A theoretical approach to endogenous development traps in an evolutionary economic system

Abstract

The representation of evolving economies can be formally represented through evolutionary self-organized systems (ESO), a cellular automata model with endogenous rules of change. Another possibility is to consider economic evolution as the result of the nested application of rules of changes on certain structures we call economic systems. Both approaches show disadvantages: ESO systems are too general and arbitrary, while the application of rules to rules lacks in most cases an effective characterization. In order to get the best out of both worlds we define here a notion of economic ESO systems. We show that the class of these systems is equivalent to a subclass of economic systems. The systems in this subclass can be effectively represented, with the extra bonus that the crucial role we assume knowledge plays in the mechanism of economic evolution becomes explicit. We claim that these systems are particularly fit for representing the notion of “poverty trap”. In fact, they arise in an economic system that is unable to surpass a critical boundary.