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Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics
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Sales rank 55,823
Customers rating (based on 65 reviews)
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Over 6.4 billion people participate in a $36.5 trillion global economy, designed and overseen by no one. How did this marvel of self-organized complexity evolve? How is wealth created within this system? And how can wealth be increased for the benefit of individuals, businesses, and society? In The Origin of Wealth, Eric D. Beinhocker argues that modern science provides a radical perspective on these age-old questions, with far-reaching implications. According to Beinhocker, wealth creation is the product of a simple but profoundly powerful evolutionary formula: differentiate, select, and amplify. In this view, the economy is a "complex adaptive system" in which physical technologies, social technologies, and business designs continuously interact to create novel products, new ideas, and increasing wealth. Taking readers on an entertaining journey through economic history, from the stone-age to the modern economy, Beinhocker explores how "complexity economics" provides provocative insights on issues ranging from creating adaptive organizations, to the evolutionary workings of stock markets, to new perspectives on government policies. A landmark book that shatters conventional economic theory, The Origin of Wealth will rewire our thinking about how we came to be here—and where we are going.
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| Publisher | Harvard Business School Press | | Release date | 06/2006 | | Availability | Usually ships in 24 hours | | Edition | Hardcover |
| | List price | $29.95 | | Our price | $19.77 (you save 33.99%) | | Used price | from $8.98 |
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Survival of the Fastest
: Beinhocker jettisons the math-based canon of economic history and recasts it as a teeming evolutionary stew (@ Wired)
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 The Orgin of Wealth
I have just completed reading the book. A 526 page book!
I must admit that it is just about the best book that I have ever read on the issues/pitfalls of neoclassical economics. What makes this book so incredible readable is its simplicity. The author is a true master of explaining complex subjects in very simple term. Just a delight!
Although its purpose is to present, what the author calls, Complexity Economics (the future economics), the first 45 pages discusses the problems with traditional economics and the fact that they have been a disaster in explaining the economic events and in forecasting the future. It discredits the static equilibrium concept and the market random walk.
Although I doubt that this was the authors intend, my take as an investor is: no one knows anything, we are not using the right mathematical tools, thus cannot forecast, cannot explain, etc., thus for lack of anything better, the best we can do is to build a well diversified portfolio and stay the course (google Bogleheads). This does not mean at all that it is the best strategy, it is just the only one available given current knowledge of aconomics.
I HIGHLY RECOMEND READING THIS BOOK, at a minimum the first 45 pages. I wish I had done so earlier, but it was only published in 2006.
Now, for those that wish to get a taste of it, which is the way I got hooked to it, google it, you can read the facinating first chapter (17 pages) for free.
 too much ambition
I've read this book in 2007, when I had just started an undergraduate course in economics. After reading it, I was greatly impressed and even became somewhat skeptical of orthodox economics. Now I have the feeling that the author doesn't know what modelling is all about. In order to manage "reality", you must simplify things, discarding what is not essential. Essential being defined in the sense that it gives you a direction in the course of things - you know where it leads you. Things that are chaotic or whose effects acumulates over hundreds of years are not essential by such definition and should not considered. The theories the book presents may add something to conventional economics, but aren't in the position to replace it.
A Look at the Unpredictable Nature of Markets.
In the late 1800s, Buffalo Bill's Wild West Show was a dazzling display of horsemanship, gunplay and other cowboy skills. One of its acts involved the sharpshooting of the great Annie Oakley. Dubbed "Little Sure Shot," Oakley had an amazing routine - she would shoot out lit candles, for example, and the corks of wine bottles.
For her grand finale, she would shoot out the lit end of a cigarette held in a man's mouth at a certain distance. For this, she would ask for volunteers from the audience. As no one ever volunteered, she had her husband planted among the spectators. He would "volunteer" and they would complete the dangerous trick together.
Well, during one swing through Europe, Oakley was setting up her finale and she asked for volunteers. To her shock - and the surprise of everyone involved with the show - she got a real volunteer.
The proud young Prince (soon to be Kaiser) Wilhelm bravely stepped down from among the spectators, strode into the ring and stuck a lit cigarette in his mouth.
Reportedly out late the night before enjoying the local beer gardens, the unexpected appearance of this famous volunteer unnerved her. But the show must go on.She took aim and fired... putting out the cigarette, much to Wilhelm's amusement. Thus, she also created one of historians' favorite "what if" moments. What if her bullet went through the future kaiser's left ear? Would World War I have happened? Would the lives of 9 million soldiers and 6.6 million civilians have been spared? Would Hitler have risen from the ashes of defeated Germany? All sorts of questions come to mind...
Scientists call these kinds of episodes "frozen accidents" - points in time when small changes would have led to dramatic consequences. Eric Beinhocker relates Oakley's tale in his new book The Origin of Wealth - which is, in part, a look at the unpredictable nature of markets.
The market itself is an accumulation of these frozen accidents. Stock prices don't always move smoothly from one tick to the next. Seemingly imperceptible changes at the margin can lead to outsized changes in stock prices. The classic metaphor for this process is that of a butterfly flapping its wings in Brazil setting off a chain of events leading to a hurricane in Texas.
One great example of this "butterfly effect" is to look at the crazy ride of Imperial Sugar. What small change caused this stock to more than double in a year's time? Basically, there was a bull market in oil. And few drew the conclusion that people would start burning food for fuel. But the biofuel boom has been good for agricultural products and agricultural producers, including sugar refineries, as the price of Imperial Sugar's stock illustrates.
The conclusion here is this: The market, as with life, is full of surprises. No one can predict these things consistently. The market is too dynamic, too complex. Beinhocker advises an adaptive mind-set, highly pragmatic, which "values tangible facts about today more than guesses about tomorrow."
Review by a writer for Agora Financial, publisher of economic and financial analysis including Financial Reckoning Day Fallout: Surviving Today's Global Depression, The New Empire of Debt: The Rise and Fall of an Epic Financial Bubble, and I.O.U.S.A.: One Nation. Under Stress. In Debt.
 Makes the same mistakes that it critiques
Eric D. Beinhocker's "The Origin of Wealth" critiques a neoclassical economics and presents a new school of economic thought called "Complexity Economics". The book starts off by presenting the history of economic thinking and the rise of the neoclassical paradigm - the current dominating economic methodology that uses complex mathematical models and assumes perfect rationality, equilibrium, etc. Beinhocker critiques Neoclassicism for some of the reasons that I heavily disagree with it-it involves too much math, assumes perfect rationality, and relies on faulty economic constructs (equilibrium is an example). In short, the theories of Neoclassicism are not in one respect consonant with reality.
However, after he critiques Neoclassicism he begins a very long, long, long explanation of his complexity economics. Most of the following chapters are descriptions of "complexity economics" and how while mainstream mathematical formulas are erroneous, his computer lab scenarios provide insight into how humans behave.In my opinion he seems to make the same mistakes that he accuses Neoclassicism of doing, using complex formulas and computerized equations as data for human action and how they behave. He simply provides a new perspective but doesn't really build on it because in reality it requires a vast pile of mathematical research and more outlandish computer models that haven't been concocted yet. He even seem to support Keynesian economics, a school of thought that can be considered as mainstream as mainstream comes, as representing some business cycle theory of complexity economics because it takes into account entrepreneurial expectations (To his credit, he still critiques it because he says they still rely on perfect equilibrium). In short, it appears as if his critique of neoclassical economics is more with the fact that they base their fancy models on 19th century physics, not 20th century physics. (I believe he states this earlier in his book, although he ties it into his "new approach" and does not say it in such a critical way).
His analysis of business structure is a little bit better. He talks about market competition and how dynamic, capitalistic and innovative companies will survive but if they fail then a new and better company will supplant them. He provides evidence that markets are in fact always changing, giving examples of companies that have started as small businesses, evolved into large ones, and then declined into shadows of their former self. Unfortunately he makes mistakes in his final chapters, such as where shuns the free market and supports antitrust. In his last chapter he supports a great deal of government intervention which in fact hampers the dynamic creative destruction he supports (I'm not going to go in detail with them as they don't really deal with the book itself, but I will talk to someone if they want).
In summation, he doesn't really provide a consistent theory for Complexity Economics. To his credit,he admits that he is really starting a new trend and is providing the framework for a change in economics. In my opinion though, just like Neoclassism, he is building the framework on a shaky foundation and doesn't combine his theories into coherent thought.
The only one of its kind
This was a very thought provoking book. It made me understand there are alot of external factors that shape who I am and how successful I may or may not be. If you are looking for an out of the ordinary, exciting social sciences/economics book I highly recommend this.
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