Economic evolution and equilibrium

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The theory formalizes a dynamic economic system through difference or differential equations, where equilibria represent 'equilibrium trajectories' that are considered optimal. A significant drawback of this conceptualization is that the intertemporal optimizing approach predetermines the entire future of the economic system. This "closed loop" perspective has led to criticism that economic theory focuses more on how the system should behave rather than how it actually behaves. This is where evolutionary economics emerges. Unlike growth or business cycle theories, it views the evolution of the economic system as open to true novelties that are inherently unforeseeable. This perspective renders traditional notions of equilibrium, which rely on a final state of rest or an intertemporally optimizing trajectory defined by differential equations and initial conditions, obsolete. While there have been efforts to reconceptualize equilibrium from an evolutionary standpoint, these attempts often still rely on ideas of rest, particularly within nonlinear dynamics and deterministic chaotic motion.