I present here a working hypothesis of the evolution of economies. The basis for the evolutionary hypothesis is as much practical as it is based on an extensive review of the literature. The review I did do certainly provided much food for thought, but there seemed not to be a coherent thread based on a single principle as is found in biological sciences. This despite the fact that much of today’s ideological fervor centres on Milton Friedman’s and others attempts to link capitalism to Darwinian evolution and even uses the phrase “survival of the fittest.” In fact, it is not analogous to evolution, but instead to ecosystems. Earlier attempts by Hyak can be excused for making this egregious error because concepts of ecology were not developed yet. It remains true however, that Friedman seemed not to examine with any rigour the predictions of an evolutionary model of the economy with the observed behaviour of economies. He certainly lived into the era of ecological thought.

I earlier described an hypothetical sketch of what have been the historical development over a period of about 100,000 years — a time scale appropriate to evolution. In this diagram I present an hypothetical evolutionary tree of the relationships and stages of development. As with all such diagrams, there is much simplification, but there is in this hypothesis at least a thread of relationships all based on the entrepreneurs DNA and recorded ideas and concepts involved from the earliest to the present. A secondary purpose in presenting this tree is to emphasize what evolution is all about in economic terms, so that it is not confused with ecosystems when the term “survival of the fittest” is used.

In this sketch of the interrelationships and development of various economic systems, There are three major divisions or Lucrephyla: Subsistence, Barter, and Monetary. The Monetary Lucrephylum has recently divided into two major groups in which the wealth represented by the monetary scheme is in the one division controlled by a central authority so that there is essentially no or very little individual ownership allowed. In this division, which is most closely related to tribal ownership of all people and property the types of systems range from greedy dictators to the theoretically benign system of communism. In all of these centrally controlled systems, the entire economy is managed, sometimes not very well, but it is nonetheless a planned management concept. All the resources (including the people) are accounted for in the plan.

In the other division the wealth represented by the monetary scheme is not completely controlled centrally and individuals are free to own property and goods, and to engage in trade. Historically, capitalism was a development that followed major revolts and the release of ownership to individuals. This more-or-less coincided with or slightly preceded the development of the industrial revolution, itself made possible by individual ownership and the concept of combining the capital of several or many individual entrepreneurs to better control the production and distribution of resources and goods so as to exchange wealth among the entrepreneurs. The end goal of this strategy is to dominate the market. In capitalism there is essentially no provision for sharing wealth with anyone except the entrepreneurs. Labour is essentially a resource cost and can be delivered by machines or people, and cheaper people are better for the intended profit. Because of labour’s omission from the model, one of two things tend to happen. The first is that people revolt against exploitation and declining wages. Government steps in to force entrepreneurs to pay taxes to support the development of the infrastructure and government services, and also to prevent excessive exploitation of labour. The second is that the labour force organizes itself into unions to sequester alternative labour sources away from the capitalist corporations, thereby leveraging better wages.

The evolution of the Monetary Lucrephylum continues actively today. We see the competitive struggles at the level of individuals, corporations, and governments on the news every day. In the centrally controlled group, dictators attempt to defend their centrally controlled ownership and the once powerful forms of communism seem to be at bay for now. In the non-centrally controlled group, corporations lobby governments for free markets so that there is little control over the sharing of wealth acquired by the corporation. The general populace (largely labour) attempts to thwart this by demanding minimum wages, laws against exploitation of children, and by joining and forming unions.

It will be interesting to see what happens in the future. Factors that will be selective forces in the competition, include the rapidly developing intelligent mechanical devices that replace expensive labour, the ability to export labour to a global resource base thus making it more difficult for labour to sequester the labour resources, the rise of the Internet enabling individual entrepreneurs to compete directly with the large corporations for production and distribution of such things as books (the publishing industry giants are in rapid decline), music (the music distribution industry giants are in rapid decline), and video/television (the major studios are currently engaged in a fight for their lives). In any ecosystem, when the environmental conditions change existing species that are pre-adapted to the change can quickly take advantage of the new conditions and explode in population.

A runaway lucrespecies in a new set of conditions can have a rapid impact on the economic ecosystem by distorting the existing balance between primary producers and the tiers of consumers. Whether it is the development of mega corporations that control all the resources, distribution, and wealth, or a rapidly expanding group of individual entrepreneurs that nibble away collectively at the control of mega corporations until they crumble. But this is survival of the fittest in an ecological (short-term) perspective of economy, not in an evolutionary context. And they are very different.