6. THE 'RED QUEEN' OF EVOLUTIONARY PUBLIC GOOD

In this view, the efficient production of waste is an evolutionary public good. Policy should then seek to be experimental in proportion to the rate and depth of economic change. In a static economy or 'closed society', there is no need for policy innovation, only policy efficiency. However, in an evolving economy or open society, policy and governance must continually experiment and innovate 'just to keep up'. This concept is known as the 'Red Queen' hypothesis in evolutionary biology (Ridley 1995) and argues, essentially, that a fitness increase in one system (e.g. the economy, due to innovation, i.e. 'running faster') will tend to lead to a fitness decrease in another system (e.g. government, due to lack of innovation, i.e. effectively 'running slower' even though nothing changed). I have suggested here that the 'Red Queen hypothesis' has a corollary in the need for public policy to be continually innovative just to stay in the same place with respect to the opportunity space of an evolving economy. Failure to achieve this will, in the limit, result in an accretion of rent-seeking that will eventually consume the systems it governs.

In biology, the mechanism by which this Red Queen process happens is sexual selection. In economics, it is market selection. In a democratic systems of governance, it is voter selection. In an open system, this leads to a positive feedback process in which competition proceeds by innovation: in biology, this is called an 'arms race'; in economics is it called the competitive process; and in politics it is called democracy. Yet in biology, economics and politics, dominance and power are regularly used to close a system to competition and feedback so as to maximize the exploitation of rents through the pursuit of efficiency. This paper has argued that the maintenance of a viable balance between the economy and the systems of governance that support it necessarily requires ongoing policy innovation. This is an experimental process that will, naturally, be wasteful. Yet that is not a bad thing, but rather is the evolutionary price that must be paid to maintain the very possibility of public sector viability and efficient governance in an open society.

Economists are sometimes prone to sweeping laissez faire arguments that discount all prospect of government endeavour to create and maintain public goods or to deny any possibility of efficiency in the management of public money. From the open system evolutionary/complexity perspective, however, the argument is somewhat different. Politics has evolved in a world of relatively slow change (Rubin 2002) in the technologies of economic systems (Beinhocker 2006), yet it is now very much the growth of knowledge through the market system that now drives the pace of human systems, and it is policy systems that must now run just to keep up. Recent decades have witnessed this disjunction in monetary and finance policy, media policy, immigration policy, climate policy, and so on. In an evolving economy, there will be an ongoing need for new policy solutions. The current incentive structure to the management of public assets and services, which is based about efficiency in terms of transparency and accountability, permits no rationalization of waste. Yet without such deliberate experimental waste (or dynamic investment) otherwise viable governance structures will eventually and inevitably be rendered non-viable by economic evolution. Economic evolution thus systematically induces policy entropy that can only be resolved through policy innovation, thus mandating both policy experimentation and operational waste. When the economy evolves, then so must policy. This is the proper and fundamental significance of innovation policy.

ACKNOWLEDGEMENTS

Thanks to John Foster and Peter Earl for useful discussion and criticism of the ideas in this paper.

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JASON POTTS

ARC Center of Excellence in Creative Industries and Innovation (CCi), Queensland University of Technology, Brisbane, Australia

School of Economics, University of Queensland, Brisbane, Australia

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