Beinhocker poses the question: what is the origin of our incredible wealth and why does it keep growing?

Classical economic theory does not give an answer. He shows how classical economics is like the medical profession centuries ago. Doctors are doing their best,  struggling to help patients, relying on inadequate and limited diagnostic tools, plausible but incorrect theoretical models and assumptions, rules-of-thumb and common sense developed by trial and error.

Since the 1980's we understand that the economy or "the market' is a specific class of all complex systems that show emergent behavior.  It is clear we have been moving in the direction of more specialization of functions, more diversity in output, more interrelations. Unfortunately our mathematical framework is not able to deal effectively with the non-linear relationships and feedback-mechanisms innate to these systems. A reductionist brute force approach is impossible: the computational effort to calculate all possible states is (near) infinite.

Fortunately computers give us the possibility to simulate these systems and understand more of their behavior.  Like why big integrated organizations or big integrated software systems are so difficult and costly to modify (loss of stability is around the corner).

The interesting question is"  how on earth it is possible for such a complex system to evolve, to reach a stable state and to adapt to changes?

The simulations show that an evolutionary approach (try many different variations simultaneously based on best practices, select the best performing, combine them and create new ones,  try again and repeat ad infinitum) is by far the best.  A system evolves very rapidly to an acceptable ("good enough") state, keeps improving continuously and can adapt quickly to external influences or disruptions. It is far, far better than a Big Man approach: trying to control and steer everything top-down.

So the continuous "tussle" of competing variations under evolutionary pressure is the core driver of our growing wealth. Reduce the tussle and/or reduce the evolutionary pressure :  the growth of our wealth slows down.

The big "If" however is the direction of the evolutionary pressure implied by "select the best performing variations".  What is "better" in a selection ?  Beinhocker argues " bigger GDP, higher productivity, more profit, bigger bonus"  is too limited and can lead to less wealth instead of more. We need an improved definition of "better".

Based on his arguments one can define  an increase in wealth as:

-          An increase in choices and options we have how to lead our lives

o   Given the energy and time we have as individuals

-          Without reducing the choices and options of others , now and in the future

o   Which implies that we have to preserve  our environment

So a better broadband pipe to an unmitigated Internet is an increase of wealth. The end-to-end paradigm results in an increase of wealth.  Price differentiation that gives more options is an increase of wealth, but artificial scarcity to improve profits is a decrease of wealth (Net Neutrality).  Walled gardens are a decrease of wealth .

 More efficiency which results in lower prices increases wealth but the bigger increases are generated by increasing our options: like mobile voice and mobile Internet, or search engines like Google (although they hardly show up in GDP and productivity statistics).

Less "tussle" by reducing competition slows the growth of wealth. Less evolutionary pressure by lowering the bar overall or focusing on the lowest common denominator reduces the growth of wealth: yes, rural areas need broadband but keep the pressure on the front runners to keep on improving.

An inspiring definition of "better", worth to explore further.