Journal of Evolutionary Economics

, Volume 22, Issue 3, pp 585–619 | Cite as

Is novelty always a good thing? Towards an evolutionary welfare economics

  • Christian SchubertEmail author
Regular Article


Evolutionary economists are increasingly interested in developing policy implications. As a rule, contributions in this field implicitly assume that policy should focus on the encouragement of learning and innovation. We argue that, from an individualistic perspective, this position is not easy to justify. Novelty and evolutionary change have in fact a rather complex normative dimension. In order to cope with this, the evolutionary approach to policy-making needs to be complemented with an account of welfare the background assumptions of which are compatible with an evolutionary world-view. Standard welfare economics is unsuited to the job, since the orthodox way to conceptualize welfare as the satisfaction of given and rational preferences cannot be applied in a world in which preferences tend to be variable and incoherent. We argue that, in order to deal with the specific normative issues brought up in an evolving economy, welfare should be conceptualized in a procedural way: At the individual level, it should be understood as the capacity and motivation to engage in the ongoing learning of instrumentally effective preferences. Evolutionary-naturalistic insights into the way human agents bring about, value, and respond to novelty-induced change turn out to be a valuable input into this extended concept of welfare. Finally, some implications of this concept are explored.


Novelty Endogenous change Preference formation Welfare Justice 

JEL Classification

B52 D83 O30 


  1. Aldrich HE, Hodgson GM, Hull DL, Knudsen T, Mokyr J, Vanberg VJ (2008) In defence of generalized Darwinism. J Evol Econ 18:577–596CrossRefGoogle Scholar
  2. Anand P, Gray A (2009) Obesity as market failure: could a ‘deliberative economy’ overcome the problem of paternalism? Kyklos 62:182–190CrossRefGoogle Scholar
  3. Andersen ES (2004) Population thinking and evolutionary economic analysis: exploring Marshall’s fable of the trees. MimeoGoogle Scholar
  4. Ariely D, Loewenstein G, Prelec D (2006) Tom Sawyer and the construction of value. J Econ Behav Organ 60:1–10CrossRefGoogle Scholar
  5. Atkinson AB (2009) Economics as a moral science. Economica 76:791–804CrossRefGoogle Scholar
  6. Audretsch DB, Grillo I, Thurik AR (2007) Explaining entrepreneurship and the role of policy: a framework. In: Handbook of research in entrepreneurship policy. Elgar, Cheltenham, pp 1–17Google Scholar
  7. Baumol W (1990) Entrepreneurship: productive, unproductive, and destructive. J Polit Econ 98:893–921CrossRefGoogle Scholar
  8. Beaulier S, Caplan B (2007) Behavioral economics and perverse effects of the welfare state. Kyklos 60:485–507CrossRefGoogle Scholar
  9. Bianchi M (2002) Novelty, preferences, and fashion: when goods are unsettling. J Econ Behav Organ 47:1–18CrossRefGoogle Scholar
  10. Binder M (2010) Elements of an evolutionary theory of welfare. Routledge, LondonGoogle Scholar
  11. Blanchflower DG (2009) International evidence on well-being. In: Kruger AB (ed) Measuring the subjective well-being of nations: national accounts of time use and well-being. Chicago University Press, Chicago, pp 155–226Google Scholar
  12. Blanchflower DG, Oswald AJ (2005) Some policy implications of behavioral economics–Happiness and the human development index: the paradox of Australia. Aust Econ Rev 38:307–318CrossRefGoogle Scholar
  13. Boeri T, Börsch-Supan A, Tabellini G (2001) Would you like to shrink the welfare state? A survey of European citizens. Econ Pol 16:9–50Google Scholar
  14. Boulding KE (1981) Evolutionary economics. Sage, Beverly HillsGoogle Scholar
  15. Bovens L (2008) The ethics of Nudge. In: Grüne-Yanoff T, Hansson SO (eds) Preference change: approaches from philosophy, economics and psychology. Springer, Berlin, pp 207–220Google Scholar
  16. Broome J (1996) Choice and value in economics. In: Hamlin AP (ed) Ethics and economics, vol. I. Elgar, Cheltenham, pp 65–85Google Scholar
  17. Broome J (2008) Why economics needs ethical theory. In: Basu K, Kanbur R (eds) Arguments for a better world: essays in honor of Amartya Sen. Oxford University Press, New York, pp 7–15CrossRefGoogle Scholar
  18. Bruni L, Sugden R (2007) The road not taken: how psychology was removed from economics, and how it might be brought back. Econ J 117:146–173CrossRefGoogle Scholar
  19. Buchanan JM (1977) Freedom in constitutional contract. Texas A & M University Press, College StationGoogle Scholar
  20. Buchanan JM (2005) Afraid to be free: dependency as desideratum. Public Choice 124:19–31CrossRefGoogle Scholar
  21. Camerer C, Issacharoff S, Loewenstein G, O’Donoghue T, Rabin M (2003) Regulation for conservatives: behavioral economics and the case for ‘asymmetric paternalism’. Univ PA Law Rev 151:1211–1254CrossRefGoogle Scholar
  22. Cantner U, Pyka A (2001) Classifying technology policy from an evolutionary perspective. Res Policy 30:759–775CrossRefGoogle Scholar
  23. Clark DA (2006) The capability approach: its development, critiques and recent advances. In: Clark DA (ed) The Elgar Companion to development studies. Edward Elgar, Cheltenham, pp 32–45Google Scholar
  24. Clark AE (2007) Born to be mild? Cohort effects don’t (fully) explain why well-being is U-shaped in age. IZA Discussion Paper No. 3170, IZA, Bonn, GermanyGoogle Scholar
  25. Cordes C (2008) A potential limit on competition. J Bioecon 10:127–144CrossRefGoogle Scholar
  26. Cordes C, Schubert C (2010) Role models that make you unhappy: light paternalism, social learning and welfare. Papers on Economics & Evolution #1022. Max Planck Institute of Economics, JenaGoogle Scholar
  27. Di Tella R, McCulloch R, Oswald A (2003) The macroeconomics of happiness. Rev Econ Stat 85:809–827CrossRefGoogle Scholar
  28. Dopfer K (1976) Introduction: towards a new paradigm. In: Dopfer K (ed) Economics in the future. Macmillan, London, pp 3–35Google Scholar
  29. Dosi G, Marengo L, Pasquali C (2006) How much should society fuel the greed of innovators? On the relations between appropriability, opportunities and rates of innovation. Res Policy 35:1110–1121CrossRefGoogle Scholar
  30. Earl PE, Potts J (2004) The market for preferences. Camb J Econ 28:619–633CrossRefGoogle Scholar
  31. Elster J (1982) Sour grapes–utilitarianism and the genesis of wants. In: Sen AK, Williams B (eds) Utilitarianism and beyond. Cambridge University Press, Cambridge, pp 219–238CrossRefGoogle Scholar
  32. Foss NJ (2006) Evolutionary Economics and Economic Policy. Available online at:
  33. Frank RH (2008) Should public policy respond to positional externalities? J Public Econ 92:1777–1786CrossRefGoogle Scholar
  34. Frey BS, Stutzer A (2002) What can economists learn from happiness research? J Econ Lit 60:402–435CrossRefGoogle Scholar
  35. Frey BS, Sutzer A (2007) What happiness research can tell us about self-control problems and utility mispredictions. In: Frey BS, Stutzer A (eds) Economics and psychology: a promising new cross-disciplinary field. MIT Press, Cambridge, pp 169–195Google Scholar
  36. Frey BS, Benz M, Stutzer A (2004) Introducing procedural utility: not only what, but also how matters. J Inst Theor Econ 160:377–401CrossRefGoogle Scholar
  37. Georgescu-Roegen N (1954) Choice, expectations, and measurability. Q J Econ 68:503–534CrossRefGoogle Scholar
  38. Gowdy JM (2004) The revolution in welfare economics and its implications for environmental valuation and policy. Land Econ 80:239–257CrossRefGoogle Scholar
  39. Gray J (1999) Hayek on liberty. Routledge, LondonGoogle Scholar
  40. Hanusch A, Pyka A (2007) Principles of Neo-Schumpeterian economics. Camb J Econ 31:275–289CrossRefGoogle Scholar
  41. Harsanyi J (1982) Morality and the theory of rational behavior. In: Sen AK, Williams B (eds) Utilitarianism and beyond. Cambridge University Press, Cambridge, pp 39–62Google Scholar
  42. Hayek FA (1948) Individualism and economic order. University of Chicago Press, ChicagoGoogle Scholar
  43. Hayek FA (1976) Law, legislation and liberty, vol. II. University of Chicago Press, ChicagoGoogle Scholar
  44. Hayek FA (1978) The confusion of language in political thought. In: New studies in philosophy, politics, economics and the history of ideas. Routledge, London, pp 71–97Google Scholar
  45. Hayek FA (1988) The fatal conceit. University of Chicago Press, ChicagoGoogle Scholar
  46. Hayek FA (2009) The common sense of progress. In: The constitution of liberty. Routledge, London, pp 36–48Google Scholar
  47. Henrekson M (2005) Entrepreneurship: a weak link in the welfare state? Ind Corp Change 14:437–467CrossRefGoogle Scholar
  48. Herrnstein RJ (1990) Behavior, reinforcement and utility. Psychological Science 1:217–224CrossRefGoogle Scholar
  49. Hodgson GM (1993) Economics and evolution: bringing life back into economics. University of Michigan Press, Ann ArborGoogle Scholar
  50. Hodgson GM (1999) Economics and Utopia: why the learning economy is not the end of history. Routledge, LondonGoogle Scholar
  51. Ironmonger DS (1972) New commodities and consumer behavior. Cambridge University Press, CambridgeGoogle Scholar
  52. Kahneman D, Wakker PP, Sarin R (1997) Back to Bentham? Explorations of experienced utility. Q J Econ 112:375–405CrossRefGoogle Scholar
  53. Kahneman D, Sugden R (2005) Experienced utility as a standard of policy evaluation. Environ Resource Econ 32:161–181CrossRefGoogle Scholar
  54. Kerstenetzky CL (2007) Hayek and Popper on ignorance and intervention. J Inst Econ 3:33–53Google Scholar
  55. Keynes JN (1917) The scope and method of political economy. Macmillan, LondonGoogle Scholar
  56. Köszegi B, Rabin M (2008) Choices, situations, and happiness. J Public Econ 92:1821–1832CrossRefGoogle Scholar
  57. Lachmann L (2007) Capital and its structure. Sheed Andres and McMeel, Kansas CityGoogle Scholar
  58. Lessig L (1995) The regulation of social meaning. Univ Chic Law Rev 62:943–1045CrossRefGoogle Scholar
  59. Little IMD (1957) A critique of welfare economics. Oxford University Press, LondonGoogle Scholar
  60. Metcalfe JS (2001) Institutions and progress. Ind Corp Change 10: 561–586CrossRefGoogle Scholar
  61. Metcalfe JS (2005) Systems failure and the case for innovation policy. In: Llerena P, Matt M (eds) Innovation policy in a knowledge-based economy. Springer, Berlin, pp 47–74CrossRefGoogle Scholar
  62. Mokyr J (2000) Innovation and its enemies: the economic and political roots of technological inertia. In: Olson M, Kähkönen S (eds) A not-so-dismal science. Oxford University Press, Oxford, pp 61–91CrossRefGoogle Scholar
  63. Myrdal G (1933) Das Zweck-Mittel Denken in der Nationalökonomie. Zeitschrift für Nationalökonomie 4:305–329CrossRefGoogle Scholar
  64. Nelson RR (1977) The Moon and the Ghetto. Norton, New YorkGoogle Scholar
  65. Nelson RR (1981) Assessing private enterprise: an exegesis of tangled doctrine. Bell J Econ 12:93–111CrossRefGoogle Scholar
  66. Nelson RR (1990) Capitalism as an engine of growth. Res Policy 19:193–214CrossRefGoogle Scholar
  67. Nelson RR (1995) Recent evolutionary theorizing about economic change. J Econ Lit 33:48–90Google Scholar
  68. Nelson RR, Winter SG (1982) An Evolutionary Theory of Economic Change. Belknap Press, CambridgeGoogle Scholar
  69. Ng Y-K (2003) From preference to happiness: towards a more complete welfare economics. Soc Choice Welf 20:307–350CrossRefGoogle Scholar
  70. North DC (1990) Institutions, institutional change and economic performance. Cambridge University Press, CambridgeCrossRefGoogle Scholar
  71. Nozick R (1974) Anarchy, state and utopia. Basic Books, New YorkGoogle Scholar
  72. Ostrom E (2005) Understanding institutional diversity. Princeton University PressGoogle Scholar
  73. Pelikan P (2002) Why economic policies need comprehensive evolutionary analysis. In: Pelikan P, Wegner G (eds) Evolutionary thinking on economic policy. Elgar, Cheltenham, pp 15–45Google Scholar
  74. Potts J (2001) Knowledge and markets. J Evol Econ 11:413–431CrossRefGoogle Scholar
  75. Potts J (2004) Liberty bubbles. Policy 20:15–21Google Scholar
  76. Qizilbash M (2008) The adaptation problem, evolution and normative economics. Papers on Economics & Evolution #0708. Max Planck Institute of Economics, JenaGoogle Scholar
  77. Rabin M (2002) A perspective on psychology and economics. Eur Econ Rev 46:657–685CrossRefGoogle Scholar
  78. Rawls J (1971) A Theory of Justice. Belknap Press, CambridgeGoogle Scholar
  79. Robbins L (1935) An Essay on the Nature and Significance of Economic Science. Macmillan, LondonGoogle Scholar
  80. Samuelson PA (1938) A note on the pure theory of consumer’s behaviour. Economica 5:61–71CrossRefGoogle Scholar
  81. Sartorius C (2003) An Evolutionary Approach to Social Welfare. Routledge, LondonCrossRefGoogle Scholar
  82. Scanlon TM (1991) The moral basis of interpersonal comparisons. In: Elster J, Roemer JE (eds) Interpersonal comparisons of well-being. Cambridge University Press, MA, pp 17–44CrossRefGoogle Scholar
  83. Schubert C (2009) Welfare Creation and Destruction in a Schumpeterian World. Papers on Economics & Evolution #0913. Max Planck Institute of Economics, JenaGoogle Scholar
  84. Schumpeter JA (1912) Theorie der wirtschaftlichen Entwicklung. Duncker & Humblot, BerlinGoogle Scholar
  85. Schumpeter JA (1942) Capitalism, Socialism and Democracy. Allen & Unwin, LondonGoogle Scholar
  86. Schumpeter JA (1954) History of Economic Analysis. Allen & Unwin, LondonGoogle Scholar
  87. Scitovsky T (1941) A note on welfare propositions in economics. Rev Econ Stud 9:77–88CrossRefGoogle Scholar
  88. Sen AK (1977a) Rational fools: a critique of the behavioral foundations of economic theory. Philos Public Aff 6:317–344Google Scholar
  89. Sen AK (1977b) On weights and measures: informational constraints in social welfare analysis. Econometrica 45:1539–1572CrossRefGoogle Scholar
  90. Sen AK (1979) Equality of What? Tanner Lecture on Human Values. Available online at:
  91. Sen AK (1980) Equality of what. In: McMurrin SM (ed) The tanner lectures on human values. University of Utah Press, Salt Lake City, pp 197–220Google Scholar
  92. Sen AK (1985) Commodities and Capabilities. Basic Books, New YorkGoogle Scholar
  93. Sen AK (1988) On Ethics and Economics. Basil Blackwell, OxfordGoogle Scholar
  94. Sen AK (1993) On the Darwinian view of progress. Popul Dev Rev 19:123–137CrossRefGoogle Scholar
  95. Sen AK (1996) On the foundations of welfare economics: utility, capability, and practical reason. In: Farina F, Hahn F, Vanucci S (eds) Ethics, rationality, and economic behavior. Clarendon, Oxford, pp 50–65Google Scholar
  96. Sen AK (1999) Development as Freedom. Knopf, New YorkGoogle Scholar
  97. Sen AK (2009) The Idea of Justice. Allen Lane, LondonGoogle Scholar
  98. Sobel D (1994) Full-information accounts of well-being. Ethics 104:784–810CrossRefGoogle Scholar
  99. Stam E (2008) Entrepreneurship and innovation policy. Jena Economic Research Papers #2008-006Google Scholar
  100. Sugden R (1993) Normative judgments and spontaneous order: the contractarian element in Hayek’s thought. Const Polit Econ 4:393–424CrossRefGoogle Scholar
  101. Sugden R (2004) The opportunity criterion: consumer sovereignty without the assumption of coherent preferences. Am Econ Rev 94:1014–1033CrossRefGoogle Scholar
  102. Sugden R (2007) The value of opportunities over time when preferences are unstable. Soc Choice Welf 29:665–682CrossRefGoogle Scholar
  103. Sugden R (2008) Why incoherent preferences do not justify paternalism. Const Polit Econ 19:226–248CrossRefGoogle Scholar
  104. Sugden R (2009) On nudging: a review of nudge: improving decisions about health, wealth and happiness. Int J Econ Bus 16:365–373CrossRefGoogle Scholar
  105. Sunstein CR, Thaler RH (2003) Libertarian paternalism. Am Econ Rev, Papers & Proceedings 93:175–179CrossRefGoogle Scholar
  106. Thaler RH, Sunstein CR (2008) Nudge: improving decisions about health, wealth, and happiness. Princeton University Press, New HavenGoogle Scholar
  107. Van den Bergh JCJM, Kallis G (2009) Evolutionary policy. Papers on economics & evolution #0902. Max Planck Institute of Economics, JenaGoogle Scholar
  108. Van Praag M, Versloot PH (2007) What is the value of entrepreneurship? A review of recent research. Small Bus Econ 29:351–382CrossRefGoogle Scholar
  109. Vanberg VJ (1994a) Cultural evolution, collective learning, and constitutional design. In: Reisman D (ed) Economic thought and political theory. Kluwer, Boston, pp 171–204Google Scholar
  110. Vanberg VJ (1994b) Hayek’s legacy and the future of liberal thought: rational liberalism vs. evolutionary agnosticism. J des Econ et des Etud Hum 5:451–481Google Scholar
  111. Vanberg VJ (2006) Human intentionality and design in cultural evolution. In: Schubert C, von Wangenheim G (eds) Evolution and design of institutions. Routledge, London, pp 197–212Google Scholar
  112. Vis B, van Kersbergen K (2007) Why and how do political actors pursue risky reforms? J Theor Polit 19:153–172CrossRefGoogle Scholar
  113. Wegner G (1997) Economic policy from an evolutionary perspective–a new approach. J Inst Theor Econ 153:485–509Google Scholar
  114. Wegner G (2005) Reconciling evolutionary economics with liberalism. In: Dopfer K (ed) Economics, evolution and the state. Elgar, Cheltenham, pp 58–77Google Scholar
  115. von Weizsäcker CC (1971) Notes on endogenous change of tastes. J Econ Theory 3:345–372CrossRefGoogle Scholar
  116. von Weizsäcker CC (2010) Cost-Benefit Analysis with Adaptive Preferences. Mimeo, Max Planck Institute for Research on Collective Goods, Bonn, GermanyGoogle Scholar
  117. Whitman DG (1998) Hayek contra pangloss on evolutionary systems. Const Polit Econ 9:45–66CrossRefGoogle Scholar
  118. Witt U (1987) Individualistische Grundlagen der evolutorischen Ökonomik. Mohr Siebeck, TübingenGoogle Scholar
  119. Witt U (1996) Innovations, externalities and the problem of economic progress. Public Choice 89:113–130CrossRefGoogle Scholar
  120. Witt U (2000) Genes, culture, and utility. Papers on Economics & Evolution #0009. Max Planck Institute of Economics, JenaGoogle Scholar
  121. Witt U (2001) Learning to consume–a theory of wants and the growth of demand. J Evol Econ 11:23–36CrossRefGoogle Scholar
  122. Witt U (2003) Economic policy making in evolutionary perspective. J Evol Econ 13:77–94CrossRefGoogle Scholar
  123. Witt U (2004) Beharrung und Wandel – ist wirtschaftliche Evolution theoriefähig? Erwägen – Wissen – Ethik 15:33–45Google Scholar
  124. Witt U (2008) What is specific about evolutionary economics? J Evol Econ 18:547–575CrossRefGoogle Scholar
  125. Witt U, Schubert C (2010) Extending the informational basis of welfare economics–the case of preference dynamics. Papers on Economics & Evolution #1005. Max Planck Institute of Economics, JenaGoogle Scholar

Copyright information

© Springer-Verlag 2011

Authors and Affiliations

  1. 1.Max Planck Institute of EconomicsJenaGermany

Personalised recommendations