Intellectual Youth and Early Milestones
While still a student, Boulding wrote a paper on displacement costs, which was published in the Economic Journal--at the time edited by John Maynard Keynes. For two years, he studied econometrics at the University of Chicago with Henry Schultz, one of the founders of the field. Frank Knight, another teacher, 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 criticized the attempt to discover conditions of equilibrium in 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.
Toward Foundations of Evolutionary Economics
In his later writings, especially also in his book Evolutionary Economics, Boulding went beyond questioning the use of a mechanistic model in economics; rather, he developed a vision of the economy that, on the one hand, was imbedded in a broad ecological context and, on the other, stressed the asymmetry of time and the global irreversibility of economic processes.
For Boulding, it was not just a matter of rhetoric when he applied the concepts of "equilibrium" and 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 to recognize the open system character of the economy and to bring intertemporal considerations into allocation and distribution theory.
Boulding never fell into entropy-pessimism. In his evolutionary interpretation, the arrow of time not only has the direction ordained by the Second Law of Thermodynamics, but is also irreversible with respect to creativity, the origination and extension of human knowledge, gains in complexity, and morphogenesis. How information arises is of central significance in his model, not simply its procurement, diffusion, or processing. 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, Boulding was brought 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 neoclassical and Harrod-Domar growth models. He criticized the latter as useless, and he noted the obsession of economists with cookbook theories of production that purport to show the complex dynamics of development of an economy 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 his contemporaries 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's magna carta of general equilibrium theory. In contrast to his contemporary colleagues, Paul A. Samuelson and J. R. Hicks, Boulding also viewed the ultimate attachment to concepts of equilibrium as a decisive weakness of Keynes's 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's 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 modern economics. As 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 economics. Boulding did not become the enfant terrible until neoclassical theory became the ruling dogma.
Vistas
The history of economics could 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 must be tentative.
Boulding's lasting credit will probably result from his demonstration of the methodological untenability of the mechanistic paradigm and of the relevance of evolutionary principles for the explanation of economic phenomena.
Boulding's theoretical profile emerges from his work on the history of economic thought. While, in neoclassical interpretation, the work of Adam Smith is generally reduced to its equilibrium aspects, Boulding regarded Smith as the first post-Newtonian thinker who, viewed over the long run, specifically worked out the disequilibratory cumulative aspects of competitive markets. He highlights Smith's vision of a system of positive feedbacks in which an extension of market leads to an increase 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's theory of the circular flow not through 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 evolutionary and institutional economics.
It rounds off the picture of a rich scholarly life to note Boulding's 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.
References
Boulding, Kenneth E. Ecodynamics: A New Theory of Societal Evolution. Beverly Hills, Calif.: Sage, 1978.
-----. Evolutionary Economics. London: Sage, 1981.
-----. "Abseits des Mainstreams: Bekenntnisse eines abtrunnigen Okonomen." In Okonomische Wissenschaft in der Zukunft, edited by Horst Hanusch and Horst Claus Recktenwald. Dusseldorf: Verlag Wirtschaft und Finanzen, 1992.
Georgescu-Roegen, Nicholas. The Entropy Law and the Economic Process. Cambridge, Mass.: Harvard University Press, 1971.
Kapp, K. William. "The Open-System Character of the Economy and Its Implications." In Economics in the Future, by Kurt Dopfer. London and Basingstoke: Macmillan, 1976.
Myrdal, Gunnar. "The Meaning and Validity of Institutional Economics." In Economics in the Future, by Kurt Dopfer. London and Basingstoke: Macmillan, 1976.
