Ron A. Boschma & Koen Frenken

Introduction to Economic Geography

Evolutionary Economic Geography (EEG)

• Definition: EEG is recognized as a progressive framework in economic geography that reconciles and integrates elements from both neoclassical and institutional economic theories. This paradigm emphasizes the need to understand the spatial dynamics of economic processes within a historical context.

• Key Objective: The primary goal of EEG is to explore and analyze the interactions between innovative theorization and established models within the three principal approaches: neoclassical, institutional, and evolutionary, focusing on how these interactions influence economic activities and development over time.

Theoretical Foundations

Neoclassical Economics

• Focus: Neoclassical economics is fundamentally centered on concepts of utility maximization and equilibrium analysis, aiming to determine how individuals and firms make decisions to allocate resources efficiently.

• Models: This approach includes various models that account for transportation costs, competitive markets, and utility functions. It is often critiqued for prioritizing economic logic over geographical considerations.

Institutional Economics

• Emphasis: Institutional economics highlights the critical role that institutions play in shaping economic outcomes, asserting that varied institutions arise contextually, influencing behavior, and processes across different regions.

• Methodology: Focused largely on qualitative methods, institutional economics seeks to understand how social norms, laws, and organizations impact economic performance.

Evolutionary Economics

• Challenge: Evolutionary economics questions static perceptions of neoclassical theory, positing that economic processes are dynamic and continually evolving. It focuses on how firms adapt and innovate through historical experiences and established routines.

• Core Concepts: It emphasizes growth and agglomeration through routines, path dependence, and the historical trajectory of organizations, suggesting that past experiences shape current economic realities and future opportunities.

Commonalities and Differences in Approaches

Commonalities:

• Spatial Focus: All three approaches are concerned with the spatial distribution of economic activities and resources.

• Historical Development: They share overlapping historical roots with significant figures contributing to debates and theories in the field.

Differences:

Methodology:

• Neoclassical: Utilizes formal modeling and a deductive reasoning approach.

• Institutional: Employs an inductive approach with a focus on case studies to derive insights.

• Evolutionary: Integrates formal modeling while also valuing contextual specifics and historical insight.

Assumptions about Agents:

• Neoclassical: Assumes agents are optimizing and act independent of context (a-contextual).

• Institutional: Views agents as rule-following and inherently contextual, focusing on larger macroscopic factors.

• Evolutionary: Sees agents as satisficing, prioritizing routines and historical experiences over strict optimization.

Conceptualization of Time:

• Neoclassical: Emphasizes static equilibrium where systems are balanced.

• Institutional: Tends to view time as static or comparative, analyzing changes primarily in snapshots.

• Evolutionary: Advocates for a dynamic perspective on time, prioritizing processes that are out-of-equilibrium and ever-evolving.

Specific Contributions of Evolutionary Economic Geography

• Dynamic Analysis: EEG promotes a thorough understanding of the evolving nature of industries, knowledge flows, and spatial relationships, moving away from static interpretations to recognize the impact of ongoing shifts and transformations.

• Path Dependence: It stresses the importance of historical factors in shaping present economic landscapes, asserting that past conditions significantly influence future opportunities and trajectories.

• Micro and Macro Levels: EEG examines micro-level organizational routines while also incorporating network dynamics at meso-levels, enabling a multifaceted understanding of regional growth and sectoral changes.

Key Issues for Exploration

• Usefulness of Formal Modeling: This is a critical point of discussion, highlighting how the formal modeling approach differentiates institutional models from those in evolutionary/neoclassical frameworks.

• Assumptions Debate: The discourse around bounded rationality and the actual operations of real agents within economic contexts requires robust investigation across methodologies.

• Conceptualization of Time: In evolutionary theory, acknowledgment of historical influences and processes of change is paramount, contrasting with approaches that focus merely on current states or conditions.

Interfaces between Economic Geography Approaches

• Neoclassical and Evolutionary: While both utilize models, their treatment of agents and the dynamics of economic behaviors diverge significantly.

• Institutional and Evolutionary: Both paradigms critique the conventional assumptions of neoclassical economics but vary considerably in methodological orientations and data interpretations.

Conclusion

• Towards an Evolutionary Economic Geography: EEG represents a promising synthesis of diverse methodologies and perspectives, providing enhanced insights into patterns of economic behavior as they relate to specific spatial contexts.

• Future Development: As EEG continues to evolve, there remains a pressing need for empirical research that substantiates theoretical assertions regarding the significance of routines, path dependence, and their collective implications for understanding economic geography and regional development.