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Structural Change and Economic Dynamics 22 (2011) 193– 203

Contents lists available at ScienceDirect

Structural Change and Economic Dynamics

jou rna l h omepa g e: www.elsev ier .com/ locate /sced

n the role of intentionality in evolutionary economic change

élix-Fernando Munoza,∗, María-Isabel Encinara, Carolina Canibanob

Departamento de Análisis Económico: Teoría Económica e Historia Económica, Universidad Autónoma de Madrid, 28049 Cantoblanco, Madrid, SpainINGENIO (CSIC-UPV), Universitat Politècnica de València, Camino de Vera s/n, 46022 Valencia, Spain

r t i c l e i n f o

rticle history:eceived April 2010eceived in revised form April 2011ccepted April 2011vailable online 28 April 2011

EL classification:41528910

a b s t r a c t

One important challenge to evolutionary economics consists of tackling the paradoxicalrelationship between purposeful human action and the ‘blindness’ of evolutionary pro-cesses. We argue that the theoretical treatment of intended action is a prerequisite forventuring beyond the phenomenological explanation of evolutionary processes. If so, evo-lutionary processes are not (at least completely) ‘blind’. Of course, not every change ina society is a consequence of purposeful action. However, even if not every action wereintended and not every novelty were the consequence of pursuing particular goals, the evo-lution of individual intentions and pursued goals (micro-level) is a key process in explainingeconomic change. In this context, an evolutionary efficiency criterion is proposed.

© 2011 Elsevier B.V. All rights reserved.

31

eywords:ntentionalityvolving capabilitiesconomic change

volutionary efficiency

Carrying out a new plan and acting according to a cus-tomary one are things as different as making a road andwalking along it. (Schumpeter, 1934 [1983], p. 85)

In the beginning there was a plan. (Loasby, 1999, p. 112)

. Introduction

One important challenge to evolutionary economicsonsists of tackling the paradoxical relationship between

urposeful human action and the ‘blindness’ of evolu-ionary processes. Several recent papers have insistedn these issues. This is the case of Vanberg (2006) dis-ussing Witt’s position on the role human intentionality

∗ Corresponding author at: Departamento de Análisis Económico:eoría Económica e Historia Económica, Universidad Autónoma deadrid, 28049 Cantoblanco, Madrid, Spain. Tel.: +34 914974395;

ax: +34 914976930.E-mail address: felix.munoz@uam.es (F.-F. Munoz).

954-349X/$ – see front matter © 2011 Elsevier B.V. All rights reserved.oi:10.1016/j.strueco.2011.04.002

plays in the explanation of evolution in economics. Van-berg has highlighted certain problematic aspects of therelationship between individual intentionality and the‘blind’ nature of social evolutionary processes. In Witt’swords, ‘culture, institutions, technology, and economicactivities evolve according to their own regularities’ (Witt,2004, p. 132). Moreover, ‘humans have sufficient intel-ligence and incentives to anticipate and avoid selectioneffects. The selection metaphor may therefore divert atten-tion from what seems crucially important for economicevolution—the role played by cognition, learning, andgrowing knowledge’ (Witt, 2004, p. 4fn). Because it is

driven by intentional human actions, Witt concludes thatcultural (and economic) evolution cannot be adequatelyanalyzed in Darwinian terms.1

1 It is because of the special emphasis a Darwinian approach places onthe ‘blindness’ of variation that Witt (and others) find it inappropriatelyapplied to the socio-economic or cultural realm where intelligent humanbeings act on insight and pre-meditated plans. However, Hodgson (2004,

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In the presence of systematic feedback between selec-tion and variation, as is the case of economic evolution, thedistinction between them, which is a fundamental premiseof the neo-Darwinian theory, is no longer valid becausepurposeful human action introduces an element of ‘direc-tional change’ (Witt, 2003, p. 29fn). Thus, a paradoxicalrelationship arises between purposeful action and ‘blind’social processes.

Despite Vanberg’s attempt to make both positions com-patible (Witt’s position and neo-Darwinism) and the factthat his analysis is quite close to our own position,2 theapproach proposed in this paper may offer an explana-tion to the paradox. Contrary to biological evolutionarytheories (mainly Darwinian), we agree with Witt inthat (socio)economic evolutionary change involves humancreativity and cognition and that the driving force of recom-binatory search for novelty here is human endeavour (Witt,1999). This is the case of Schumpeter who stressed theentrepreneur’s role in explaining economic dynamics: theentrepreneur is a ‘creator personality’ (Schumpeter 1932[2005]) that gives rise to ‘new combinations’ and, when try-ing to carry them out, he transforms the economic system.3

Schumpeter also insisted that major innovation requires abasic motivation or powerful ambition: entrepreneurshiprequires a tendency towards a transforming goal – whichwe have called ‘innovative intentionality’ (Canibano et al.,2006).

The fact that humans respond in a deliberate andplanned manner to the problems they face is perfectlycompatible with a view that emphasizes the conjecturalnature of their problem-solutions and the open-endednessof the process in which the validity of their conjecturalsolutions is tested. Thus, new goals may arise, the hier-archy of agents’ goals may change, objectives that havebeen reached may be removed from plans and goals thathave not been reached may be replaced with others, etc.This implies learning processes and the emergence of newactions that cannot be explained only as a mere conse-quence of knowledge acquisition; they produce specialconnections between new goals and new actions-means.

Beliefs, actions, plans, goals, etc. are intentional categoriesof human action (Searle, 2001).

p. 175) claims that ‘at the core of Darwinism are presuppositions concern-ing causality and causal explanations’ and ‘contrary to widespread belief,these presuppositions do not downgrade or ignore human intentionality.’See also Hodgson (2010) and Hodgson and Knudsen (2006a,b,c, 2007) andNelson (2006, 2007). For a discussion on the ontological implications ofthis debate, see Vromen (2008).

2 Vanberg’s analysis is also based on the hypothesis that human actorsseek what they consider success and they use their accumulated knowledgeto come up with strategies – plans which, we could say, they expect to besuccessful. In this sense, there is no doubt that deliberate human problem-solving is always looking ahead; and such ‘looking ahead’ should not beconfused with pre-adaptedness.

3 Schumpeter’s concept of entrepreneurship explicitly excludes inven-tion. However, both invention and entrepreneurship are loci of novelty(see Arthur, 2007). The main difference between inventors andentrepreneurs is that an inventor, as such, does not play an economicrole on his own insofar as he does not mobilize resources into new pro-duction lines. If he does, then, by functional definition, he becomes anentrepreneur.

conomic Dynamics 22 (2011) 193– 203

Although important contributions have been made tothe challenge facing economic and social theory throughthe consideration of intentionality (e.g. Malle et al., 2001;North, 2005; Searle, 1983, 2001; Simon, 1983; Penrose1959 [2009]) and, therefore, the formulation of goals andplans in the explanation of evolutionary processes, it isour opinion that a more comprehensive theoretical frame-work is needed. In this paper, we address this problemby applying the concept of action plan (Rubio de Urquía,2005; Encinar and Munoz, 2006): a theoretical conceptthat connects micro and meso analytical levels and allowsus to consider the role of intentionality in the explana-tion of human action. Based on this concept, the paperaddresses the logical relationships between goals, means,connections and intentionality in order to shed light on theapparently paradoxical relationship between individualintended action and the ‘blindness’ of economic processes.We argue that the theoretical treatment of intended actionis a prerequisite for venturing beyond the phenomenolog-ical explanation of evolutionary processes.

The paper shows how intentionality of human actionis a key factor for explaining evolutionary processes ofeconomic change. Thus, using the action plan approach,we introduce the role of purposeful action or intention-ality. Intentionality becomes apparent in agents’ actionplans, plans that interact (meso level) and are evaluatedby agents in terms of performance. Depending on per-formance, action plans are revised, renewed, or simplyabandoned. Renewed variety fuels emergent orders andintentionality thus shapes emergent orders. If we are right,evolutionary processes are not (at least not totally) blind.

The paper is organized as follows. In Section 2, wepresent the analytical structure of action from the actionplan concept (micro level). This section introduces inten-tionality. Section 3 shows how the interactive deploymentof individual plans is at the base of socioeconomic dynamics(meso level). In this section, we also propose an evolution-ary efficiency criterion. The paper finishes with concludingremarks on the role of intentionality and goal dynamics inevolutionary processes.

2. Intentionality and action plans (micro level)

Some of the writings that analyse the foundationsof evolutionary economics describe economic evolutionas the process of the growth of knowledge (Dopfer andPotts, 2004; Loasby, 1999, 2002). For instance, Metcalfeand Foster (2004, p. xi) point out that the knowledgeacquired by agents, together with the interaction of thatknowledge, is at the base of economic evolution and thecomplexity of economic processes. The evolutionary litera-ture argues that knowledge is the foundation of capabilitiesand is structured in routines (Becker, 2004; Nelson andWinter, 1982), cognitive, behavioural, social and techno-logical rules (Dopfer and Potts, 2008) and organizationalframeworks, etc. However, insufficient consideration isgiven to the goals pursued by agents (individuals or orga-

nizations), the dynamics of their own evolution, whichaffects the connections between them, their hierarchy andcontent, and the agents’ intentionality. Only recently hasconsideration been given to the role and consequences of

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he agents’ pursuit of goals on the development of newapabilities and new behavioural patterns, etc. (see Dosit al., 2003, 2000; Langlois, 2006; Nelson, 2006, 2008).

Evolutionary economics sees evolution as the processr set of processes that combine the generation of novel-ies with the selective retention of some of these noveltiesDopfer and Potts, 2008; Loasby, 2001, p. 1), following thehree-phase schema: (1) generation, (2) selection/adoptionnd (3) retention of variety (Foster and Metcalfe, 2001,. 6). Evolving systems are characterized by continuousndogenous change, induced by the generation of nov-lties and subject to selection processes that operate onelf-organized processes (Kauffman, 1995).

A fundamental question that arises at this point ishat changes. What is (if any) the unit of selection in

uch generation–selection–retention processes? And whatbout the causal explanation of renewed variety? This is

central point in the research on socioeconomic or cul-ural processes: which analytical unit of selection is aetermining factor for the theoretical explanation of thevolutionary process and for the role intention, learningnd the growth of knowledge play in such process. Forome authors, the unit of selection is routines (Becker,004), for others it is institutions (Hodgson, 1993; North,005), knowledge (to the extent that they identify the basicconomic problem with that of the social organization ofnowledge) (Boulding, 1981; Hayek, 1945, 1952; Loasby,999, 2007b), capabilities (Dosi et al., 2000) or rules (Dopfernd Potts, 2008). Finally, there are those who, on a morebstract level, consider that ‘it is connections that change’Potts, 2000, p. 57).

All these units have one thing in common: they aretructures, a concept (structure) that is taken for grantedn the process of doing something. However, a more fun-amental question is where these structures come from;

n other words, what determines how and when theseew (completely new or modified) structures arise (inhe form of routines, knowledge, etc.), structures thatould eventually become the units of selection in such

eneration–selection–retention processes. In this paper,e propose agents’ action plans (the projective connec-

ion between means/actions and goals) as the analyticalnit capable of explaining how different structures linkedo human action (as those mentioned above) are produced.f we assume that ‘humans have sufficient intelligence andncentives to anticipate and avoid selection effects’ (Witt,004, p. 128), we need a framework that provides informa-ion on several elements of analytical structure of agency.n such a framework, we should differentiate connectionsetween the different kinds of elements that are connectedy an agent: on the one hand, means and actions; onhe other, goals, which determine the sense of intentionalctions.

The action plan allows the theoretical treatment ofntended action as a prerequisite for explaining socioe-onomic evolutionary processes. Intentionality (an agenteature of representations by which they are about some-

hing or directed at something (Searle, 1995)) is linked tooals and it activates the development of capabilities, theesting of new connections within a system, and, there-ore, the generation of new knowledge, which may be of a

onomic Dynamics 22 (2011) 193– 203 195

surprising kind. This is the case, for example, of the firmas a planning entity: the growth of firms is essentiallyan evolutionary process based on the cumulative growthof collective knowledge, in the context of a purposivefirm (Penrose 1959 [2009], p. 237). In this way, economicdynamics may be understood as complementary to whathas been previously exposed as the process of generation,adoption and an attempted interactive deployment of theagents’ action plans and the resulting ‘products’.

2.1. Action plans

An action plan is the agent’s projective linkage of means(which include specific actions) to goals (or ends) (Rubiode Urquía, 2005). The very nature of an action plan is theprojective character of the ordering involved. At each instantof time, an action plan may be interpreted as a template,blueprint or ‘guide’ for action that projectively connectselements of a different nature: something the agent wantsto achieve (goals or purposes) with the means the agent‘knows’ afford him success (means/actions). This con-cept shows the direction of action: agents (individuals ororganizations) determine their goals and their connectionwith means/actions, and project the sequence for attain-ing them. Accordingly, they need to order their actions(depending on their knowledge, experience, perceptions,beliefs, creativity, entrepreneurship, etc.) to achieve pur-poseful goals.

An agent action plan is a rather general open analyticalstructure; it can include routinized patterns of behaviour,strategic designs and monitoring and valuation procedures,etc. A plan can also refer to its goals at several points in thefuture, represent hierarchical dependencies between goalsand actions with as many analytical moments in time asmay be required, as well as alignments of goals with otherindividuals’ plans, e.g. it configures a system as complexas desired and composed of different subsystems that areas hierarchically dependent as necessary. In fact, an actionplan may be considered as a quasi-decomposable systemas put forward by Simon (1962).

The projective character of an action plan refers notonly to the fact that historic time (and timing) play cen-tral roles in explaining human action (that is the case ofpath dependencies, technological trajectories and biogra-phies, etc.), but also to the fact that actions and goals need tobe imagined before they are deployed by agents. Imagina-tion plays a central role in this approach. As (Loasby, 2007a,p. 4) states, ‘imagination always operates by making newconnections, thereby creating new structures: imaginationcreates order. There seem to be three motives for doing so:as a direct challenge to an existing order; as a response toa breakdown of order; and as an attempt to colonise a terraincognita.’

These sets of means/actions and goals (the elements ofthe system ‘action plan’) can be manifold. The set of actionsand goals linked projectively by an action plan may con-tain different kinds of elements: material or immaterial

elements located at different moments in time (obviously,not all at the same time); elements with a monetary price(in official currency) or without a monetary price (a sub-jective level of satisfaction of a need); etc. Action plans are

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an open analytical representation of an agent’s projectiveaction because means and goals are not given a priori, butrather produced by the agents themselves. These analyti-cal constructions enable the depiction of any kind of actionplan (such as a plan for a trip, a business plan, and a strategicplan) with structures of hierarchical dependence betweengoals and with as many analytical periods of time as neces-sary. They may be feasible ex ante or not (owing to logical ormaterial impossibilities), have consistent goals or presentsome kind of inconsistency, give rise to full coordinationor rationed behaviour, etc.4 Finally, it is important to pointout that action plans are bimodal entities: they are bothanalytical concepts (a system that connects actions/meansto goals) that allow us to learn about important features ofhuman action and, when this template is replenished withparticular actions and goals, they are blueprints or ‘guides’for action for a particular individual or organization (e.g.the expansion plan of a particular firm). In this paper weare interested in the former type of action plan.

Plans are a pervasive concept and the importance ofaction plans for economic theorizing is not new.5 Agencies(individuals and organizations) make plans and planningimplies making connections.6

2.2. Action plans and knowledge

How are plans formed? Which is the relationshipbetween plans and evolutionary processes? An agent’s‘real’ action constitutes an indissoluble and dynamic wholethat can be partially observed (or at least, its externaleffects can) and is greater than the selection and interactivedeployment of plans. An arbitrary but fruitful starting pointis the cognitive dynamics of agents, e.g. agents’ knowledgeand perception of reality. Knowledge may be considered asa system and the structures of the human brain that sup-port it also constitute a system (Fuster, 2003). A system isexplained by both its constituent elements and the con-nections by which they are related. In a dynamic analysisof emergence and evolution, the fundamental issues arethat connections are continually changing, which ‘makesconnections the prime variables’ (Potts, 2000, p. 5), andthat the recombinant process of connections may gener-ate novelties (Loasby, 2001). Knowledge is an example ofassociation of elements; what the specific elements areand how they are connected is knowledge itself. In this

approach, knowledge may be considered as a structure,a system of connections that is also changing. Thus thegrowth of knowledge would consist of the accumulation

4 Certain prominent properties of action plans, such as feasibility, con-sistency, reflexivity and the relationships between them, may be found inEncinar and Munoz (2005).

5 Lachmann (1994a [1976], p. 233). The concept of action plan (or planof action as it is sometimes called) can be found in the work of economistsfrom different traditions, such as Keynes (1936), Mises (1949), Hicks(1939), Stackelberg (1946 [1943]), Eucken (1940), Debreu (1959), Penrose(1959), Malinvaud (1999), Boulding (1991) and Metcalfe (2004), who talksof ‘entrepreneurial plans’, etc. For some authors, plans are merely a name(Debreu, 1959; Malinvaud, 1999).

6 An interesting paper that offers a rather formal look at the impact ofchanging goals on project planning and project success is Dvir and Lechler(2004).

conomic Dynamics 22 (2011) 193– 203

of connections between the internal elements of a systemand between said elements and others belonging to higheror lower ranks.

Agents make use of their acquired knowledge to drawup theories (Nelson, 2008) on how the diverse elementsthat constitute the physical-natural, technological andsocial systems within which they deploy their action arecausally connected. These theories have a conjectural valuein a Popperian sense and they are not necessarily true inthe sense that they have not been scientifically contrasted.Theories are models or frameworks that enable agentsto anticipate (forming expectations about) the sequencesand consequences of their actions in a context of uncer-tainty (Knight, 1921), thus defining the set of feasibleevents and weights (‘probability’) agents attach to them.These future courses of action have to be necessarily imag-ined and deemed possible (Loasby, 1996; Shackle, 1972)since they affect the agents’ actions. These models provideframeworks and procedures which, insofar as they are ofcommon use, may be defined as institutions.7

The connections that configure these frames or struc-tures for action are necessarily incomplete.8 In a contextof true uncertainty, it is impossible for agents to know allthe feasible links between the elements (usually means,but sometimes goals of action) that constitute a presentand future system. Learning consists of testing (and even-tually retaining) new connections that prove to be usefulfor agents to reach their goals. As a result, agents deploybounded rationality, which refers to the ‘reasoning capabil-ities of a player who, on the one hand, has a goal to achieveand goes after his goal with an at least partially formedtheory on how to achieve it (this is the ‘rationality’ partof the concept), and, on the other, is aware that the the-ory is somewhat crude, that it will probably be revised inthe course of the effort and that success is far from assured(this is the meaning of the ‘bounded’ qualification to ratio-nality)’ (Nelson, 2008, p. 78). Both aspects of the conceptseem necessary for what we know about human and orga-nizational problem-solving on a variety of scenarios. Thisapproach is also compatible with the emergence of noveltyand with the growth of knowledge, i.e. with the conditionsof possibility of true learning processes (Witt, 2007).

However, economic behaviour cannot be understoodonly on the basis of present or past knowledge. It is also

the future where individuals locate their goals or ends(Lachmann, 1994b [1978]). As intentionality is directness,

7 Because of this, Loasby (1999, p. 13) claims that the study of eco-nomic processes is also the study of institutions. Institutions may havevery different ranges of common use: e.g. agricultural auction markets, e-commerce, stock exchanges. Firms develop their own institutions, whichmay create unexpected difficulties in a merger or in implementing anaction plan which requires intercompany collaboration.

8 Following Earl (2003), the economic agent is completely recon-structed when all of his internal and external operational connectionshave been made completely explicit. However, it is actually impossibleto fully reconstruct an economic agent; economic agents are continu-ously establishing and removing connections. We refer to such a processas learning. By contrast, an example of a complete system is that of theWalrasian general equilibrium theory. In the latter kind of system thereis no room for learning or for true dynamics.

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elements (such as expectations, beliefs, and preferences).The sets of means and objectives exist only within theseframeworks, and the means, goals and their connections

9 When a scientific organization is planning a scientific expedition toAntarctica, for example, it does not have to prepare ex novo every detail of

F.-F. Munoz et al. / Structural Chang

gents’ goals introduce intentionality in their actions. Thus,ctions such as producing, consuming, innovating, andorking and organizing are conditioned by agents’ desires

nd the goals they pursue, which vary greatly and areubject to change over time (Canibano et al., 2006). Con-equently, diversity and changes in pursued goals shoulde considered a key explanatory element of the self-ransformation process of social and economic systemsy means of the renewed intentional actions they induce.hese are the imagined realities deemed possible andesired and towards which the agent directs his actionLoasby, 1996). They are also a source of complexity (in aroader sense than Metcalfe and Foster, 2004). Importanteatures of novelty generation and innovation processes

ay be addressed by focusing on the dynamics of thegents’ formulation of goals.

Speaking about plans (based on the analytical opennessf both means and goals of action) implies the definitivebandonment of the timeless framework of the ‘technol-gy of choice’. The paradox of a timeless approach asn analytical basis for the explanation of processes thatre necessarily deployed in time is solved through theynamic openness of the actions and goals pursued bygents. Robbins’ (1932) definition of economics is essen-ially correct, but it is not sufficient.

In this approach, an agent’s rationality depends on theoals and motivations he pursues, his expectations andeliefs, etc.; that is, on intentional states of mind. In thease of firms, for instance, specific groups of human beingsrought together to do something, ‘if we assume that firmsct for a purpose, we must find an acceptable assumptions to why they act’ (Penrose 1959 [2009], p. 23; italics inhe original). Thus, we claim that what directs economicctivity is not only the economic calculus (instrumentalationality) that operates over given data sets of prefer-nces, technologies, etc. and selects the given courses ofction after considering their (certain or probable) conse-uences in terms of an index of action (utility, profit.), butlso the possibility of developing a true open rationality, theationality of the unexpected in a context of radical uncer-ainty where genuine choices have to be made in the sensef Shackle (1977). Intentionality fuels the constitution oflans and their deployment; i.e. individual actions.

.3. The analytical structure of individual action and theonstitution of plans

The bare bone of our approach is that entities such asgents, organizations and governments can be conceiveds carriers of plans, i.e. as conjectural schemas that allowperations (Dopfer, 2004, p. 179). Plans are not actionsut rather the products of imagination and logical reason-

ng; however, they are building blocks of rational action.n order to understand the significance of action in evolv-ng economic processes, it may be useful to break down itstructure into the following sequence of analytical steps.he first is the constitution of the agent’s set of action plans,

(t). The second is the selection of the bundle of action planshe agent wants to implement, P*(t) (logically P*(t) ⊂ P(t))nd the third is the interactive deployment of selected plans*(t) [p*(t) ∈ P*(t)] within the external (natural and social)

onomic Dynamics 22 (2011) 193– 203 197

environment. The fourth and final step is the evaluation andrevision of some (or all) p*(t), such as p*(t) ∈ P*(t), duringand after its deployment and its implications for the set ofaction plans that are to be constituted in the ‘future’, e.g.P(t + 1). In this context, t refers to the instant of time whenthe agent is ‘planning and acting’ (Hayek, 1945).

Constitution and selection are associated with the ana-lytical circumstances of the agent’s individuality (microlevel), while deployment is associated with the interactionwith other individuals’ action plans (meso level). Evalua-tion and revision deserves special consideration becauseit is at this analytical stage when the agent activates hislearning processes.

Logically, plans are constituted before they are selected,deployed and evaluated. At this stage, agents set theirgoals as well as their hierarchy; they lay out (or invent!)the means/actions that would produce the desired statesassociated with their goals and try to estimate the timeneeded to achieve them while making the connections(links) between all the elements. Parts of those plansare quasi-independent systems of actions-objectives thathave previously proven effective for achieving interme-diate or lower-order goals (within the hierarchy of theplan), as is the case of behaviour routines, technologies, etc.Thus, action plans form structures or systems composed oflower hierarchical order systems; this is why action plansare quasi-decomposable systems (Simon, 1962). This cir-cumstance allows the agents to release (scarce) cognitiveresources from many details of their plans and to use themto explore new ways of achieving the goals they pursue.9

Moreover, economising cognitive resources makes it pos-sible for agents’ action plans to introduce a great deal ofnovelty, if feasible, into the economic system, giving riseto economic development. Once an action plan has provensuccessful it will not be needed again and only certain newconnections will be retained by the economic system in theform of knowledge, routines, etc.

The constitution of a particular set of plans P(t) dependson a complex structure of beliefs, attitudes, creativity,emotions, perceptions, values and theoretical and tech-nical representations of reality that have evolved overhistorical time. These elements make up a complex sys-tem of connections and interactions that give rise what wemay refer to as ‘individual frameworks’. ‘Individual frame-works’, or agents’ ‘internal models’, are mainly the resultof individuals’ cognitive and goal dynamics and the cul-tural dynamics within which they live. The interaction ofthese three dynamics generates the action spaces of agents,which involve both objective elements (in the sense ofperceived as ‘real’, external to the actor) and subjective

the journey; a lot of work has already been done by other expeditions and,perhaps by the experience of the scientists involved in the expedition. Itis at their disposal in the form of technology, special equipment, knownroutes, accumulated experience, etc. Thus, they can concentrate on themost important (and original) details of their scientific mission.

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(i.e. plans) inherit the contents and formal characteristicsof these frameworks. It is at this stage when agents deploy‘bounded rationality’. Furthermore, while plans are beingconstructed they are simultaneously being ‘ranked’.10

The plans to be deployed are selected according to theprinciple of economic behaviour (PEB). Let us take the hier-archically ordered set of action plans Pi(t) conceived asfeasible by the individual i in t. The PEB states that theagent invariably adopts and tries to carry out the bundle ofaction plans P*(t) ⊂ P(t) which, at the time the choice takesplace (t), occupies the highest rank among P(t). This prin-ciple makes sense once P(t) is analytically given, and thishappens because, in order to produce a genuine choice,the agent must close when choosing the specific contentand valuation of P(t). Choosing is an activity that oper-ates over P(t). Step (1) (constitution of plans) provides the‘raw material’ (including the valuation criteria) upon whichthis principle operates and that has to be understood as aprinciple of selection, an ex ante selection (Loasby, 2002, p.1227).

2.4. Deployment and evaluation: micro-meso level

However, planning is not economic action. Planning isitself a part of action (it is in fact an activity), but not thekind of action that is truly relevant for the economy. It is theinteractive deployment of these plans drawn up by agentsthat partly configures the economic (and social) generaldynamics. This process will depend not only on how plansare internally constituted, their structure and content, butalso on the results of interaction. Depending on how faragents are successful in achieving their goals, which willdepend on the character of their plans and their logical andtemporal compatibility, etc., they will revise the structureand content of said plans and induce learning processes.Social dynamics are partly the result of this concurrenceof individual dynamics. The emergent properties of socialprocesses operate on the agent (micro) dynamics to formu-late plans, thus providing the evolutionary processes withrenewed variety. The interactive deployment of these planstransforms agents’ external (physical and social) and inter-nal (individuals and organizations) reality and becomes asource of complexity.

From an individual point of view, while deploying thebundle of selected plans, Pi*(t), and in order to monitorto what extent goals are being achieved, agents evaluatetheir plans in terms of achievements. It is at this step whenagents test their expectations, their imagined sequences ofmeans to goals (i.e. their plans) and their consequences.Evaluation against expectations may be biased by what are

now thought, or assumed, to have been past expectations.There is some evidence of the importance of a clear recordof what was expected when the decision is made; it is also

10 An interesting question is how plans are ranked, especially if agree-ment between people is required. Action plans may be inter-individuals(in fact this kind of plan constitutes the decisive part of individual plannedaction). This is the case, for example, of individual action plans formedwithin a firm, a family, etc. In fact, it is within a family, a firm, a soci-ety, etc. where individuals constitute and rank their plans according tocommon values and beliefs, past experiences, decision rules, etc.

conomic Dynamics 22 (2011) 193– 203

possible for a plan that fails to meet original expectationsto be highly appropriate for a changed situation.

It is not possible to separate deployment from evalu-ation in practice. However, it is useful from an analyticalpoint of view. The efficiency criterion employed by agentsin practice is the degree to which what has been plannedis being executed and is thus producing the pursued goals;otherwise, the degree of (revealed) inconsistency or unfea-sibility of plans is a proxy measure of their inefficiency.Agents will revise the whole or parts of plans (or even dis-card and replace them completely) if they judge them notto be sufficiently effective. This implies establishing newconnections with the previous elements (actions/means)or with entirely new ones; and it also triggers learningprocesses that basically consist of reconfiguring mentalconnections and the exploration of adjacent states of thesystem (individual frameworks). The virtue of opennessand variety within it also applies to the exploration ofadjacent states: from any one starting position, there aremany adjacent states and they may differ from one indi-vidual to another because their categories differ; but anyorganization can tolerate only a limited amount of varietybecause its coherence and stability relies on its mem-bers predominantly conforming to accustomed practices.The acquisition of new knowledge and new capabilities,etc. is determined by the agents’ intention to reach theirgoals and the human inclination to imitate the behaviourof others, ‘human curiosity and the desire to experimentalso play a role. . . [Moreover], some of these ‘experimen-tal’ behaviours do better than others’ (Allen, 2001, p.321).

The role of learning (a process in itself) is crucial forunderstanding complex processes: individuals ‘have tospend time acquiring knowledge from information stocksand flows in order to make plans. This knowledge gath-ering is also a process in time. There is satisfaction in thediscovery of novel connections, and there is excitement asaspirations form.’ Moreover, ‘what is decisive in complexsystems is not optimization but, rather, selection. (. . .) Sub-jective optimization will produce a range of strategies toreach an aspirational goal, given that assumptions concern-ing opportunities and constraints (beliefs) will vary acrossindividuals’ (Foster, 2005, pp. 882–883).

In this interactive process, Knightian uncertainty pre-vails on ‘how the next attempted stage will play outtherefore tends to forestall effective planning and prepara-tion for later stages—and also makes the current evaluationof future promise more problematic’ (Winter, 2007). Theex ante uncertainty about such things does not relate onlyto whether they will happen, but also to what they are(because they have not been seen before). The only alter-natives in any plan actually available for survey are acollection of first steps. The more distant steps are largelyhidden, as are the attainable final states or outcomes andthe steps in between. At the same time, only by movingforward is it possible to learn what the options are for con-tinuing further forward. ‘Throughout this design process,

there is a dialectical dance between ‘feasibility’ and ‘desir-ability,’ such that proximate objectives co-evolve with thetechnical [and social] achievements’ (Winter, 2007, p. 27).And this is because so few of the facts that matter are

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dynamics begins with the concept of reflexivity. Reflexivityrefers to a feedback mechanism that works between theconstitution and evaluation of plans. At each moment, the

11 Felin and Foss have recognised that intentionality deserves moreattention in future work in this area because ‘individuals within orga-nizations have intentions, beliefs, interests and expectations that drive

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vailable ex ante to guide decisions: they emerge as theroduct of decisions. This is the case of entrepreneurs whoonstruct plans as possibilities in their minds. They haveriginal creative thoughts about what might form the basisf a business project. These entail making connectionsnd this connection-constructing process is selective (Earl,003, p. 114). The entrepreneur would be someone with aomparative advantage in making connections. Moreover,he entrepreneur is a destabilizing agent who opens uppportunity sets in the manner envisaged in Schumpeter’sork. By making novel, previously unimagined connec-

ions, ‘the entrepreneur creates new elements from whichet further sets of combinations can be made, leading toconomic growth and the seemingly infinite variety ofroducts from which modern consumers can choose.’

Socio-economic processes are constituted when agentseploy their plans of action interactively. These processesepend on (and, at the same time, have influence over)he constitution of the set of action plans, P(t), and therameworks of the agents that form society. New phenom-na and properties result from these interactions and affecthe sets of action plans on both an individual and collectiveevel.

. Intentionality and the meso level

How does intentionality (and thus intentional cate-ories such as beliefs, actions, plans, goals, and will)ppear at the meso level? Agents evaluate to what extentheir plans are being successful and, if not, revise themccordingly. It is when ‘action plans’ are actually deployedn external reality (transcending the imagination of thendividual or the organization) that the outcomes ofctions appear and learning processes are activated. Thiseployment and the corresponding outcomes of actionsranscend the micro level. It is at this point whereaction plans’ connect micro and meso analytical levelsnd where novelties that fuel evolutionary processes maymerge.

.1. Complex adaptive systems

Economic and social reality might be thought of as network of plans (systems) that configures systems of higher order of complexity (firms, institutions, sectors,conomies). The analysis of the relationship between thelements of a system and their connections is fundamen-al for examining how a system evolves among adjacenttates. Systems can be seen as a set of elements and con-ections. Connections are akin to mathematical operators,hich must stay fixed if logical deductions concerning

quilibrium outcomes are sought. However, it is essentialn a dynamic analysis for connections to be continuouslyhanging (Potts, 2000; Earl and Wakeley, 2010), transform-ng the ‘geography’ and properties of the system (Kirman,997). Novelties may emerge because of the changing com-

inations of connections (Loasby, 2001); which may be

ntended or not. Of course, not all changes in society arehe result of intended actions. In fact, not all actions car-ied out by agents are intended (as shown in the literature

onomic Dynamics 22 (2011) 193– 203 199

on organizational routines).11 Furthermore, not all the con-sequences of actions are intended or even expected.

Economic systems are complex adaptive systems(Foster, 2005, p. 875). When differentiating betweenself-organizing models and true evolutionary models,Allen (2001) points out that, ‘in self-organizing mod-els, it is assumed that the subcomponents have fixedinternal structure, implying that they are not modifiedby experiences. . . If the micro components have internalstructure, and if, in addition, this can change throughtime, thus changing the behaviour of the individual ele-ments, a complex evolution can take place as the emergentmacrostructure affects the local circumstances experi-enced by individuals. This in turn leads to an adaptiveresponse that in its turn changes the resulting systemstructure generated. Changes in the micro components affectsystem structure and its performance in the larger environ-ment’ (p. 327; italics added). We have just seen above thataction plans are quasi-decomposable systems: on the onehand, they have internal structure and may be composed ofsubsystems (such as routines) and, on the other, they intro-duce changes in the connections of higher order (many ofthem also quasi-decomposable) systems, e.g. firms, orga-nizations, technologies, etc.

The economic process is deployed in a complex envi-ronment as a result of the interaction of a population ofaction plans. This complex environment includes institu-tions, rules, routines, habits, technologies, etc. and objectssuch as roads and the countryside, which are (at leastpartially) the products of human action. The continuousgeneration of novelty disrupts the coordination of theprocess and prevents it from reaching something like astationary state. Novelty may emerge from plans them-selves (the intended introduction of new means, objectivesand/or changes in connections) or as a result of the unin-tended consequences of interaction. The economy evolvescontinually in Schumpeter’s sense. It is a restless processresulting from a permanent tension between the tendencytowards coordination and the continuous emergence ofnovelties12; a process generated by its own radical uncer-tainty. However, it is in this context where institutionsacquire meaning. For example, ‘the institution of a mar-ket, like other institutions, helps us to behave intelligentlydespite pervasive uncertainty. Uncertainty therefore doesnot mean an end to planning; indeed it makes planningmore important, because now, instead of being a preludeto action, it becomes a part of the process of managingbusiness or one’s life’ (Loasby, 1999, p. 117).

A different way of inquiring on the nature of ‘social’

their behaviour in collective settings.’ (Felin and Foss, 2009, p. 164).12 As well as the tension which causes problems, there is also a dialectical

relationship, which Raffaelli (2003) has identified in Marshall’s thinking:the conversion of novelty to routine releases cognitive resources for thegeneration of further novelty.

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individual is making decisions and executing actions thataffect him and all the individuals interacting with him. Thisinteraction configures the ‘social reality’ and he ‘balances’his action in terms of achievement. This ‘social reality’reverts to the agent’s process for configuring renewedplans, which may imply redefining or creating (ex novo)action plans. This property would allow the theoreticalanalysis of the connection between individual and socio-economic dynamics because it refers to the dynamic nexusbetween them. From this perspective, achievement is seenas the consequence and cause of plans. Thus ‘social’ dynam-ics are themselves complex phenomena in that they areboth a consequence of the interaction of the concurrentindividuals’ dynamics and inductors of certain influencesover said concurrent individual dynamics.

In the presence of reflexivity, the agent has the capac-ity for being self-modified as a result of his own actions.13

Together with the deployment of individual action, thiscapacity is a determining factor for individual and ‘social’action. In other words, the mechanism of interactionbetween an individual’s and ‘social’ dynamics will be dis-cernible only if the individual is analytically considered ascapable of modifying himself, reflecting, redirecting andrenewing his actions (his plans) in the light of what heperceives as the results of his actions in the ‘social’ milieuwithin which he operates.

In short, it is the concern for the inherent dynamicdimension of intentions and goals that makes the individ-ual and organizational capabilities truly evolutionary. Theemergence of new intentions linked to the conception ofnew goals renews agents’ capabilities. Therefore, evolvingcapabilities open up new possibilities for action that allowthe conception of new goals, generating continuous feed-back between capabilities and intentions (Loasby, 2008).The cognitive, ethical and cultural dynamics (within whichthe categories of intention operate) that govern the pro-cesses of constitution, selection and deployment of plansare then at the base of the meso.

The consequences of actions may be and usually arevery different from what agents pursue. Interaction in com-plex situations, un-knowledge, etc. may lead to completelyunexpected results. Nevertheless, human action, qua ratio-nal, within human constraints, is intended action: theremust be goals (reasons) for acting (Mises, 1949).

3.2. Meso-efficiency

How is it possible (by considering the role of agents’goals) to explore the transforming geography and proper-ties of the system? As has been said, the emergence anddevelopment of capabilities are induced by intention, byagents’ tendency towards the goals they set up. Goals areimagined realities, expectations, valued as more desirable

states and towards which agents direct their action. Withinsuch a system, there is constant feedback between theintention and the evolutionary capabilities and this feed-

13 Becattini (2006) has emphasized Marshall’s interest in how peopleare changed by what they do: in the long run, Marshall argued, wants aredetermined by activities.

conomic Dynamics 22 (2011) 193– 203

back explains the transformation of the economic systemitself.

The pursuit of a (new) goal may lead to the developmentof new capabilities and new patterns of behaviour and theactivation of learning processes, giving rise to new actions(and interactions) and new ways of doing things (processinnovations) that may ultimately produce (by means ofdesign or as a result of selection) institutions and/or theirmodification. It also leads, for instance, to processes ofentrepreneurial experimentation, political entrepreneur-ship (Witt, 2003, p. 82), etc.

As an example of this, we may consider the Penrosiantheory of the internal growth of the firm. If we suppose thatinternal growth is the main goal of the firm, the firm willtrigger a process in which its ‘productive resources’ (partic-ularly the productive services available from managementwithin the firm) will deploy a truly dynamic process ofinteraction in two steps: first of all, the services to whichthey could be applied; and then to a particular productiveopportunity for which those services may be used. Afterthe completion of an optimum plan for expansion, a ‘newdisequilibrium’ that has been created on the basis of theprevious action plan will arise. The outcome of a firm’splans include goals, patterns of behaviour and actions,which generate new sets of routines and/or evolving capa-bilities that release cognitive resources and simultaneouslyprovide the basis for a new sequence of action plans.

As in the previous example, the new structures ofconnections between new means and goals introduce‘renewed genetic material’ in the form of new action plans(new conjectures) which, when interacting, transform thenetwork of connections of the system, giving rise to theemergence of all types of novelties within the systemand fuelling evolutionary processes. The presence of opengoals implies the possibility of capabilities opening up newpossibilities of action. The appearance or hierarchical rear-rangement of goals is a source of transformation of theagents’ plans and of the subsystems that make up the eco-nomic system.

When agents conceive new goals, they activatebehaviours and actions that are focused on the attainmentof such goals through intention and will. As a consequence,this process generates new knowledge and transforms thecapabilities that are distributed among the agents. The evo-lutionary process commences again and again by meansof the feedback mechanism between knowledge and theestablishment of new connections that would give rise tonew action plans. A successful outcome will install new reg-ularities, which will release cognitive resources that maybe used to devise new action plans; and the outcomes mayinspire ideas for such plans. This is how action plans con-tribute to the self-transforming process discussed here.

Here, a connection may be found between Schum-peterian economics and the meso level: the possibilityof novelty as such is associated with an entrepreneur’stransforming intention, which results in the breaking ofsymmetries and the introduction of jumps. These trans-

forming impulses transcend the micro level and thenemerge, together with the collective interactions (bothwithin and beyond markets), at the meso, generating thevariety that fuels the evolutionary processes of diffusion,

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election and retention. As we have pointed out elsewhere,chumpeter’s (1932) example of Mantegna’s innovationsould be interpreted as a conscious and individual actndertaken by the painter; but it could also be shown as

precursor of the ‘Renaissance style’ (Munoz et al., 2009).A further question is whether or not the dynamic

equence of connections between means/actions and goals,hich produces new plans of action, may be judged in

erms of the adequacy of connections. Roughly speaking,e may assert that connections between means/actions

nd goals are adequate if, and only if, they allow the pro-ected actions and the deployment of means to producehe formulated and pursued goals. In other words, connec-ions between means/actions and goals are adequate whenntentions, which are activated when (new) goals are for-

ulated, give rise to actual facts as expected. This is anvolutionary efficiency criterion on the meso level whenntentions are updated through agents’ actions: owing tohe efficiency of the connections between means/actionsnd goals, intentions turn out to be actual facts in whichoals are being produced.

The proposed meso-efficiency criterion is based on theonsideration of the constant feedback process betweenntentions, capabilities and goals and it leads us to moverom a dynamic to an evolving perspective: the continuouseedback process that moves from intention to actions andice versa is at the basis of the self-transformation (evo-ution) of an agents’ action spaces and, consequently, ofconomic change. This self-transforming process of a sys-em, of its elements and connections, is what makes it anvolving complex economic process.

This evolutionary efficiency criterion is relative to theoals, intentions and expectations of the agents involvedn the system. The fact that some (or all) agents may per-eive that they are not reaching their goals, fulfilling theirxpectations or fulfilling (materialising) their intentions isn indication of a certain incompatibility with the actionsi.e. means deployed and timing, but also incompatibilitiesf goals) carried out and that would deserve a (more oress detailed) revision. This is the case, for instance, when1) the agent’s action plan does not take into account rel-vant information about the social environment in whicht interacts with the action plans of other agents; or (2)he goals and demands for means of other agents col-apse the feasibility (and so the performance) of the planhe agent is trying to deploy. Concepts such as coordina-ion and lock-in effects are related to the interaction oflans.

If the dynamic action of the agents that interact withinhe economic and social system is explained under the cat-gories of intentionality, agents may interpret that theirction is rationed and thus, the performance of the eco-omic/social system is, from their own point of view, belowxpectations. If this evolutionary process is generating andesting new ideas, then it is to be expected that some (or

any) people will consider that it is frustrating their ownxpectations. Moreover, it is not easy to decide what novel-

ies might have been developed with a different sequencef action plans. This kind of judgment applies not only,or instance, to policy makers, but also to entrepreneurs,rganizations and customers within the economy.

onomic Dynamics 22 (2011) 193– 203 201

An improvement of the efficiency of the economicsystem would require the revision of the individual (or col-lective) intentionality of the agents involved in the system;otherwise, the meso, i.e. products (commodities, technolo-gies, structures, systems, etc.) and categories (value, prices,causality, etc.) of action, can only be understood as self-referenced explanations, which are not explanations bymeans of (micro-) foundations. Judging the efficiency of anevolutionary process that is guided by human intention isnot easy, but if it is not guided in this way, it would appearto be a meaningless question.

4. Concluding remarks

The study of evolution in economic systems is not sim-ply a study of outcomes, but also a study of the processesthat generate those outcomes and which may be subjectto action. The aim of this paper is to contribute to theanalysis of the relationship between human action and thegeneral direction of evolutionary economic processes. Weclaim that human action qua rational obeys plans madeby individuals in accordance with their intellectual capa-bilities, their reasoning and willpower, their experiences,emotions and feelings, expectations and preferences, etc.,i.e. agents’ frameworks or internal models (micro level).Once the different courses of action that have been imag-ined and deemed possible and desirable conform to anindividuals’ goals (and their hierarchy), they select someof them and thereafter deploy purposeful actions in orderto execute their plans.

The interactive deployment of those plans transformsboth the external (physical, cultural and social) and theinternal (revised individual frameworks) reality of individ-uals and becomes a source of complexity. Social dynamicsis the result of this concurrence of agent goal dynamics(meso level). Additionally, individual cognitive and goaldynamics are the cause and consequence of such socialdynamics. The emergent properties of socio-economic pro-cesses operate on the individual’s frameworks in differentways (mainly through reflection and learning processes)and these frameworks, insofar as they generate plans, pro-vide renewed variety that fuels evolutionary processes.

Important contributions have been made on these top-ics by other authors (in particular (Dopfer et al., 2004)).However, what we consider to be necessary still is a deeperanalysis of the role played by agent goal dynamics andintentionality in the constitution and development of themeso level. The meso level of economic analysis is wherethe action plan approach may make its contribution: thisconcept opens up the way to goals by naturally introducingtheir role in the explanation of action.

It is precisely at the meso level where the emergenceof interactions within a population that carries out actionplans with common (or not) expectations, beliefs, means,goals and intentions is possible. In order to transcend frommicro to meso level, and in a second step, to come to macrovia meso (‘[t]he economy is made of meso, and meso is

made of a population of carriers’ (Dopfer and Potts, 2008,p. 22)), we have proposed that it is necessary to explorethe result of the interaction of agents’ action plans (via thecontinuous implementation of evolving capabilities and

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evolving goals). The concept of goals/ends (and not onlyknowledge) arouses purposeful behaviours and actions bymeans of intentionality and will. At the same time, the tem-porary and social dimension of action means that whileagents act in order to reach certain goals, their motiva-tions, desires and aspirations may change, thus alteringtheir initial goals and/or their hierarchy.

Goal dynamics do not play a central role only in theexplanation of individual action, but also in the explana-tion of the direction of collective (‘social’) action throughthe mechanisms of coordination, because they are a sourceof novelty. Moreover, it is the invention and selection ofnew goals that determines the content and direction ofthe opportunities for action. The apparently paradoxicalrelationship between purposeful action and ‘blind’ socialprocesses arises here. Despite the time uncertainty, theprocesses to be observed are not completely erratic, butrather spontaneous and structured. As Witt states, it seemsthat culture and economic activities evolve according totheir ‘own regularities’.

In this paper we have posed that these ‘own regular-ities’ have to do with the presence of agents’ reflexivityand the deployment of individual purposeful actions at themeso level. If we are right, it has been shown that it is atthe meso level where agents’ behaviour becomes effectiveand, for this reason, it introduces an element of ‘directionalchange’. In this context, socio-economic dynamics are not(or at least not totally) ‘blind’.

Acknowledgements

The authors would like to thank two anonymous refer-ees for very useful comments and suggestions as well as toProfessor Rafael Rubio de Urquía for his valuable advises.An earlier version of this paper was presented at the 12thInternational Schumpeter Society Conference 2008 (Riode Janeiro). The authors acknowledge the scientific andmaterial support from the ‘Instituto de InvestigacionesEconómicas y Sociales Francisco de Vitoria’. The usual dis-claimers apply.

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