Innovation and evolution in an artificial spatial economy

Abstract

This thesis regards economies as constructive systems. A constructive system is defined as a system whose later components are generated during the interaction of its earlier components. The thesis develops a model that simulates an evolving spatial economy: as time progresses, it generates new products and new technology. The model is built around von Neumann technology matrices, but this model does not assume fixed matrices as is usual. Instead it progressively expands the matrices by adding columns and rows representing new technologies and products. The additions are not predetermined, but are composed of new combinations of existing products and techniques, and by this means new, innovative functionality is created. A spatial, individual based model, consisting of economic agents and a price mechanism, decides where the profits are, and thus selects the successful additions. The model shows that through the localized price mechanism and agents' local optimization an efficient global economy can exist, illustrative of Adam Smith's invisible hand, and can evolve: according to a measure developed by Bedau et al. (1998) the model demonstrates real evolutionary dynamics. New goods and skills allow the economy to enlarge, either through a growing population or through increased consumption. The model allows the study of spatial implications of continuous creativity, which is important in our world of continuously changing economic challenges and opportunities.