Evolutionary economicsConventional economic reasoning begins with the definition of scarcity, then assumes the existence of a "rational agent" bent solely on the attainment of one goal - the maximization of her/his welfare as defined by that agent. All relevant information is assumed to be held in common ("perfect information", and the scheme of valuation ("preferences" or "tastes") used by the decision maker is also assumed to be constant and native to the agent ("nonenvy" or "independent preferences"). Given the foregoing stipulations, the determination of the "rational choice" for any agent becomes a straightforward exercise in the differential calculus. Evolutionary economics derives from a more modern tradition of inquiry, which does not take the characteristics of either the objects of choice or of the decision maker as fixed. Karl Marx began in the mid-19th century with his schema of stages of historical development, by introducing the notion that "human nature" was not constant and was not determinative of the nature of the social system; on the contrary, he made it a principle that human behavior was a function of the social and economic system in which it occurred. At approximately the same time, Darwin developed a general framework for comprehending any process whereby small, random variations could be accumulated over time and under the urgings of economic forces into large-scale changes that resulted in the emergence of wholly novel forms ("speciation"). This was followed shortly after by the work of the American pragmatic philosophers (James, Peirce, Dewey) and the founding of two new disciplines, psychology and anthropology, both of which were oriented toward cataloging and developing explanatory frameworks for the variety of behavior patterns (both individual and collective) that were becoming increasingly obvious to all systematic observers. The state of the world converged with the state of the evidence to make almost inevitable the development of a more modern framework for the analysis of substantive economic issues.
Thorstein Veblen began his career in the midst of this period of intellectual ferment, and as a young scholar came into direct contact with some of the leading figures of the various movements that were to shape the style and substance of the newly-minted social sciences into the next century and beyond. Veblen saw the need for taking account of cultural variation in his approach; no universal "human nature" could possibly be invoked to explain the variety of norms and behaviors that the new science of anthropology showed to be the rule, rather than the exception. His singular analytical contribution was what came to be known as the "ceremonial / instrumental dichotomy"; Veblen saw that every culture is materially-based and dependent on tools and skills to support the "life process", while at the same time, every culture appeared to have a stratified structure of status ("invidious distinctions") that ran entirely contrary to the imperatives of the "instrumental" (read: "technological") aspects of group life. The "ceremonial" was related to the past, and conformed to and supported the tribal legends; "instrumental" was oriented toward the technological imperative to judge value by the ability to control future consequences. The "Veblenian dichotomy" was a specialized variant of the "instrumental theory of value" due to John Dewey, with whom Veblen was to make contact briefly at the University of Chicago.
The most important works by Veblen include, but are not restricted to, his most famous works ("Theory of the Leisure Class"; "Theory of Business Enterprise"), but his monograph "Imperial Germany and the Industrial Revolution" and the essay entitled "Why Economics is not an Evolutionary Science" have both been influential in shaping the research agenda for following generations of social scientists. TOLC and TOBE together constitute an alternative construction on the neoclassical marginalist theories of consumption and production, respectively. Both are clearly founded on the application of the "Veblenian dichotomy" to cultural patterns of behavior, and are therefore implicitly but unavoidably bound to a critical stance; it is not possible to read Veblen with any understanding while failing to grasp that the dichotomy is a valuational principle at its core. The ceremonial patterns of activity are not bound to just any past, but rather to the one that generated a specific set of advantages and prejudices that underly the current structure of rewards and power. Instrumental judgments create benefits according to an entirely separate criterion, and therefore are inherently subversive. This line of analysis was more fully and explicitly developed by Clarence E. Ayres of the University of Texas from the 1920's.