The Geography of the New Economy
R. D. Norton


In a 1996 book, The Future of Capitalism, Lester Thurow makes skillful use of two metaphors from the natural sciences. The first is the concept from biology of punctuated equilibria . The second metaphor is the image of tectonic plates, the geological layers whose largest versions are continental in scale, which lie beneath the surface of the earth and drift an inch or two a year, causing the earthquakes and volcanoes that are visible to us.

Thurow's argument is that the world economy has arrived at a moment of sudden change, marked by five "tectonic" underlying forces. To wit:

(1) the end of communism,

(2) the arrival of a truly global economy, owing to communications advances,

(3) the end of America's technological advantage relative to the rest of the world,

(4) the end of America's economic, military, and diplomatic leadership, and

(5) demographics including migration and the aging of the world's populations.

Time has not been kind to Thurow's diagnoses of America's weakness. But our interest concerns not his predictions but his evolutionary metaphors. (For more in the way of geological metaphors in particular, see his 1998 New York Review of Books essay, Asia: The Collapse and the Cure.)


Thurow is not the first economist to use a biological analogy to chart capitalism's trajectory. The logic of punctuated equilibria accords with Joseph Schumpeter's famous chapter, "The Process of Creative Destruction" in his Capitalism, Socialism, and Democracy (1942, 1962, pp. 81-86). "The essential point to grasp," he wrote there, "is that in dealing with capitalism we are dealing with an evolutionary process (p. 82)." The driver he saw was innovation—not only technological, but organizational as well. "The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers' goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates" (p. 83).

The biological metaphor lies at the core of Schumpeter's vision of capitalism. In addition to technological innovations in the steel industry, in energy conversion, and in transportation,

The opening up of new markets, foreign or domestic, and the organizational developments from the craft shop to such concerns as U.S. Steel illustrate the same process of industrial mutation—if I may use that biological term— that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism (p. 83).

Well before Schumpeter, Alfred Marshall had also embraced biological and in particular evolutionary imagery. His famous textbook, Principles of Economics, which went through 8 editions until the last one in 1920, had the Latin motto on the title page,"Natura non facit saltum." This translates (I gather) as "nature does not work in leaps." Or, as he explained in another of his standard works, Industry and Trade (1923, p. 6), The idea that, "Nature does not willingly make a jump…is specially applicable to economic development." (Cited in Laurence Moss, 1982, p. 3.)

In "Biological Theory and Technological Entrepreneurship in Marshall's writings," Laurence Moss has shown that Marshall's fondness for evolutionary imagery had a finite life-cycle. As Moss writes in beginning his account, "it is instructive to begin with Schumpeter's views on economic development because Alfred Marshall's views are exactly the opposite" (Moss, p. 3). As we noted, Schumpeter believed that nature (economic nature at least) moved not only in leaps, but in revolutionary bursts of creative destruction, driven by entrepreneurial innovation.

The story Moss tells us reveals a great deal about the politics of evolutionary metaphors. Darwin's theory of evolution via natural selection implied long, smooth, continuous adaptations of a species to its natural environment. When this view was challenged in the early years of the 20th century by Mendel's earlier genetic experiments, Marshall lost his appetite for evolutionary metaphors.

By that time, Darwin's notion of survival of the fittest had long since been snatched by Herbert Spencer to provide a justification for the extreme inequalities of wealth that accompanied the Industrial Revolution. Spencer propounded a theory of Social Darwinism, i.e., to the victor belong the spoils. The victor, in this context, is the industrialist best adapted to his economic environment. John D. Rockefeller, Andrew Carnegie, and the other Robber Barons were rich because they were best endowed. (From a subsequent perspective, that of Schumpeter, the Robber Barons were also entrepreneurs, hence authors of creative destruction, the engine of progress.)

The political thorn in Social Darwinism cuts more deeply when it strikes the system's losers, ordinary people. In Spencer's scheme of things, they were less suited to the environment, but, alas, that was nature's way, as it were. To this extent, Spencer accepted the ideological baton from Thomas Malthus, whose policy message in works such as his at first anonymous Essay on the Principle of Population (1798) was that it is useless to help the poor, since they will only reproduce themselves in larger numbers. On the scale of the world economy, similar reasoning justified imperialism, and the domination of "inferior races" by whites (and in Asia, by Japan).

What, then, was Mendel's heresy that dislodged Marshall from his love of (Darwinian) evolutionary metaphors? In retrospect, the answer is surprising. While Mendel's genetic "laws" modified Darwinian "natural selection" in basic ways, nothing in Mendel's genetic laws is necessarily "mutationist." Instead, what Moss notes is that an interpreter of Mendel's theory, one Hugo de Vries, pushed the mutationist emphasis because it suited his tastes. The mutationist (and therefore discontinuous) interpretation of Mendel popularized by de Vries seems to have put a chill on Marshall's interest in biology.

What is clear is that Marshall backed away. In a footnote quoted by Moss, Marshall distances himself from the vulgarity of a "great-man" theory of economic change as follows:  

This conclusion…will remain valid even if further investigation confirms the suggestion, made by some Mendelians, that gradual changes in the race are originated by large divergences of individuals from the prevailing type. For economics is a study of mankind, of particular nations, of particular social strata; and it is only indirectly concerned with the lives of men of exceptional genius or exceptional wickedness and violence. (Marshall, 1920, p. 844.)

In other words, Marshall saw fit to reject biological analogies once they seemed to permit mutationist disruptions. In contrast, such disruptions (or discontinuities) are just what Schumpeter's entrepreneur inflicts upon the world..

Not that contemporary biology still holds to a mutationist view of evolutionary change. As summarized by Daniel Levinthal in a 1998 article (p. 218):  

The modern perspective, introduced by Gould and Eldredge…hinges not on single mutational event but on speciation—the separation of reproductive activity. The initial speciation event is minor in the sense that the form does not differ substantially from its predecessor. However, as a result of a separate reproductive process driven by genetic drift and a possibly distinct selection environment, the speciation event may trigger a divergent evolutionary path.

To explain evolution, then, (1) Darwin advocated natural selection (giraffes with long necks being better adapted to reach the leaves on higher branches), (2) Mendel introduced the science of genetics, which was interpreted later to highlight the role of mutations, whereas a school of contemporary biologists highlight (3) speciation.


Why does any of this matter for our purposes? The metaphor is being used to help us understand the way technologies evolve. As Levinthal writes, "These ideas are applied here to provide insight into the pace and nature of technological change." In his view, "As in the process of punctuation in the biological context, the critical factor is often a speciation event, the application of existing technological know-how to a new domain of application" (p. 218).

In turn, the application of the metaphor can reveal something about human agency, the role of entrepreneurs in advancing the pace of technological change. That, at least, is the goal. As Levinthal observes, "The process of 'creative destruction' occurs when the technology that emerges from the speciation event is successfully able to invade other niches…." (p. 218). The case he explores is the development of wireless communication technology. His conclusion, consistent with the speciation theme, is that the great events in the 20th century history of wireless were not dramatic technical breakthroughs but rather applications of existing techniques to new commercial domains.


On the other hand, metaphors can mislead. Or they can obfuscate. (Come to that, watch out for fabricated quotes attributed to an imaginary Darwin.)

Kevin Kelley's useful book, New Rules for a New Economy, advocates the use of biological metaphors to understand the new economy:

Change in technological systems is becoming more biological. This will take a lot of getting used to. Networks actually grow. Evolution can really be imported into machines. Technological immune systems can be used to control computer viruses. This neobiologicalism seeps directly into our new economy. More and more, biological metaphors are useful economic metaphors (p. 114).

Examples are used throughout the book. Consider this simile (not strictly a metaphor, but at least a trope): "[Life evolved] from globular organisms into fantastic beings, just as networks allow place-based firms to blossom into fantastic spaces." P. 95.)

This rhetoric helps Kelley explore the ramifications of Metcalfe's Law. Recall that the law says that (unlike costs, which are linear) benefits to the N users of a network increase quadratically (N x N) as the number rises. The threshold effects that result lead to images of increasing returns, meaning not the economist's increasing returns to scale, but positive feedback. As Kelley puts it, "In networks we find self-reinforcing virtuous circles. Each additional member increases the network's value, which in turn attracts more members, initiating a spiral of benefits" (p. 25).

Kelley's book is worthwhile, and a real clarification of some of the preliminary ideas that appeared in the on-line version at Wired, where he is the top editor. For example, he has reduced his controversial "12 rules for the New Economy" to 10:

1. Embrace the Swarm (Embrace "the decentralized points of control.")

2. Increasing Returns (As in Metcalfe's Law, with positive feedback added.)

3. Plenitude, Not Scarcity (Software and net firms can have low variable costs.)

4. Follow the Free (Software, e.g., with zero marginal costs, can be given away.)

5. Feed the Web First ("Unless the net survives, the firm perishes.")

6. Let Go at the Top (Be ready to cannibalize your success and go for it again.)

7, From Places to Spaces (We see disintermediation and "new mid-size niches.")

8. No Harmony, All Flux (Keep innovating to survive.)

9. Relationship Tech (As in "high tech, high touch": the winning mix.)

10. Opportunities before Efficiencies (Do the right thing, not just things right.)

On the other hand, a book like Michael Rothschild's Bionomics: Economy as Ecosystem (1990) is for some tastes, at least, over the top. The metaphor permits countless biological examples that may or may not shed light on economic relationships. Mostly, by my reading, they do not. But many business people seem to find his comparisons useful as an aid for thinking about competition (as in survival-of-the-fittest).

Two points about metaphors are worth making in this context. One is that, as just noted, they can stimulate new thinking. "A metaphor achieves its effect by holding in tension two incompatible meanings that reveal some new insight." Or, "A metaphor expresses an is/is not tension that creates meaning." (Both quotes are in a spectacularly constructive essay on deconstructionism and post-modernism by William Grassie.)

The second point is more elusive. It is that metaphors are mental models, just as mathematical models are in a sense metaphors. You will recall from high-school English classes that a metaphor is one form of "trope," or figure of speech. It says that one thing is something else, so as to make a point. A simile, in contrast, says that one thing is like something else. Either trope, metaphor or simile, is intended somehow to get at an as yet undefined property of an object, relationship, or idea.

Mathematical models in science have the same function. We need not go into this point here, as later in this textbook you will find an abundance of beautiful mathematical models to help you test your visions of the world. Suffice it here to tell you Paul Krugman's punch-line when he addressed the European Association for Evolutionary Political Economy in November, 1996. "In short, I believe that economics would be a more productive field if we learned something important from evolutionists: that models are metaphors, and that we should use them, not the other way around."

As a student of the "real" evolutionary literature, Krugman can also be scathing about the mis-use of evolutionary metaphors. And yet it would hard to find a more informative exploration in the field of complexity theory (based on the study of pattern in nature) than his 1996 book, The Self-Organizing Economy. This lively little book, a counterpoint to Brian Arthur's work, reappraises much of urban economics and recasts it using models of self-organizing systems.

Someone has said that the history of mathematics can be understood as progressing from place to pace to pattern. "Place" refers to Euclidean geometry in the ancient world. "Pace" refers to the discovery of calculus by Newton and Leibniz in the 17th century. "Pattern" is the current mode in science, as buzzwords and phrases like chaos, complexity, emergent properties, and self-organizing systems make clear. It is just this new emphasis on pattern (as distinct from formal hypothesis-testing using simple refutable statements to be tested with data) that makes metaphor an increasingly prominent instrument in science.


What was the scientific method? In a 1996 book, the geographer Trevor J. Barnes highlights the dance between logic and evidence:

From the 1920s to the late 1950s and early 1960s, the received view within the philosophy of science was the hypothetico-deductive model of explanation. Before then the inductivist model prevailed. But because of a fatal logical flaw first recognized by David Hume—that an empirical regularity observed in the past need not logically continue into the future—inductivism was supplanted by a deductive model at the turn of the century. It was not until 1948, though, that the H-D method was formally codified in a well-known paper by Hempel and Oppenheim. They argued that all scientific explanation is characterized by the same logical structure, one combining hypothesized laws with the deductive syllogism.

Barnes' book is called Logics of Dislocation: Models, Metaphors, and Meanings of Economic Space. (Barnes, 1996.) He recounts the rise and fall of "the scientific method" in geography using the story of David Harvey, who performed "the most famous about-face in geography" (Barnes, p. 103). In 1969, Harvey's book, Explanation in Geography, advocated the H-D (hypothetico-deductive) philosophy of science and advanced the cause of mathematics within the field.

Within four years, Harvey reappeared as a full-blown Marxist geographer, advocating an almost completely different system of thought. Eventually, in 1989, the year the Cold War ended, Harvey would move on to a post-Marxist stance, in The Condition of Postmodernity: An Inquiry into the Origins of Cultural Change. In Barnes' view, Harvey's 1969 version of the scientific method was already dated when it appeared, having been eclipsed by the "strong program" in the sociology of scientific knowledge (SSK) at the University of Edinburgh, a view that makes knowledge claims in science a matter of social relations.

Harvey's 180-degree transformation could be described in the cliché as a "paradigm shift." The word paradigm derives in practice from a hugely influential 1962 book by Thomas Kuhn, The Structure of Scientific Revolutions. The concept has been extended in academic circles to mean that "all belief-systems are arbitrary," artifacts of one's socially derived framework and implicit assumptions. That Kuhn himself was in some fundamental way confused is suggested in a powerful recent downgrading of his book, Steven Weinberg's 1998 essay, "The Revolution that Didn't Happen."

The upshot is that to an outsider, at least, economic geography today appears polarized as between pragmatic empiricism and ideological abstraction. Consider in this regard a recent working paper on "The New Regionalism," posted on the site of The Economic Geography Research Group. John Lovering of Cardiff University, in "Theory Led by Policy: The Inadequacies of 'The New Regionalism' in Economic Geography Illustrated from the Case of Wales," critiques the "New Regionalism in Thought." That is, he disputes "that sub-set of ideas in policy-related economic geography which converge on the claim that 'the region' is displacing the nation-state as the 'crucible' of economic development." (p. 5).

Lovering contrasts Sophisticated New Regionalism and Vulgar New Regionalism:

Sophisticated New Regionalism concerns itself with the logical implication of assumptions, and operates in a theoretical space carved out by the invention of ideal-types. As such, it is unaffected by claims concerning the real world. Its purpose is to point out theoretical possibilities (such as the possible role of economic interactions or relations of 'Trust' in territorial 'clusters' of industry). The sophisticated version, he continues, is sophisticated by virtue of its distance from empirical claims that might be readily refuted.
By the same token, Vulgar New Regionalism lends itself to refutation: (VNR) assumes or implies that theoretical categories can be read-across to real-world empirics. It derives its force from concrete empirical claims, and its vulgarity arises from the fact that many of these are crude, over-generalised, or just plain inaccurate. In other words, regional development in the case in question is not in reality shaped by the processes upon which it focuses, but is in fact shaped by other factors altogether.


So when it comes to evidence and belief, it depends on what you are trying to do.

Regional science can be understood as a tolerant safe haven for people from other, more formally controlled or method-constrained disciplines—such as neoclassical economics.

Yet from its inception in 1956 at the University of Pennsylvania, regional science has had a hard-scientific bent to it. The Penn Ph.D. program in regional science began when Walter Isard and Benjamin Stevens came there from MIT, where Isard had been Stevens' dissertation supervisor. (You can read this story in a more graceful version on the Ben Stevens Memorial site, in a biography written by Ronald Miller, who for many years edited the discipline's flagship journal, The Journal of Regional Science, along with Isard and Stevens.) A snapshot of Ben (in the hat) and Walter at a regional science conference a few years ago has kindly been provided by Robert C. Douglas, who took the picture.

Stevens was a renegade scion of the J.P. Stevens textile empire. After a year at Cornell, followed by a year working in a factory in Mexico (at local wages), he came back to Georgia Tech for a degree in mechanical engineering. He arrived in 1952 at MIT's Economics Department (then as now, as good as it gets) fully credentialed in the quantitative arts.

Now one might ask why, when Stevens showed up mathematically legitimate at the nation's top economics department, he got a degree instead from MIT's planning program. The answer, perhaps, is that economics as then practiced in the very best departments had no room for space as a variable. As Paul Krugman has said recently,

The first big effort to get space into economics came in the 1950s, under the leadership of the redoubtable Walter Isard. Isard was and is a man of huge energy and vast learning; he performed an invaluable service in making the previously inaccessible German tradition available to monolingual economists like myself; and he created an interdisciplinary enterprise, regional science, which has been of considerable practical importance in the real world. But the aim he set himself in his magnum opus, Location and Space Economy, to bring spatial concerns into the heart of economic theory, was never attained.
(Paul Krugman, 1995, Development, Geography, and Economic Theory, p. 55.)

The reason, Krugman believes, is that economic theory in that day was dependent on the assumptions of constant returns to scale and perfect competition. Only much later, when a newly formalized model of monopolistic competition was introduced by economists Avinash Dixit and Joseph Stiglitz in 1977, was the way cleared for what Krugman sees as a more unified theory of location and spatial structure, which he has now described as "the new economic geography." (Paul Krugman, "Urban Concentration: The Role of Increasing Returns and Transport Costs," International Regional Science Review, 1996, 19, p. 6.)

What needs to be understood is that regional science began as a science. Ron Miller's biography on the Stevens site observes that in 1957 Stevens added space to the domain of linear programming just as Isard had already done with input-output analysis:

His first published article …"An Interregional Linear Programming Model"… infused the linear programming framework with a spatial dimension in rather the same way that Isard's article on regional input-output analysis had done for input-output models some seven years earlier. …Ben continued to explore the ways in which mathematical developments in economics, operations research and related disciplines could enrich the field of regional science.

The result, says Miller, was to extend "a sound quantitative foundation for the still-young field of regional science." This foundation would eventually be extended to include other formal models in location theory.

What, then, is regional science today? Krugman's conclusion is on target:

…what Isard ended up creating was an eclectic applied field: regional science. Regional science is not a unified subject. It is best described as a collection of tools, some crude, some fairly sophisticated, which help someone who needs an answer to practical problems involving spatial issues…. (p. 57).

Open, multidisciplinary, technical, and pragmatic—all these, combined with an orientation to space and location, are the hallmarks of the discipline.

In putting together the Stevens memorial site, I had occasion to compile two sets of links to do justice to the discipline that Isard and Stevens and Miller created. One list is long, a kitchen sink. The other I dubbed Supersites in regional science. It is short and selective: a dozen sites that are intended to convey the range and power of the discipline. Someone else could come up with a different list, perhaps an entirely non-overlapping one. In any case, this selection may give you a place to start your explorations.

Have fun!

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