What Does Coevolutionary Theory Say about What Governments Can and Cannot Do To Induce Development?

How Does Coevolutionary Theory Explain Development?

In explaining China’s rise, Yuen Yuen Ang applies the theory of adaptation among other tools. This is the same theory of adaptation first theorized by Darwin in his evolutionary theory. In short, a complex system adapts through experimentation, selection and niche creation. Applied to economics, the idea is that an economic system grows through the process of adaptation.

This is a solution that seems hopeful but is rife with difficulty. Intuitively, experimentation doesn’t always lead to valuable ideas. This is observed in daily life. People, households, companies and states can fail at the experimental stage. Think of the countless number of people who try to change careers. Entrepreneurs fail. Business does not take off as expected. Investment in a new product can bring down a company.

This suggests that development does not have a package of solutions. As per my observations, a state can create the preconditions for market experimentation and growth. Moderate success in the market can breed institutional reform. Strong businesses can demand better services. The government might then restructure itself to provide those services, building stronger institutions in the process. Success in the market and the state can continue feeding into itself, over and over again, building a more positive feedback loop.

Property rights and the availability of education are but two examples of policies that increase the adaptability of the economy. The first is an incentive for entrepreneurs to build business. Entrepreneurs are a most important element of macro economic experimentation. Furthermore, education increases the future capacity of the economic system to experiment. In a nutshell, the state and the private sector can make better use of scarce resources and contributions of higher quality if they focus on their specific roles.

Can a Government Set Out to Build Silicon Valley?

In the hopes of mimicking the economic success of the Northern Californian region of Silicon Valley, the Kenyan government has been engaged in a project to build what has become known as a Silicon Savannah. On the one hand, Kenya has been home to a number of successes in tech and business solutions. The area of financial technology and financial inclusion is an example. Since 2007, MPESA, a money transfer and mobile payment platform has facilitated cashless transactions between Kenyans via smart and dumb phones. Capitalizing on the ubiquity and reliability of MPESA, fintech solutions in credit have emerged. Since 2010, the iHub innovation center in Nairobi, Kenya as helped birth an excess of 100 companies. The arrival of an undersea fiber optic cable in 2010 that helped increase East African internet broadband speeds and the 2013 launch of a Kenyan ICT Authority gave teeth to the Kenyan states’ ICT strategy. Central to this strategy, the Kenyan government has purchased and is developing a 2000 hectare piece of land in Makueni County. Notably, Kenya’s greatest tech successes are not indigenous. A glance at the landscape suggests that foreign direct investment has been the key catalyst in the growth of Kenyan domestic tech.

ICT Silicon Valley Strategy Vs. Yuen Yuen Angs’ Coevolution

Going by Yuen Yuen Angs arguments, a government does not set out to build silicon Valley. Rather, a government educates and empowers present and future businessmen to build it. The ‘on the ground’ procedural environment is too complicated for the state to master without depleting resources that can be better deployed elsewhere. Put another way, the knowledge and risks involved in business entrepreneurship are not the province of the state. It is better that the state prioritize the creation of the preconditions necessary to grow industry. For example, though Kenya’s internet bandwidth has increased, the change in internet speeds and the distribution of internet access remain low. Policy actions that increase the internet access for public school children and all economic sectors would be of great benefit. For example, the Kenyan state can focus on expanding the fibre optic network such that rural schools and other public and private institutions are serviced by a veritable internet access avenue. This would be a better use of scarce resources.