Interactive Learning forms the core of innovation systems lyrics



IFIAS 6. Technical Change and Economic Theory
Neo-Schumpeterian R Nelson, G Dosi, G Silverberg, L Soete and C Freeman in this 1988 book introduce new concepts that overturn Hayek

Evolutionary economists like Bengt Ake Lundvall and the editors of Technical Change and Economic Theory (1988, IFIAS Vol 6) proposed as neo-Schumpeterian that innovations and technology are endogenous to economics.

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Friedrich Hayek, with other classical economists in thе Austrian school, did not have the methodology to considеr technology endogenous.

Lionel Robbins and his 1939 paper The Inevitability of Monopoly, whom Hayek cited in The Road to Serfdom, considered technology an externality.

Like the other classical economists, their analysis focused on individual agents because of “given data” issues as Hayek discussed in his self-described 1936 seminal essay Economics and Knowledge that he delivered as a Presidential Address to the London Economics Club already cited above.

Thus, his economics focused on the benefits from transactions and did not consider increasing returns – that would have made monopoly inevitable – that comes from knowledge embedded in technology and from interactions, coming from social media like Facebook.

Hayek’s economics cannot handle social media.

Increasing returns from social network effects and learning embedded in products – while originally studied with the railroads (though not referred by Hayek) – needed the work of W Brian Arthur in the 1990s, about the time Hayek died, to be researched and made the basis of such modern wonders as Silicon Valley.

This dynamic (inter-temporal dis-equilibrium as normal) neo-Schumpeterian context of [national] innovation systems is the construct that SYNTHESiST is using as foundation for developing appropriate innovations in the appreciative theory of development that he is working on.

New Institutional Economics makes Hayek’s Sensory Order obsolete
Douglass North. Process of Economic Change
D North (ref R Heiner, 1983) and new institutional economic introduce new concepts that overturn Hayek

In Understanding the Process of Economic Change (2005, Princeton Unversity Press), Douglass North who is the 1993 Nobel laureate for economics wrote a justification for new institutional economics that overturns Hayek’s core idea that supports his libertarian claim based on the gap between perception and cognition.

Note: Interestingly, both North and Hayek take off from Frank Knight and the handling of risk in economics.

Possibly because of the difference of the state-of-the-art (1980s vs 1930s) in the science of perception and cognition, North and Hayek reached different conclusions that determined their choices in political economy.

Referencing a 1983 study by Ronald Heiner on The Origins of Predictable Behavior, North notes that humans bridge the gap coming from uncertainty by “constructing rules to restrict the flexibility of choices in such situations.”

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