Policy Implications of Darwinian Versus Newtonian Views of the Economy

Using the non-ergodic, macroeconomic, evolutionary model of Carlaw and Lipsey (2010), in which agents make decisions under Knightian uncertainty, the project will demonstrate that history matters to economic processes and therefore the stationary equilibrium concepts used in all mainstream macroeconomic policy making are erroneous. The project will demonstrate that Real Business Cycle and endogenous growth theory models and empirics are in doubt because the Carlaw and Lipsey’s non-stationary theory produces data that is empirically equivalent to their own tests. Yet Carlaw and Lipsey’s theory is more consistent with historical evidence including recent failures of the financial system.