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Tag Archives: business cycle

darwinFirst time I have read anything from the Hindustan Times, it turns out to be a very interesting article that compares economic development to evolution and natural selection. Failing companies in times of recession are very much like a particular species struggling for survival.

First, treat corporations and governments as organisms competing in the natural environment of the market. Second, see environmental change in the way, over the past decade, sophisticated financial risk instruments and an unprecedented wave of cheap capital had changed the global economy. Subprime loans and the like were born of this unholy marriage. In Darwinese, the environment has changed radically. And right now natural selection is taking place with the market (and official bail-outs) determining which firm, and even the odd government, survives the shakeout.

Also mentioned, Darwin was an avid reader of Adam Smith, and Alfred Marshall is said to have been inspired by Darwin. Not sure any of this helps us to break out of our recession, but maybe it adds a little perspective to the natural cull of companies that happens with a downturn.