TOWARD AN EVOLUTIONARY PRODUCTION THEORY PRINCIPLES AND ELEMENTS

In this paper I begin an attempt to carry out some of the program sketched out in my 1982 paper, An Essay on the Theory of Production. That program is to create an alternative production theory that covers much of the ground covered by standard production theory, but, much more importantly, also provides a helpful platform for theories of invention, innovation and change, both organizational and technological. The 1982 paper explains why standard production theory is extraordinari ly ill-suited for that task, and along the way sets forth a story of why and how it became so. The proposed alternative theory is in more than one sense, but first and foremost in the sense that it is intended to be useful in the context of a broader evolutionary perspective on economic activity. One key principle is that the theory is directed to the structure of what is possible and abstains from comment on what is impossible, except perhaps for appropriate deference to what the natural sciences may have to offer on the subject. Some propositions of standard economic theory do not require assumptions about what is impossible, but important ones do. Any proposition that rests on the assumption that X is impossible is vulnerable to overthrow by an innovative advance that makes X possible. This sort of thing happens often enough to make it clear that a theory intended to work in a changing world must be very circumspect about declaring things impossible.