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Eric D. Beinhocker, "The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics"

Over 6.4 billion people participate in a $36.5 trillion global economy, designed and overseen by no one. How did this marvel of self-organized complexity evolve? How is wealth created within this system? And how can wealth be increased for the benefit of individuals, businesses, and society?

In The Origin of Wealth, Eric D. Beinhocker argues that modern science provides a radical perspective on these age-old questions, with far-reaching implications. According to Beinhocker, wealth creation is the product of a simple but profoundly powerful evolutionary formula: differentiate, select, and amplify. In this view, the economy is a "complex adaptive system" in which physical technologies, social technologies, and business designs continuously interact to create novel products, new ideas, and increasing wealth.

Taking readers on an entertaining journey through economic history, from the stone-age to the modern economy, Beinhocker explores how "complexity economics" provides provocative insights on issues ranging from creating adaptive organizations, to the evolutionary workings of stock markets, to new perspectives on government policies.

A landmark book that shatters conventional economic theory, The Origin of Wealth will rewire our thinking about how we came to be here—and where we are going.

From the Inside Flap

What is wealth? How is it created? How can we create more of it for the benefit of individuals, businesses, and society?

These are the fundamental questions that Eric Beinhocker asks in this groundbreaking book. According to Beinhocker, the field of economics is in the midst of a revolution that promises to overthrow a century of conventional theory and profoundly change our thinking about economic growth and innovation.

In provocative and entertaining fashion, The Origin of Wealth surveys the cutting-edge ideas of leading economists and scientists who are reshaping economics and brings their work alive for a broad audience. Beinhocker argues that the economy is a "complex adaptive system," more akin to the brain, the Internet, or an ecosystem than to the static picture presented by traditional theory.

Building on these new ideas, Beinhocker shows how wealth is created through an evolutionary process. Modern science views evolution not just as a biological phenomenon, but as a general-purpose formula for innovation. It is this evolutionary formula, acting on technologies, social institutions, and businesses, that has taken us from the Stone Age to the enormously complex $36.5 trillion global economy of today. If Adam Smith provided the inspiration for economics in the twentieth century, Charles Darwin is providing it in the twenty-first.

By understanding the evolutionary origins of wealth, we can also answer the question "How can we create more of it?" Beinhocker describes how new research is turning conventional wisdom on its head in areas ranging from business strategy and the design of organizations to the workings of stock markets and the world of politics and policy.

From Publishers Weekly

Accounting for the creation of wealth has long challenged humanity's best minds. For business readers and academics, Beinhocker is a zealous and able guide to the emerging economic paradigm shift he calls the "Complexity Economics revolution."

A fellow of the economic think tank McKinsey Global Institute, he rejects traditional economic theory, based on a physics model of closed systems, in which change is an external disruptive shock. Instead, he outlines an open, adaptive system with interlocking networks that change organically, reflecting the interaction of technological innovation, social development and business practice. Wealth is created to the degree that this interaction decreases entropy in favor of "fit order" that meets human needs, desires and preferences.

Beinhocker is sufficiently comfortable with this evolutionary model to advocate a comprehensive redesigning of institutions and society to facilitate it. He argues for corporate policies that favor many small risks over a few big ones and recommends restructuring financial theory to favor growth and endurance rather than short-term gains.

Though he asserts that complexity economics can reduce political partisanship and increase social capital, Beinhocker stops short of saying that it cures sexual dysfunction. By the end, the concept emerges as a great idea that the author tries to make a panacea.

Contents

& 8220;Preface and Acknowledgments

Part I: A Paradigm Shift

 1 The Question: How Is Wealth Created?

  The Mysteries of Wealth

  Humanity's Most Complex Creation

  2.5 Million Years of Economic History in Brief

  A Tale of Two Tribes

  The Economy Evolves

  The Creation of Fit Design

  Complexity Economics

  The Road Map Ahead

 2 Traditional Economics: A World in Equilibrium

  The Need for a New Approach

  Defining Traditional Economics

  Pin Making and the Invisible Hand

  A Healthy Balance

  Dreams of a New Science

  As Predictable as Gravity

  The Panglossian Economy

  The Neoclassical Synthesis

  From Allocation to Growth

  The Legacy of Traditional Economics

 3 A Critique: Chaos and Cuban Cars

  The Clash of the Titans

  Unrealistic Assumptions

  Incredibly Smart People in Unbelievably Simple Worlds

  Time Waits for No One

  Making the Interesting Exogenous

  Keeping a Lid on Things

  Reality Test

  The "Law" of Supply and Demand

  The Law of One Price

  Equilibrium in a Few Quintillion Years

  Nonrandom Walks

  Misused Metaphors

  Half-Baked Physics

  Open Sesame

  The Misclassification of the Economy

  Beyond Walras's Cathedral

Part II: Complexity Economics

 4 The Big Picture: Sugar and Spice

  Welcome to the Sugarscape

  The Rich Get Richer

  Birds Do It, Bees Do It... and So Do Agents

  The Invisible Hand Comes to Sugarscape

  Equilibrium Lost

  The Evolution of Hierarchy

  An Economy in Silico

  Further Defining Complexity Economics

  Table 4–1: Five "Big Ideas" That Distinguish Complexity Economics from Traditional Economics

 5 Dynamics: The Delights of Disequilibrium

  Dynamics and Feedback

  The Science of "Nonpachydermology"

  The Economy Is Complex but Not Chaotic

  The Invisible Hand Sometimes Shakes

 6 Agents: Mind Games

  Spock Goes Shopping

  Cognitive Dissonance

  You Selfish Pig!

  To Err Is Human

  That Does Not Compute

  Arthur's Bar Problem

  Inductive Rationality

  Why Deep Blue Can't Tie Its Shoes

  The Mind of an Agent

  Frog Learning

  Frog Poetry?

  Stock Bots

 7 Networks: Oh What a Tangled Web We Weave

  How Networks Catch Fire

  It's a Small World

  The Value of Random Friends

  "The Network Is The Computer"

  Big Is Beautiful: Informational Scale

  Big Is Bad: Complexity Catastrophes

  Degrees of Possibility Versus Degrees of Freedom

  Two Cheers for Hierarchy!

  Boring Is Better

  The Edge of Order

 8 Emergence: The Puzzle of Patterns

  Are Business Cycles Like Wiggling Jelly?

  We're All (New) Keynesians Now

  "More Is Different"

  Oscillations: Boom and Bust in Beer World

  Punctuated Equilibrium: Are There "Keystone" Technologies?

  Power Laws: Earthquakes and Stock Markets

  Why Are Stock Markets So Volatile?

 9 Evolution: It's a Jungle Out There

  Design Without a Designer

  Artificial Life

  An Algorithm for Innovation

  The Library of LEGO

  The Setup for Evolution

  The Evolutionary Process: Child's Play

  Replicators Just Want to Replicate

  Explorations on the Fitness Landscape

  The Grand Champion Search Algorithm

  Good Tricks, Forced Moves, and Path Dependence

  Stripping Evolution Back to Its Basics

  From Evolutionary Theory to Economic Reality

Part III: How Evolution Creates Wealth

 10 Design Spaces: From Games to Economies

  The Prisoner's Dilemma

  The Tournament of Champions

  Strategies in Silico

  A Rain Forest of Bits

  The King of the Forest

  Unpredictable but Understandable

  The Library of Babel

  The Library of Smith

  A Model of Economic Evolution

 11 Physical Technology: From Stone Tools to Spacecraft

  The Dawn of Economic Man

  Physical Technology Space

  Physical Technology Readers

  Physical Technology Feeds Its Own Growth

  Technology Evolution by Deductive-Tinkering

  Selection on the Physical Technology Landscape

  Imitation Is the Sincerest Form of Flattery

  Explaining Technology S-Curves

  Disruptive Technologies

  The Scientific Revolution: Reprogramming Evolution

 12 Social Technology: From Hunter-Gatherers to Multinationals

  Let's Get Organized

  How Social Technologies Evolve

  Deductive-Tinkering in Social Technology Space

  Competing to Cooperate

   Non-Zero Magic

   Dividing the Spoils

   Cheaters (Mostly) Never Win and Winners (Mostly) Never Cheat

  From Family Units to Business Units

  Peace, Love, and Understanding

  Building Computers Out of People

 13 Economic Evolution: From Big Men to Markets

  Businesses Do the "Living and Dying"

  Units of Selection

  Strategy Glue

  Differentiation: From Entrepreneurs to Bureaucrats

  Selection: Big Men Versus Markets

  How Selection Works in Market Systems

  Replication: Amplifying Success

  Economic Evolution in a Nutshell

  In Praise of Markets—for Different Reasons

  Meta-lnnovations: Revisiting 1750

 14 A New Definition of Wealth: Fit Order

  Cranks and Half-Baked Speculators

  A Proposal: Three Conditions for Value Creation

   Irreversibility: Breaking Eggs to Make an Omelet

   Decreasing Entropy: Are Pink Cars and Bombs Value Creating?

   Fitness (Part 1): An Evolutionary View of Preferences

   Fitness (Part 2): Pushing Our Own Pleasure Buttons

  The Universal Utility Function

  Wealth Is "Fit Order"

  Did We Pass the Test?

Part IV: What It Means for Business and Society

 15 Strategy: Racing the Red Queen

  Are You Committed?

  A $270 Billion Frozen Accident

  "The Future Ain't What It Used to Be"

  The Myth of Sustainable Competitive Advantage

  Strategy Is a Red Queen Race

  Companies Don't Innovate; Markets Do

  Strategy as a Portfolio of Experiments

  Context: Creating Prepared Minds

  Differentiation: How Bushy Is Your Strategic Tree?

  Selection Pressure: Setting Aspirations

  Amplification: Swarming Like Bees

  An Adaptive Mind-Set

 16 Organization: A Society of Minds

  Social Architecture and Adaptability

  Organizations Are Complex Adaptive Systems

  Why Firms Exist

  Executing and Adapting

  Individuals: Through Rose-Colored Glasses

  Individuals: Adaptability and Loss Aversion

  Individuals: The Price of Experience

  Individuals: "Rigids" Versus "Flexibles"

  Structure: How Much Hierarchy?

  Structure: The Coevolution of Resources and Business Plans

  Culture: Rules of Behavior

  Culture: The Ten Commandments

   Performing norms

   Cooperating norms

   Innovating norms

  Culture: Inherent Tensions

  Creating an Adaptive Social Architecture

  A Society of Minds

 17 Finance: Ecosystems of Expectations

  Crashing Nobel Prizes

  Forgotten Frenchmen and Dusty Libraries

  Textbook Stock Picking

  Vegas, Churchill Downs, and Wall Street

  Cotton Prices, Fat Tails, and Fractals

  "A Non-Random Walk Down Wall Street"

  Attack of the Econophysicists

  Markets as Evolving Ecosystems

  Price Does Not Equal Value

  A New Definition of Market Efficiency

  Implications for Managers

   The Cost of Capital

   Do Stock Options Make Sense?

   What Is the Goal of a Corporation?

  Endure and Grow

 18 Politics and Policy: The End of Left Versus left

  A Framework Past Its Time

  Human Nature and Strong Reciprocity

  Left-Wing Utopias and Free Market Fantasies

   The Critique of the Left

   The Critique of the left

   Government as Fitness Function Shaper

  "Culture Matters"

  Social Capital and the "Great Disruption"

  Inequality, Social Mobility, and the Culture of Poverty

   Is Inequality Moral?

   A Lack of Social Mobility

   The "Culture of Poverty"

   Rawlsian Logic and Policy

   Changing Cultures and Creating a "Common Layer"

  Future Directions

Epilogue

Notes

Bibliography

Index

About the Author& 8221;

Tags: qEconomics, qComplexityEconomics, qBusiness, qFinance, qInvesting, qEvolution

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See Also:

Nassim Nicholas Taleb, "The Black Swan: The Impact of the Highly Improbable"

Thomas Sowell, "Economic Facts and Fallacies"

Arthur B. Laffer, et al., "The End of Prosperity: How Higher Taxes Will Doom the Economy--If We Let It Happen"

Alan Beattie, "False Economy: A Surprising Economic History of the World"

Robert J. Samuelson, "The Great Inflation and Its Aftermath: The Past and Future of American Affluence"

Paul Krugman, "The Return of Depression Economics and the Crisis of 2008 (2nd Edition)"

Robert Sobel, "The Pursuit of Wealth: The Incredible Story of Money Thoughout the Ages"

Thomas L. Friedman, "The World is Flat 3.0: A Brief History of the Twenty-first Century"

Thomas L. Friedman, "Hot, Flat, and Crowded: Why We Need a Green Revolution—and How It Can Renew America"

Neil Ferguson, "The Ascent of Money: A Financial History of the World"

No matter how you look at it, wealth = theft. All the Earth's resources are our resources; that is humans, animals, plants, etc. No one has any left of ownership. Ownership is the most dangerous delusion humans have. If we all lived together, we'd obviously have a far more advanced social order. Resources would be used wisely & with real purpose, rather than an enhancement for vainity.

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