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kenneth_boulding

Past president of the Society for General Systems Research (now the International Society for the Systems Sciences), 1957 and 1958.


Kenneth Boulding: A Founder of the Systems Sciences and of Evolutionary Economics

  • contributed by Kurt Dopfer, University of St. Gallen, Switzerland
    This is a revised version of a paper published in the Journal of Economic Issues, 28(4), 1994, pp. 1201-04

Many readers of this note will still remember Kenneth Boulding�s Richard T. Ely lecture in December 1965, when he set out against the conventional wisdom, criticized the ivory tower of orthodox economics, and called for a paradigmatic change in economic thinking.

Intellectual Youth and Early Milestones

The plumber�s son was born in Liverpool in 1910, studied philosophy and economics at Oxford. He got his B.A. in 1931 and his M.A. in 1939. While still a student, he wrote a paper on �Displacement Costs�, which was published in the Economic Journal - at the time edited by John Maynard Keynes. Two years of study at the University of Chicago then followed where he studied econometrics with Henry Schultz, one of the founders of the field. Frank Knight, another teacher of his helped the young graduate to further early recognition by writing an article on �Mr. Boulding and the Austrians�. Finally, Boulding spent a semester at Harvard, where he wrote a paper on Boehm-Bawerk for a seminar conducted by Joseph Schumpeter in which he already criticized the attempt to discover conditions of equilibrium in theoretical systems that are by their very nature in disequilibrium. In 1934, he published an article in the Quarterly Journal of Economics about the application of the pure theory of population to the theory of capital - an analysis that left its traces in his future work.

Towards Evolutionary Foundations of Economics

In his later writings, especially also in his book Evolutionary Economics, Boulding went beyond questioning the use of a mechanistic Weltbild for economics; rather, he developed a vision of the economy which, on the one hand, was embedded in a broad system-wide ecological context and, on the other hand, stressed the asymmetry of time and the global irreversibility of economic processes. Boulding may be regarded today as one of the founders of the Systems Sciences and of Evolutionary Economics.

For Boulding, it was not just a matter of rhetoric when he applied the concepts of �equilibrium� and of the �invisible hand� to ecology and thus addressed the principle of self-organization. Together with N. Georgescu-Roegen and K. W. Kapp, he was one of the first economists who recognized the open system character of the economy and brought intertemporal considerations into allocation and distribution theory.

Boulding never fell into �entropy-pessimism�. In his evolutionary interpretation, the �arrow of time� does not only have the direction ordained by the Second Law of Thermodynamics. Time is also irreversible with respect to creativity, the origination and extension of human knowledge, gains in complexity and morphogenesis. The phenomenon of how information arises - not just its procurement, diffusion or processing - is of central significance in his model. The ultimate aim of Boulding�s scholarly work was a comprehensive theory of development designed to explain economic phenomena on the basis of evolutionary principles.

Bifurcations in the Development of Economic Theory

In several ways, this brought Boulding into theoretical opposition to the prevailing thinking. The notion of an economic process that is time-asymmetrical and irreversible, is first of all incompatible with the premises of the neoclassical and Harrod-Domar growth models. He criticized the latter as useless, and noted the �obsession of economists� with �cookbook theories� of production that purport to show the complex dynamics of development of an economic system by using recipes such as �Take land, labor and capital and add a bunch of innovative entrepreneurs�.

With his approach to evolution, he ran into the sharpened knives of the generation of then also young economists who had expected that the �General Theory of Equilibrium� would be the crowning glory of their theoretical endeavors. Already when he was a student, he challenged Schumpeter�s fondness for Walras� magna carta of the general equilibrium theory. In contrast to his contemporary colleagues, Paul A. Samuelson and J. R. Hicks, he also viewed its ultimate attachment to concepts of equilibrium as a decisive weakness of Keynes� General Theory. With his LM-IS diagram, Hicks refined the analysis of equilibrium and, in his �neoclassical synthesis�, Samuelson joined the neoclassical theory of market equilibrium with Keynes� circulation equilibrium. The notion of equilibrium appeared to allow the integration of the independently developed and as yet unconnected results of micro and macro theory.

Though the theoretical developments were based on the feeble methodological foundations of equilibrium, they brought great renown to the representatives of what came to be called later on �modern� economics. As already in the second half of the nineteenth century when there was a split in theory formation between classical and marginalist economics, there was also a parting of the paradigmatic ways before World War II that split economics into the camps of �modern� neoclassicals and of (implicitly less �modern�) heterodox economists. Boulding did not become the enfant terrible until neoclassical theory became the ruling dogma.

Vistas

This development could also have happened differently. Today, evolutionary economics attracts increasing interest and it could be that some day the development of theory in the last 50 or 60 years will be regarded by historians of economic thought as the �long detour of neoclassical economics�. In this perspective the assessment of Boulding�s scientific contribution appears as tentative as well as undervalued with respect to its significance for the future development of economic theory.

Boulding�s theoretical profile also emerges from his work on the history of economic thought. While, in neoclassical interpretation, the work of Adam Smith is generally reduced to equilibrium aspects in price theory, Boulding regarded Smith as �the first post-Newtonian thinker� who, viewed over the long run, specifically worked out the disequilibratory cumulative aspects of the theory. He highlights Smith�s vision of a system of positive feedbacks in which an extension of market leads to a rise in the division of labor which in turn expands the market. Boulding�s interpretation also stresses that Smith took account of the links within the process of generation of technical progress and the growth of knowledge.

Similarly, Boulding interprets Keynes� theory of the circular flow not by the hydraulic metaphor, but on the basis of processes of positive feedback: An initial decline in investment causes a decline in profits which leads to further cuts in investment and in turn to further shrinkage of profits, and so on. Here, Boulding describes the process of cumulative circular causation, as put forth by Gunnar Myrdal and other institutional economists. In distinction to Boulding, however, Myrdal first wrote a book about Monetary Equilibrium which rested largely on the monetary theory of Knut Wicksell, and other representatives of the Stockholm school, before he recognized the deficiencies of this explanatory scheme and himself turned to an evolutionary and institutional economist.

Lasting Credits

Boulding�s lasting credit for advancing the development of economic theory will probably be his demonstrating of the methodological untenability of the mechanistic paradigm and of the relevance of evolutionary principles for the explanation of the complexity and dynamics of economic systems.

It rounds off the picture of a rich scholarly life when we finally refer to his lifelong commitment to the cause of peace. He never collected large sums of money from prize award committees for his extraordinary achievements in the science of economics, nor for his activities for peace - but this in no way lessens the great worth of his work. The Grand Old Man died in 1993 at the age of 83.


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