impact of the genetic endowment of humans on economic activities constituted another focus of discussion at Buchenbach 2001. In part, this is owed to the fact that this issue figures prominently on the agenda of the Max Planck Institute. This point was made most explicitly in Ulrich Witt's contribution. Witt argued that evolutionary economics requires a multitude of case studies as well as a set of detailed hypotheses and models for the explanation of economic processes. For the latter, he suggested to use as a starting point what he called the "continuity of reality conjecture" - the conjecture that economic evolution is the extension of biological evolution by different means, but nonetheless based on and restricted by the genetic endowments of humans in terms of needs, wants, and cognitive capabilities. This position also showed up in the various contributions of other researchers from the Max Planck Institute. Wilhelm Ruprecht (discussant: Martin Bemmann, Dresden) used learning processes both at the unconscious and at the conscious level as the explanation for changes in consumer demand for sweeteners. Guido Bünstorf (discussant: Jens Krüger, University of Jena) related his discussion of energy as a factor of production to its potential to modify goods in ways that render them better suitable to fulfill universal and learned human wants.Witt, Metcalfe, Vanberg And Christian Cordes (discussant: Markus Becker, Odense) presented evidence for an universal "preference for ease". It has, so Cordes' hypothesis, since prehistoric times resulted in a labor-saving tendency in the innovative activities of humans.

A different aspect of universal behavioral regularities was highlighted in Viktor Vanberg's contribution. Vanberg stressed the rule-following character of human decision making. He suggested that the reluctance of economists to consider alternatives to the rational choice model, in spite of the persistent criticism of the model and its problematic empirical record, is due to its intuitive appeal as a representation of purposeful and adaptive behavior. To replace rational choice, according to Vanberg not a specific psychological theory is required, but a framework at the same level of generality as rational choice. A suitable candidate, he argued, exists in Ernst Mayr's suggestion that human behavior is program- or rule-based which captures the intentionality of human behavior without implying the teleological character of rational choice. The advantage of a conception of human behavior as rule-based was seen in its compatibility to a number of more specific accounts of human behavior, including Hayek's "Sensory Order", Simon's bounded rationality, Holland's computer models, as well as recent findings in evolutionary psychology and epistemology. Human ethology as another potential source for evolutionary economics in order to gain evidence on actual human behavior was advocated by Carl Henning Reschke (Cologne, discussant: Livia Reina, Dresden). Lehmann-Waffenschmidt, Cartner

The economics of innovation is a traditional stronghold of evolutionary economics. At Buchenbach 2001, it was covered, in quite different ways, in the keynote lecture by Uwe Cantner and in the presentation made by Kerstin Gerth (both at the University of Jena). Cantner gave an introduction in empirical methods of measuring the impact of innovation on productivity which adopt non-parametric specifications of technology and distance functions as measures of efficiency. In two exemplary applications, Cantner demonstrated the potential of his method. At the micro level, he could show how the catch-up performance of the Asian NICs can be split up into two phases of early capital accumulation and subsequent productivity increases. At the industry level, he argued that there is no simple answer to the question of whether lagging behind implies an advantage for later productivity increases, but that the potential to catch up depends both on the distance to the technological frontier and on industry-specific factors. Kathrin Happe Kerstin Gerth (discussant: Thomas Grebel, Augsburg) presented an historical approach to the issue of the impact that knowledge has on the growth performance of economies. She studies the biographies of German Nobel Prize winners in the period of the Kaiserreich (1871-1918) in order to derive evidence on the role of the educational system for the German catch-up of the time.

A final set of presentations dealt with more conceptual and methodological issues. Marco Lehmann-Waffenschmidt (Dresden) discussed in his keynote lecture the implications that the epistemological positions of contingency and radical constructivism, if taken seriously, have for evolutionary economics, in particular for notions of causality. Kurt Dopfer (St. Gallen) presented an abstract unifying framework of evolutionary economics based on information-theoretical concepts and the consideration of interaction between agents. The suggested framework allows to organize origination, adoption and retention processes at the micro, meso and macro levels. Cornelia Friedrich (Dresden, discussant: Alexander Ebner, Frankfurt/Main) investigated logical interdependencies in evolutionary concepts of analyzing competitive processes such as path dependence, critical masses, lock-in, and networks. Kathrin Happe (Stuttgart, discussant: Nicole-Barbara Buschle, Dresden) discussed practical problems in the development and use of agent-based simulation models.

Guido Bünstorf