Punctuated equilibrium and power law in economic dynamics

This work is primarily based on a recently proposed toy model by Thurner et al. (2010) [3] on Schumpeterian economic dynamics (inspired by the idea of economist Joseph Schumpeter [9]). Interestingly, punctuated equilibrium has been shown to emerge from the dynamics. The punctuated equilibrium and Power law are known to be associated with similar kinds of biologically relevant evolutionary models proposed in the past. The occurrence of the Power law is a signature of Self-Organised Criticality (SOC). In our view, power laws can be obtained by controlling the dynamics through incorporating the idea of feedback into the algorithm in some way. The so-called ‘feedback’ was achieved by introducing the idea of fitness and selection processes in the biological evolutionary models. Therefore, we examine the possible emergence of a power law by invoking the concepts of ‘fitness’ and ‘selection’ in the present model of economic evolution.