HOW STABLE IS THE SELECTION ENVIRONMENT?

It is clear that the ultimate selection criteria of evolutionary market activities are the preferences or interests of the economic subjects themselves and, more specifically, those of the consumers. These decide in the end which market activities will fail and which will succeed (see Section 11.3). At a first level, though, it is institutions that act as a primary selection criterion of the evolutionary market processes.

To be considered a selection criterion at all, a factor must demonstrate relative stability. The variables that ultimately affect the probability of survival of different problem solutions must remain relatively invariant so that the selection forces can operate. If social institutions are to play the role of those variables, they must remain relatively stable. Following our basic distinction between rules of the game and activities within the rules, our main purpose has been to prove that both levels are subject to evolutionary change.

Since both institutions and markets change, the function of social institutions as a selection environment for the evolutionary change taking place in markets is not self-evident. Moreover, this proposition must itself be proved so that the whole theory can retain its validity. In concrete terms, what must be proved is that the pace of change in institutions is slower than the pace of change in markets. Only in this case might institutions possess the relatively invariant character with regard to market changes and allow for the formulation of satisfactory empirical propositions on economic evolution.