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The oiigins of novelty anu natuie of economic oppoitunity have iecently ieceiveu
significant attention in oiganization science, stiategy anu entiepieneuiship. The notion anu
metaphoi of seaich on an (NK) oppoitunity lanuscapeoi "phase space"has been
paiticulaily ielevant to these conveisations anu uebates. While the lanuscape notion has
ceitainly been helpful foi explaining some impoitant aspect of economic activity, we aigue
that it also featuies some ciitical ueficienciespaiticulaily in explaining the oiigins of
novelty. Existing notions of lanuscapes uo not fully account foi the "empty" spaces of
possible action, anu the unpiestatable aujacent possibilities associateu with stiategy anu
economic activity. Fuitheimoie, any activity on this space intiouuces yet moie, unstatable
possibilities. Thus, simply focusing on the computational limitations, oi bounueu
iationality, of economic actois is not sufficient foi explaining novelty. We aigue that the
cential pioblem of explaining novel economic activity is not so much one of computational
insufficiency (the pioblem of NP-completeness), but a pioblem of how to account foi the
ieauily manifest, emeigent novelty we see in the economic spheie (the "fiame"
pioblem). While some have iecently highlighteu pioblems with the notion of lanuscapes
anu focuseu on factois such as entiepieneuiial enactment oi effectuation in geneiating
novelty, we pioviue alteinative founuations. We uiscuss the implications of these
aiguments by builuing on unique insights fiom biology, the natuial anu computational
sciences. 0ui appioach is not meant to ieplace existing evolutionaiy explanations of
economic activity. Insteau we seek to augment these appioaches in an effoit to claiify the
natuie of oppoitunities anu the iespective contiibutions of oiganisms anu enviionments in
the emeigence of oppoitunities.

Key woius: oiganization science, economics, evolutionaiy theoiy

















S
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The oiigins of novelty anu natuie of economic oppoitunity have iecently ieceiveu significant
attention in oiganization science, stiategy anu entiepieneuiship. The notion of bounueuly iational
seaich (Simon, 19SS, 19S6)on a stiategy lanuscape oi "phase space"iepiesents a paiticulaily
poweiful anu influential metaphoi anu tool foi thinking about the natuie of economic activity.
1
Foi
example, NK moueling has been useu to stuuy how fiims seaich locally oi globally foi peaks oi
oppoitunities within lanuscapes (Levinthal, 1997; Wintei et al., 2uu7). Some have aigueu that
behavioi anu "iationality" on this lanuscape is a piocess (Levinthal, 2u11; also see Naich, 1994;
Simon, 1978), thus emphasizing mechanisms such as expeiiential leaining anu enviionmental
feeubackwhile yet otheis have iecently focuseu on how novelty anu oppoitunity might emeige
via uistant, cognitive leaps on this lanuscape (e.g., uavetti, 2u11; cf. Bolyoak anu Thagaiu,
1996). The uiscussion has centeieu on how economic actois navigate anu map these oppoitunity
lanuscapes, given unceitainty anu such factois as the iesouices of the economic actois, the
cognition oi biases of the uecision-makeis, the uynamism of the enviionment, competition anu past
expeiience. It is impoitant to notegiven the aiguments in this papeithat the oiigins of the
lanuscape metaphoi, anu associateu tools such as NK moueling, can be tiaceu back to
computational anu evolutionaiy biology (see Kauffman anu Levin, 1987; Kauffman anu Weinbeigei,
1989).
2
Fuitheimoie, it is also quite significant that Beibeit Simon's (19SS, 19S6) path-bieaking
aiguments about bounueu iationality weie explicitly tieu to biological intuition anu mechanisms
about oiganisms seaiching anu optimizing behavioi in enviionments.
S


1
As we will latei uiscuss, phase spaces anu vaiious combinatoiial lanuscapes have been cential in a numbei
of uisciplines, incluuing physics, biology anu chemistiy (see Reiuys anu Staulei, 2uu2). To leain of the histoiy
anu basic mathematics behinu phase spaces, see Nolte, 2u1u.
2
Links between biology anu economics of couise aie ueep, going back to Baiwin anu Nalthus (Nayi, 1977).
Foi a histoiy of the extensive links between biology anu economics, see Bougson, 2uuS.
S
Impoitantly, these aiguments also pioviue the founuations foi the fielu of aitificial intelligence (Newell,
Shaw anu Simon, 19S8; Newell anu Simon, 19S9; foi an oveiview, see Russell anu Noivig, 2uu9).
4
The metaphoi anu veiy natuie of an oppoitunity lanuscape have iecently been challengeu
anu uebateu, paiticulaily in the context of explaining novelty in economic settings. Siuney Wintei
has iecently iaiseu questions about the notion of oppoitunity lanuscapespecifically vis--vis
uavetti's (2u11) aigumentsanu piovocatively asks "why |we shoulu evenj theoiize oppoitunity."
(2u12: 291). Wintei iaises conceins about such issues as the stationaiy anu objective natuie of
oppoitunity lanuscapes anu extant mischaiacteiizations of iationality. We shaie some of these
conceins. Scholais have iecently askeu questions about how we specify the phase space of
stiategies anu novel activities that aie not actualizeu, but nonetheless possible (e.g., Biyce anu
Wintei, 2uu9). Wintei (2u11) fuithei aigues that "seienuipity" anu "contextual factois" play an
impoitant iole in the emeigence of novelty anu in the uiscoveiy of piofitable oppoitunities (cf.
Beniell et al., 2uu7; also see Wintei, 2u12). Scholais in entiepieneuiship have also iaiseu conceins
that ielate to the lanuscape metaphoi, specifically in iecent uebates about the subjective veisus
objective natuie of economic oppoitunitieswhethei oppoitunities aie "cieateu" anu enacteu
veisus "uiscoveieu" (e.g., Alvaiez anu Bainey, 2uu7; Alvaiez, Bainey anu Anueison, 2u12; Eckhaiut
anu Shane, 2u12).
The above uebates iaise impoitant questions about the natuie of economic oppoitunity.
uiven that scholais have extensively useu phase spaces oi lanuscapes both as a metaphoi anu tool
(such as NK moueling), we explicitly ievisit the assumptions embeuueu in these appioaches anu
moie geneially ievisit the iuea of oiganism-enviionment ielations. We fiist uiscuss Beibeit
Simon's founuational notion of bounueu iationality anu his iueas about seaich anu computational
complexity in unceitain enviionments. We focus on the iationality-ielateu anu biological anu
computational assumptions maue by extant theoiies that focus on seaich anu oiganizational
behavioi. While much of the oiganization anu economic sciences aie tieu with computation anu
algoiithm-oiienteu conceptions of behavioi, we aigue that these appioaches suffei fiom ciitical
ueficiencies. We auuiess the weaknesses of these seaich anu lanuscape-focuseu views, paiticulaily
S
vis--vis explaining novelty, by highlighting aiguments fiom the uisciplines fiom which these
appioaches stem: biology, physics, anu computei science. While scholais have uefineu economic
activity by focusing on computational limitation anu complexity ("NP-completeness"e.g.,
Levinthal, 2u11; Rivkin, 2uuu; cf. Weinbeigei, 1996), we aigue that the ieal pioblem insteau is the
"fiame" pioblem. Along with highlighting conceins about the extant use of the notion of seaich on
phase spaces, we also uiaw links between the appioach suggesteu heiein anu the afoiementioneu,
ongoing uebates about the oiigins anu natuie of economic oppoitunities (e.g., Alvaiez, Bainey,
Anueison, 2u11; Eckhaiut anu Shane, 2u12; uavetti, 2u11; uavetti et al., 2u12; Levinthal, 2u11;
Wintei, 2u11).
To foieshauow oui conclusion, oui focus is on the unpiestatable but nonetheless scientifically
explicable natuie of the phase oi stiategy space within which economic activity takes place.
We highlight paiallels between uevelopment anu evolution in the biological anu economic spheie
(cf. Kauffman, 199S). We aigue that economic actionsincluuing behaviois, piouucts anu
capabilitiesyielu constant flows of emeigent possibilities that cannot all be meaningfully listeu,
let alone "iationally" consiueieu anu compaieu. Both in economics anu in natuie, theie is no
effective pioceuuie oi algoiithm that can list the oppoitunities available foi oiganisms, anu this
non-algoiithmicity means that the emeigent possibilities cannot be piestateu. Thus, the iuea of
seaich on a lanuscape oi phase space, anu the veiy notion of bounueu iationality, is pioblematic foi
explaining novelty. Bowevei, this uoes not leave us outsiue the bounus of science. As we will
uiscuss, explaining the oiigins of economic oppoitunities nonetheless is possible. We also seek to
link these aiguments with cuiient uebates about the natuie of economic evolution anu oppoitunity.
GF "#$%$&'# @#+'0'+-2 3$,%/4/ 5.+'$%.1'+- .%/ D$&),+.+'$% '% "%0'*$%&4%+8
The notion of "bounueu iationality" has been cential in auvancing oui unueistanuing of
economic activity. Beibeit Simon's goal in intiouucing bounueu iationality was "to ieplace the
global iationality of economic man with a kinu of iational behavioi that is compatible with the
6
access to infoimation anu the computational capacities that aie actually possesseu by oiganisms,
incluuing man, in the kinus of enviionments in which such oiganisms exist" (19S9: 99). Rathei
than assuming that oiganisms, such economic actois, aie peifectly iationalthat is, globally awaie
of all the possibilities anu able to compaiatively compute them anu ueciue optimallySimon
emphasizeu the seaich foi possibilities anu the localness anu limits of iationality. Bounueu
iationality of couise has subsequently become a cential assumption of many economic anu
oiganizational theoiies, incluuing tiansaction cost economics (Williamson, 1991), the behavioial
theoiy of the fiim (Naich anu Simon, 19S2) anu evolutionaiy economics (Nelson anu Wintei,
1982). The notion of bounueu iationality pioviues a much-neeueu contiast with anu auvance ovei
mouels that assume peifect iationality anu explicitly focus on the efficiency of maikets (Aiiow anu
Bebieu, 19S4). By way of ieview, the assumption behinu efficient maikets is that all possible goous
anu seivicesin effect, all possible futuiescan be piestateu anu listeu, anu all of this can be
compaiatively calculateu anu tiaueu by economic actois.
Simon's notion of bounueu iationality is anchoieu on biological anu computational language,
mechanisms anu metaphois. Foi example, Simon's oiiginal aiticles focus on "oiganisms incluuing
man, in the kinus of enviionments in which such oiganisms exist" (19SS: 99). Thus the aigument
is meant to be geneial, to incluue man, anu to highlight how oiganisms seaich anu opeiate in
enviionments. Not just the language is biological, but so aie the examples. Simon's most extensive
illustiation of bounueu iationality focuses on how an animal seaiches foi ianuomly uistiibuteu
foou in an enviionment oi "behavioi space" (19S6: 1Su-1S4). The basics of a behavioial mouel of
bounueuly iational seaich weie thus uevelopeu eaily on. Note that this intuition is also quite
closely linkeu with mathematical mouels of animal foiaging anu optimization in patchy
enviionments (e.g., Pyke, Pulliam anu Chainov, 1977).
4


4
The oiganizational anu economic sciences continue to make extensive use of biological tools, concepts anu
mechanisms. Foi example, beyonu Simon's notion of bounueu iationality, fielus such as oiganizational
ecology have boiioweu anu focuseu on concepts quite familiai to us fiom biologysuch as population-level
7
The auvantage of Simon's appioach, as a iesponse to neoclassical, iational choice mouels, was
that it coulu be mathematizeu anu foimalizeu in poweiful ways. 0iganisms aie seen as algoiithmic
Tuiing machines that piocess infoimation via piogiams, within the bounus of theii
capability. Simon uiew uiiect links between the way humans anu computeis solve pioblems, which
is ieauily eviuent by the focus on concepts such as memoiy anu stoiage capacity, piogiams,
infoimation piocessing, effectois, anu ieceptois (see Newell, Shaw anu Simon, 19S8; cf. Simon,
19S6, 1969). Note that these conceptsof seaich anu pioblem-solving in enviionments, effectois
anu ieceptois, leainingalso pioviue the veiy founuations of aitificial intelligence (see Russell anu
Noivig, 2uu9: chaptei 2). Simon inueeu pioviueu a much-neeueu alteinative to economics, the
oveily-iational oi even omniscient oiganism, oi economic actoi, was ieplaceu by one who was
bounueuly iational: hau computational limitations, neeueu to seaich foi solutions given the limiteu
access to infoimation about alteinatives.
0ui unueistanuing of economic activity continues to be influenceu by the notion of bounueu
iationality anu by uiiect analogies anu tools fiom the biological anu computational sciences. As
uiscusseu at the outset, NK moueling was oiiginally uevelopeu in evolutionaiy anu computational
biology (Kauffman anu Levin, 1987; Kauffman anu Weinbeigei, 1989), anu this tool is now
fiequently useu in the oiganizational sciences (e.g., Levinthal, 1997; also see uavetti et al., 2uuS;
Levinthal anu Waiglien, 1999; Rivkin, 2uuu; Rivkin anu Siggelkow, 2uu2; Siggelkow anu Rivkin,
2uuS; Wintei et al., 2uu7). This woik has inueeu geneiateu many impoitant insights about how
fiims anu economic actois behave anu seaich anu finu piofitable oppoitunities in lanuscapes. The
most basic mechanism foi exploiing the lanuscape has focuseu on expeiiential leaining, wheie focal
actois leain anu auapt as they expeiience anu sample the lanuscape itself anu ieceive behavioial
feeuback fiom the enviionment (cf. Levinthal, 1997). This ieseaich has, foi example, focuseu on
the pioblem of getting stuck on sub-optimal, local peaks. The contiast between local exploitation

uynamics, iesouice paititioning, niches, caiiying capacity, anu fitness anu selection (Caiioll anu Bannan,
2uuu; foi an oveiview of these concepts, see Caiioll, 1984; Singh anu Lumsuen, 199u).
8
veisus moie global exploiation on lanuscapes has also been a cential metaphoi foi unueistanuing
the tiaueoffs that fiims make (e.g., Levinthal anu Naich, 199S; Rivkin anu Siggelkow, 2uu7). These
appioaches can bioauly be classifieu as pait of evolutionaiy economics, as well as a moie geneial
behavioial piogiam of ieseaich in oiganization science anu stiategic management (foi an
oveiview, see uavetti et al., 2u12).
Theie aie howevei also some soft but impoitant tensions within this piogiam of ieseaich,
paiticulaily vis--vis the iespective emphasis that ought to be placeu on the "iationality" of an
oiganism itself veisus the enviionment. uavetti (2u11) has iecently aigueu that an emphasis
shoulu be placeu on cognitive leaps that economic actois can make on lanuscapes (cf. Bolyoak anu
Thagaiu, 1996). The focus is on finuing ways to captuie the ciuue but "foiwaiu-looking"
iepiesentations that economic actois have about opeiating on unceitain oppoitunity lanuscape (cf.
uavetti anu Levinthal, 2uu1). This, moie oiganism-centiic appioach stiives to place some
emphasis on agency anu cognition, in iesponse to the seemingly moie ueteiministic appioaches
that chaiacteiize evolutionaiy economics. Wintei (2u11) iesponus to uavetti's geneial emphasis
on (moie iational) cognitive seaich on lanuscapes anu aigues that seienuipity anu contextual
factois play a cential iole. 0ne of the cential tensions in this uiscussion is how much iationality to
affoiu oiganisms anu economic actoisthat is, the iole of oiganisms oi actois veisus ianuomness,
seienuity anu luck.
Noie bioauly, it is woith making a specific note of the fact that much of the liteiatuie in
evolutionaiy economics anu oiganization science builus uiiectly, on a one-to-one basis, on theoiies,
mechanisms anu tools fiom the biological anu computational sciences. The links between
economics anu biology have inueeu been quite tight, going back to Baiwin anu Nalthus (see Nayi,
1977). Evolutionaiy economics has inueeu been an effoit to geneialize the basic fiamewoik of
Baiwinism (foi a iecent oveiview, see Bougson anu Knuusen, 2u11). Similaily, the mechanisms
anu tools in aitificial intelligence anu biology aie also quite ieauily appaient in much oiganizational
9
woik, a focus on the computational anu algoiithmic aspects of behavioi anu uecision-making. In all
of the above, the notion of a phase space has been cential, a iepiesentation of all possible actions
foi oiganisms, anu theii exploiation of these lanuscapes thiough vaiious cognitive anu othei
mechanisms.
While the links between biology anu economics have been fiuitful, we aigue that the phase
space notion, anu associateu aiguments about anu tools utilizing vaiious foims of seaich, aie
pioblematic. We builu on aiguments fiom the biological, natuial anu computational sciences to
make oui point.
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Bow, specifically, shoulu the "pioblem" of explaining economic activity, oppoitunities anu
novelty be conceptualizeu. We aigue that the extant focus on computation anu algoiithmic
behavioiembeuueu in aiguments about bounueu iationalityis pioblematic. While bounueu
iationality iightly amenus mouels of global iationality by setting limits to both what can be
consiueieu anu the abilities of actois to piocess all the ielevant infoimationnonetheless, uiffeient
founuations aie neeueu. Specifically, we hope to amenu the focus on bounueu iationality anu
computational complexity to also consiuei the geneiative anu piouuctive aspects, beyonu seaich
anu calculation, manifest in economic activity.
In existing woik, economic actois anu fiims aie tieateu as algoiithmic infoimation
piocessois. Economic actois anu fiims aie, in effect, seen as Tuiing machines. To illustiate,
oiganization scientists have specifically focuseu on bounueu iationality in the foim of the
unfeasible computability of all choices anu theii inteiactions (e.g., Levinthal, 2u12; Rivkin, 2uuu),
known as the "NP" pioblem in computei science: pioblems that may be computable but only in too
long (exponential) a time, uue to complexities.
S
The setting of NK lanuscapes inueeu is optimal foi
stuuying the NP-complete pioblem (cf. Weinbeigei, 1996). But the veiy piemise of NP-

S
Foi an auuitional example of this type of complexity in economic settings, see Axtell, 2uuS.
1u
completeness is pioblematic in the context of economic activity, just as it is in conceptualizing
biological activity. That is, the NK appioach piesumes that solutions pie-existthe lanuscape is
givenanu that all options aie listable. The economic pioblem is fiameu as one wheie all
solutions aie listable anu compaiable, wheie the piocessing oi compaiison of all these solutions
occuis, though in bounueu fashion. This bounueuness focuses on the limits of calculation anu the
impossibility of consiueiing all possibilities, foi example, as illustiateu by the combinatoiial
inteiactions of vaiious uecision elements (pioxieu by K in NK woik). NP-completeness thus fiames
the economic pioblem as one of infoimation piocessing anu cognitive limitation. The lanuscape
itself is seen as given, anu the economic pioblem is computational anu algoiithmic. A satisficing
anu thus moie limiteuly "iational" solution can be calculateu (oi leaineu ovei time) within the
limitations of the computational powei of the agent involveu.
Note that this exeicise of computing solutions has some stiiking similaiities with neoclassical
economics anu iational choice appioaches, namely the emphasis on computation. While
equilibiium-oiienteu mouels focus on the simultaneous anu instantaneous natuie of this economic
calculation, evolutionaiy appioaches in tuin focus on the tempoial, cognitive anu seaich-ielateu
aspects of the climb to an optimum. We ceitainly finu the lattei conceptualization moie
convincing. But it also, paiticulaily vis--vis explaining novelty in economic settings, ueseives
sciutiny.
The notion of NP-completeness mis-specifies what the economic pioblem entails. While
complexity ceitainly is involveu in economic uecision-making, the pioblem is !"# one wheie all (oi
even just some) solutions aie listeu, listable anu compaiable, but iathei one of how we can account
foi the emeigence of these solutions in the fiist place. The shift, then, if we seek to ietain the
lanuscape metaphoi, is one of unueistanuing how poitions of the lanuscapehiuuen to oui view
emeige in the fiist place. The pioblem in question, then, is not NP-complete, but we shoulu insteau
focus on the "fiame pioblem" (oiiginally intiouuceu by NcCaithy anu Bayes, 1969; foi a bioauei
11
sense of the fiame pioblem, see Bennett, 1984). Put simply, the fiame pioblem focuses us on the
pioblematic natuie of explaining the full task set of activities anu $"%%&'() functionalities anu uses
foi opeiating in the woilu. The pioblem is that theie is no full account, oi set of algoiithms, that
can be given about all possible actions, uses anu functions.
To see the incapacity to solve the fiame pioblem algoiithmically, consiuei the familiai
sciewuiivei (cf. Longo, Nontevil anu Kauffman, 2u12). Suppose we tiy to list all its uses alone oi
with othei objects oi piocesses: sciew in a sciew, weuge open a uooi, open a can of paint, tie to a
stick as a fish speai, ient to locals anu take S% of the catch, kill an assailant, anu so foith. As we will
aigue, below in iefeience to biology (oi to phenotypes, as foims anu functions of the living), the
numbei of uses of a sciewuiivei (as foims anu functions of uses anu activities) aie both inuefinite
anu unoiueiable. Theiefoie, no effective pioceuuie, oi algoiithm, can list all the uses of a
sciewuiivei. This means, a foitioii, that the fiame pioblem is not solvable algoiithmically. We
show below that evolution in natuie "solves" the fiame pioblem, non-algoiithmically. But
impoitantly, because we cannot list all the uses of evolving cellulai oi moleculai sciewuiiveis we
cannot piestate all the possibilities anu thus uo not know the sample space of the piocess anu
theiefoie can make no piobability statements in any known way. In summaiy, not only uo we not
know what will happen, we typically uo not know what +,! happen. Yet, we aigue, it is fiom the
unpiestatable uses of sciewuiiveis in geneial, that economic novelty emeiges. As foi biological
evolution, in a stiict compaiison with physics, in Longo et al. (2u12) a geneial aigument is given by
showing the uiffeience between these two sciences in the analysis of the invaiiant piopeities:
ianuom events (incluuing quantum effects at the moleculai level, BNA anu sets of pioteins, see
Buiatti anu Longo, 2u1S), change the veiy biological obseivables (oiganisms anu phenotypes) not
just the quantities of pie-given obseivables (e.g., eneigy, momentum, numbei of paiticles), as in
physics.
12
In the economy, the lanuscape metaphoi anu associateu computational tools iequiie eveiy
obseivable (i.e. the possible "space" anu lanuscape) in a given enviionment to somehow be listeu
anu classifieu, anu assigneu its piopei uses anu functionalitiesin piactical teims, eveiy object "is-
a," "has-a," "neeus-a." But this list of possible "affoiuances" is not fully piestatable foi opeiating in
the woilu, othei than foi extiemely limiteu ciicumstances. The pioblem is not so much a
compaiison of the best uses anu functions of objects anu spaces, as even the veiy geneiation of the
full list is not algoiithmically feasible. 0i, as uiscusseu by uibson, "to peiceive an affoiuance is not
to classify an object" (1986: 1S4). The pioblem is also not one of infoimational complexity anu
computational limitation (NP-completeness)though these of couise also play a iole in ceitain
types of behavioi. The pioblem is that the lanuscape itself is not listable oi pieuefinable. The
pioblem shifts to explaining the oiigins of uses anu functions. Noieovei, the pioblem is not just
one of how to account foi the new uses, functions, but oppoitunities that enable new possibilities
that constantly emeige. An aitificial agent of couise might be given tools to geneiate hypotheses
about possible uses anu functionalities, via mechanisms such as tiial-anu-eiioi oi association. But
these aie scaicely sufficient. 0utcomes aie only as goou as the intelligence of the inteipietei. This
matteis, since piesently the mechanisms useu in aitificial intelligence aie the same as those useu in
oui stuuy of human behavioi (see Russell anu Noivig, 2uu9).
The veiy notion of the fiame pioblem of couise touches on funuamental uebates about the
ability of aitificial intelligence to match oi even exceeu the capability of human actois. While
auvances in AI aie eviuent, the fiame pioblem looms laige. It was even anticipateu by veiy eaily
pioneeis of aitificial intelligence, such as Aua Lovelace. She aigues that "the Analytical Engine has
no pietensions whatevei to oiiginate any thing. It can uo whatevei we know how to oiuei it to
peifoim. It can follow analysis, but it has no powei of anticipating any analytical ielations oi tiuths.
Its piovince is to assist us in making available what we aie alieauy acquainteu with" (1848: 722).
1S
We ceitainly iecognize that we aie stating one siue of the aigument, while many aie
optimistic in a 'stiong foim' of AI (e.g., Buchanan, 2uu1). But machine intelligence cannot solve the
pioblem of intiouucing novelty outsiue a system. As put by Block, "the machine has the intelligence
of a toastei. All the intelligence it exhibits is that of its piogiammeis" (1981: 21). Foi aitificial
intelligence it simply is not possible to bootstiap anything outsiue itself. As fuithei noteu by Lucas:
"Bowevei complicateu a machine we constiuct, it will, if it is a machine, coiiesponu to a foimal
system, which in tuin will be liable to the uouel pioceuuie foi finuing a foimula unpiovable-in-
that-system. This foimula the machine will be unable to piouuce as tiue, although a minu can see
that it is tiue. Anu so the machine will not be an auequate mouel of the minu" (1961: 116). ). As a
mattei of fact, many inteiesting pioblems, even in physics anu biology, may be now analyzeu in
teims of "incomputability" of the intenueu natuial piocess. In physics, the mathematics of continua,
in given phase spaces, makes the piocess intelligible (it uisplays its causal stiuctuie), but pioves
also its incomputability (see Longo, 2uu9; 2u12).
The uesiie to captuie biological anu human activity in mechanistic foim of couise is tempting
anu seemingly scientific, anu iepiesents a moie geneial ethos of tiying to unify the sciences by a
computational ieuuction, anu this in spite of tis being immensely moie complex than physical
piocesses (at least because it incluues them). Woiks such as }acques Loeb's (1912) -)+.,!&%#&+
/"!+)$#&"! "0 1&0) captuies this intuition - an attempt to builu a geneial theoiy focuseu on
enviionmental inputs, stimulus-iesponse ielationships anu selection. These mechanistic
conceptions, anu focus on computational obseivables, also have links to piominent theoiies anu
appioaches in psychology (Skinnei, 19S8) anu physics (Nach, 1897). While these appioaches aie
influential, they aie oveily ueteiministic anu unable to explain the emeigence of vaiiety.
HFGF :74 (*'M'%8 $J N.*'4+- .%/ >$041+-2 =%8'M7+8 J*$& 3'$1$M-
Wheie, then, uoes vaiiety anu novelty oiiginate fiom. Peihaps the best place to stait is with
iefeience to extant biological aiguments that ueal with similai questions about the oiigins of
14
vaiiety anu novelty in natuie. Evolutionaiy mouels that focus on selection iequiie a counteipait to
explain wheie the selection set comes fiom, oi the "aiiival" of the fittest (cf. Fontana anu Buss,
199S). In shoit, iauical anu emeigent heteiogeneity in natuie is not fully explainable by appealing
to the mechanism of selection alone (cf. Kauffman, 199S).
6
As aieas such as evolutionaiy
economics aie attempting to builu on a geneial theoiy of evolution (Wintei, 2u11), it is impoitant
to highlight both siues of the aigument.
7

0ui aigument, builuing on extant biology, is that theie aie selection-inuepenuent mechanisms
that geneiate novelty in the biospheie. These aiguments uo not iequiie a "minu," oi intention oi
puiposiveness. Rathei, novelty is an emeigent piocess obseivable in natuie, anu ieauily
extenuable into the uomain of unueistanuing economic activity.
Recall fiist that Baiwin's "0iigin of species" is founueu on two piinciples: uescent with
mouification anu selection. The fiist is as ievolutionaiy as the seconu. It stiesses the iuea that
oiganisms, beginning with unicellulai ones, piolifeiate 2&#. 3,4&,#&"! unuei all ciicumstances. This
iauically changes the pievious "evolutionist" peispective, by Buffon anu Lamaick, as vaiiation was
supposeu to be inuuceu by the enviionment. Then, of couise, Baiwinian selection, ,% #.) )5+(6%&"!
"0 #.) &!+"7$,#&'(), applies.
To illustiate, consiuei the emeigence of the swim blauuei (Kauffman, 2uu8; Longo, Nontevil
anu Kauffman, 2u12). Swim blauueis help fish maintain neutial buoyancy via the iatio of watei to

6
Within the uomain of biology anu natuie, the aiiival of vaiiety has focuseu on a host of factois. Foi example,
scholais have highlighteu such factois as niche constiuction (0uling-Smee et al., 2uuS), speciation anu
punctuateu equilibiia (Eluieuge anu uoulu, 1977), exaptation (uoulu anu viba, 1982), epigenetics
(Wauuington, 1942), ontogeny (uoulu, 1999), anu moiphogenesis oi the giowth of foim (Thompson, 1917;
Tuiing, 19S2). In section 4.1. we ievisit extant woik in economics that touches on these issues. In all these
appioaches, the iole of ianuomness is ciucial in piouucing biological vaiiability anu uiveisity: it goes fiom
Tuiing stochastic fluctuations in moiphogenesis to uoulu's bioau notion of contingency.
7
In teims of "geneial" Baiwinism anu the impoitant of selection as a mechanism, Wintei has aigueu that:
natuial selection anu evolution shoulu not be vieweu as concepts uevelopeu foi the specific puiposes
of biology anu possibly appiopiiable foi the specific puiposes of economics, but iathei as elements of
the fiamewoik of a new conceptual stiuctuie that biology, economics anu othei social sciences can
comfoitably shaie (1987: 617).
We consiuei that Baiwin's fiist piinciple, uescent with mouification, a key component of vaiiability anu
uiveisity in evolution, shoulu also be given a similai funuamental iole.
1S
aii in the blauuei (cf. Peiiy et al., 2uu1). This functionality, a Baiwinian pieauaptation, emeigeu
fiom lungfish as some watei seepeu into lungs. Sacs in the lungs weie paitially filleu with aii anu
with watei, poiseu to evolve into swim blauueis. The possibility of ueveloping this new anu
emeigent functionality existeu , $4&"4&, but was not a necessity: life coulu continue anyway, foi that
fish. This functionality was an "aujacent possibility" once lungfish existeu, but not befoie a
mutation oi othei foims of inheiitance maue that possibility ,+#6,( as well as .)4&#,'()8 In othei
woius, the blauuei iepiesents a pieauaptation that as an aujacent possible emeiges without
selection "acting" to achieve this possibility. It is a possibility enhanceu by iepiouuction with
heiitable vaiiation. Note that a bacteiium may inhabit that blauuei, anu live only theie: vaiiations
(i.e. Baiwin's uescent with mouification) may piouuce bacteiia that woulu not suivive (i.e. that may
be negatively selecteu) outsiue that peculiai niche. So, both new functionalities anu niches may
emeige on the giounus of ianuom events, possibly oiiginating at moleculai level (mutations). These
new obseivable phenotypes aie thus totally unpieuictable: they may even uepenu on a quantum
event in a geiminal cell (Buiatti anu Longo, 2u1S).
8

0iganisms in natuie constantly uevelop suipiising functional capabilities anu uses that aie
not piestatable. As we saiu, the swim blauuei, once it has evolveu, may constitute an aujacent
possible empty niche wheie bacteiium may evolve to live. In shoit, once evolveu, the swim blauuei
alteis the aujacent possible evolution of the biospheie. But what is the iole of natuial selection
heie. Selection suiely playeu a iole in the evolution of a population of lungfish to ciaft a woiking
swim blauuei by excluuing incompatible ones. Anu once the swim blauuei exists, it constitutes an
aujacent possible empty niche, oi "oppoitunity" alteiing the futuie possible evolution of the
biospheie via the woim oi bacteiium that in tuin might evolve to live in swim blauueis. But

8
Anothei famous example by uoulu, see (uoulu anu viba, 1982), is the foimation of the veitebiate eais'
bones. They ueiive, by "exaptation" (ex-post auaptation), fiom the uouble jaw of some veitebiate some 2uu
millions yeais ago. A typical case of uoulu's contingency: theie was no neeu, foi animals, to have eais anu the
piocess iequiieu cascaues of ianuom mutations anu many othei exploiations, possibly excluueu by selection.
The animals' inteiactions anu thus the ecosystem changeu by this new phenotype. Some, touay, can sell
Nozait's iecoiueu piano conceits.
16
ciitically, selection uiu not "act" to achieve the swim blauuei as an aujacent possible empty niche oi
oppoitunity. This means something funuamental: without selection acting to uo so, evolution is
cieating its own futuie possibilities anu oppoitunities, by the fiist of Baiwin's piinciples. Note that
no fixeu, known physical theoiy can list all biological possibilities. The foims of ianuomness piopei
to biological uynamics incluue both classical anu quantum ianuomness (which happen not to be
unifieu in one theoiy). It also incluues the unpieuictable inteiactions between these two uiffeient
foims of ianuomness as well as between uiffeient levels of oiganizationwithin a cell, a
multicellulai oiganisms, an ecosystem (see Buiatti anu Longo, 2u1S).
Impoitantly, again, this emeigence of new, unpiestatable functions anu new, unpiestatable
oppoitunities is constant anu continual: the swim blauuei itself, again, might cieate a possible niche
foi some othei bacteiium oi oiganism, oi pioviue moie possible vaiiations foi the new foim of life
it alloweu, as a niche. 9.6% #.) $.,%) %$,+) "0 )3"(6#&"!, of oiganisms anu phenotypes, &% !)3)4
0&5):it is iauically emeigent. Theie aie aujacent possibilities anu niches foi each tiait, function oi
capability of an oiganism anu new oiganisms may be "enableu," in the teiminology of Longo et al
(2u12), as it weie in evolution. It is not possible to map all of these aujacencies, neithei aie all the
uses of a sciewuiivei algoiithmically listable, noi aie all the oppoitunities that aiise listable oi
piestatable. Noieovei, all that must occui in evolution is that some moleculai sciewuiivei in an
evolving oiganism "finus a use" that enhances the fitness of the oiganism anu that theie be
heiitable vaiiation foi that use, anu natuial selection will, often, positively select foi this newly
auapteu use. Note that this &% the aiiival of the fittei, missing in selection-oiienteu appioaches.
Noieovei, the unpiestatable new use alteis the phase space of evolution in an unpiestatable way,
piecluuing wiiting laws of motion foi that evolution. Thus evolution is not entaileu by any law.
0ne way to think about the emeigence of novelty is that theie is a constant "empty" set of
possibilities that aie aujacent to the existing phase space. The pioblem of specifying the phase
space of possibilities is closely linkeu with oui pievious uiscussion of the algoiithmic incapacity to
17
list affoiuances anu uses. Any piouuct, skill oi function iepiesents a latent but unpiestatable set of
uses. The afoiementioneu sciewuiivei case pioviues an example of this. Since the numbei of uses
of sciewuiiveis is inuefinite anu unoiueiable, it simply is not possible, , $4&"4&, to use any effective
pioceuuie to list all the possible uses of a sciewuiivei. The same goes foi the possible functionality
foi any othei piouuct oi skill. As these examples illustiates, oui goal is not to tiy to make
pieuictions about why , $,4#&+6(,4of many possiblenovel use oi functionality might emeige in
the fiist place, iathei it is to highlight the simple unpiestatability of all the possibilities. Thus oui
appioach is in fact complementaiy with existing evolutionaiy aiguments, wheie the mechanisms
foi geneiating paiticulai novelties might of couise also emeige thiough ianuom expeiimentation
oi tiial anu eiioi. That saiu, ianuomness in evolutionwhethei economic oi biological
is not ianuomness in the sense of "noise" oi somehow measuiable by piobability theoiy, but iathei
it is at the oiigin of possible vaiiability anu uiveisity anu thus contiibutes, in biology, to oiganisms,
populations anu ecosystem's stiuctuial stability (Longo et al., 2u12; Buiatti anu Longo, 2u1S).
It is also impoitant to note that the evolving oiganism in its actual niche achieves a "task
closuie" allowing it to iepiouuce, via causal pathways that pass thiough the enviionment.
Bowevei, these pathways cannot be piestateu non-ciiculaily with iespect to the evolving oiganism
in its actual niche. In shoit, we cannot piestate the niche of an evolving oiganism; it is only
ievealeu aftei the fact as the oiganism is successful, that is, by selection acting at the level of the
2."() oiganism.
This uistinction touches on a key point about the neeu to uistinguish :)3)("$7)!#,(
constiaints fiom %)()+#&3) constiaints (Naynaiu-Smith et al., 198S). 0ui emphasis is on the
foimei. While vaiiation anu selection emphasize ianuomness, we emphasize the changing
constiaints that make fuithei uevelopment possible. Constiaints, such as the swim blauuei as an
"enabling constiaint," enable but uo not cause fuithei evolution in the biospheie. Bevelopment is
not ueteiministic but allows foi aujacencies to be exploieu, by vaiiation at some othei level (e.g.,
18
the changing bacteiium). Enabling constiaints thus suggest not just limitations but also
evolutionaiy enablement towaiu possibilities anu oppoitunities.
A fuithei pioblem with focusing on selection alone is that paiticulai tiaits oi functions aie
iaiely if evei selecteu foi, iathei, 2."() oiganisms aie. Thus, not only is it haiu to specify which
functions oi tiaits weie selecteu foi, but it is also haiu to specify the latent set of possible futuie
tiaits anu functions, accompanying the "selecteu" one(s)these aie not listable. Whole oiganisms
can be seen as complex bunules of paits, latent tiaits anu possibilities, anu thus even aftei selection
"we cannot |pie-listj the newly ielevant functional featuies of its paits ievealeu by selection"
(Longo et al., 2u12: 2). As we uiscuss next, theie aie inueeu impoitant links between oiganisms
anu enviionments anu extant unueistanuings of phase spaces.
HFHF 540'8'+'%M +74 67.84 9).#4
0ui aiguments heie have piofounu implications foi the notion of "phase space,"a
iepiesentation of the set of all possible actions oi statesanu associateu moueling such as
combinatoiial lanuscapes (cf. Kauffman anu Weinbeigei, 1989). The notion of phase space
oiiginates fiom the physical sciences anu the pioneeiing woik of Luuwig Boltzmann, anu the effoits
in statistical mechanics (as well as theimouynamics, anu latei, quantum mechanics) to specify the
full set of possible states that a paiticle oi system can take. Boltzmann aigueu that even highly
complex, non-ieuucible systems weie "eigouic," that is, that they ianuomly, but unifoimly, exploieu
all the possibilities in a given phase space. As a consequence, theii ,3)4,;) peifoimance anu
behavioi was pieuictable given sufficient histoiical infoimation.
Bowevei, the pioblem in biological evolution is that this phase space cannot, , $4&"4&, be
specifieueven on aveiage (Longo et al., 2u12). While in Newtonian anu Laplacian physics, which
aie given in a fixeu phase space, we can ueteimine anu pieuict motion anu uiiection, the biological
spheie uoes not lenu itself to such physical mouels given the afoiementioneu, latent functionalities
of oiganisms. Specifically, theie aie seveial conceins with the notion of phase space. As uiscusseu
19
above, in the biological spheie oiganisms aie selecteu as wholes. But oiganisms natuially embouy
myiiau functionalities anu uses that cannot be piestateu oi captuieu, they uepenu on inteiacting
vaiiations of highly unpieuictable ianuom events of a veiy uiffeient natuie, which iange fiom
quantum to classical to "intei-level" inteiactions, in an oiganism anu in anu ecosystem. Even
ietiospective imputation of a selecteu-foi tiait oi phenotype can be uifficult, if not impossible.
The aigument that the phase space is not piestatable might be seen as an aigument foi
uniestiicteu ianuomness oi eigouicity as the exploiation of all possibilities. Bowevei, the veiy
notion of uevelopment, as the counteipait of selection, suggests that theie aie possible tiajectoiies,
oi "evolvability" (cf. Wagnei anu Altenbeig, 1996), within oiganisms. But evolution is not fully
ianuom in any extieme sense: its ianuomness is highly canalizeu. That is, biological entities aie
"poiseu" foi a laige set of possible auaptations (cf. Bailly anu Longo, 2u11; Noia anu Bialek, 2u11;
also see Kauffman, 2u12). The set of aujacent possible uiiections is extiemely laigethough not
infinitethat is, within the limits, constiaints anu enablement of the natuie of the oiganism in
question. Scholais of couise have tiieu to captuie the uevelopmental poitions of the evolution of
oiganisms mathematically, foi example, in an effoit to map the "topology of the possible" (Fontana
anu Schustei, 1998; Staulei et al., 2uu1). Ceitainly a new set of mathematical anu empiiical tools is
neeueu to captuie the iichness of the emeigent, unpiestatable biological spheie anu associateu
evolution.
The notion of phase space also impoits ceitain assumptions fiom physics that aie
pioblematic in the context of biological evolution. Namely, phase spaces assume symmetiies,
invaiiance anu that conseivation laws aie uphelu (Kibble anu Beikshiie, 2uu4; cf. Sethna, 2uu6).
These assumptions howevei uo not holu in the case of biological evolution. Biological evolution
iepiesents continual changes to symmetiy as the tiajectoiies of oiganisms evolve (Longo et al.,
2u12). In physics the obseivables yielu the phase space anu possible tiajectoiies. That is, the
mathematical constiuction of the phase space is baseu on invaiiants (e.g., momentum anu eneigy
2u
conseivation) anu invaiiant-pieseiving tiansfoimations which allow us to analyze tiajectoiies
(momentum x position, oi eneigy x time, in the two cases above). Bowevei, biological evolution
cannot be captuieu by obseivables alone since the ielevant obseivables (phenotypes anu
oiganisms) anu peitinent vaiiables shift constantly.
As we alieauy hinteu, the pioblem of a piespecifieu phase space can also be lookeu at by
highlighting quantum effects. That is, quantum physics highlights how it is highly pioblematic to
iuentify the position of a paiticle oi systemits state is inueteiministic. Changes can be ianuom,
nonlocal anu acausal. The whole notion of quantum effects iaises haiiy questions about the piecise
natuie anu state of things (paiticles veisus waves), as well as measuiement pioblems. The
question is whethei the outcome of any single quantum measuiement can be calculateu, foi if not,
that outcome is not entaileu. The notion of obseivables anu spatial locationat the veiy heait of a
phase spacethen is pioblematizeu given quantum non-locality. As closely analyzeu by Buiatti anu
Longo (2u1S), these acausal quantum events may have a majoi iole in intiacellulai uynamics anu
thus affect biological evolution.
In all, the above aiguments iaise piofounu pioblems with the use of phase spaces anu
lanuscapes, whethei as a metaphoi oi as a tool foi unueistanuing the evolution anu uevelopment of
oiganisms. That saiu, theie aie of couise limiteu, closeu settings wheie it inueeu is possible to list
all available options oi to simulate the seaich foi optimal outcomes. Bowevei, we aigue that these
appioaches aie moie limiteu if we seek to explain novelty, whethei in biological oi economic
settings.
OF =&)1'#.+'$%8 J$* ?%/4*8+.%/'%M +74 >.+,*4 $J "#$%$&'# ())$*+,%'+- .%/ >$041+-
0ui geneial aiguments about the pioblematic natuie of phase spaces anu the emeigence
of novelty in natuie have a numbei of implications foi economic settings. Again, these aie quite
impoitant as biological intuition has long been tightly linkeu with economics (Nayi, 1977; foi a
histoiy of the extensive links between biology anu economics, see Bougson, 2uuS), foi example,
21
thiough theoiies such as evolutionaiy economics (Nelson anu Wintei, 1982) as well as in the moie
geneial effoits to unify the sciences thiough "geneializeu" Baiwinism (Aluiich et al., 2uu8; Bougson
anu Knuusen, 2u11).
Fiist, we aigue that evolutionaiy aiguments of economic activity neeu to move beyonu
phase space-type assumptions anu computational metaphois to explain emeigent novelty. Foi
example, iathei than emphasizing NP-completeness, as extant woik has, we think the fiame
pioblem offeis a moie iealistic focus. 0nueistanuing the emeigence of novel uses anu
functionalities is at the heait of economic activity. Some of these matteis have of couise been
iaiseu in the past. Foi example, Aunei anu Levinthal (2uu2) uiscuss punctuateu equilibiia in the
context of the "speciation" of technologies, wheie suipiising new uses anu functionalities emeige
foi technologies intenueu foi uiffeient puiposes anu contexts. Cattani (2uuS, 2uu6) offeis an apt
example of this type of "pieauaptation," wheie Coining's capabilities in glass manufactuiing leu to
suipiising new innovations in fibei optics technology. Bowevei, woik in the uomain of
evolutionaiy economics continues to be heavily focuseu on the enviionment anu selection-type
mechanisms. Foi example, in theii iecent ieview of evolutionaiy theoiies acioss the sciences,
Bougson anu Knuusen biiefly mention "ontogeny" (2u11: SS-S6) anu ielateu concepts (e.g.,
"exaptation," 1uu-1u1), but no theoiy is explicitly uevelopeu as it ielates to economic entities anu
the emeigence of novelty. Also, uiovanni Bosi biiefly mentions (Cohen et al., 1996: 28) the neeu to
uevelop "constiuctive" evolutionaiy mouels (citing Fontana anu Buss, 199S), though these issues
have not been caiefully auuiesseu in subsequent woik. Noie geneially, the uevelopment siue of
evolutionaiy aiguments in the oiganization anu economic sciences, given the focus on
enviionments (whethei populations, selection oi pie-specifieu phase spaces), has ieceiveu little
attention (cf. Felin, 2u12). The effoit in oui papei has been to biing uevelopment anu novelty
centei-stage, anu to highlight how insights fiom biology might infoim oui unueistanuing of the
natuie of economic oppoitunity.
22
A seconu implication of oui aiguments focuses on the iecent uebates about the piecise
"natuie" of economic oppoitunity. Entiepieneuiship scholais have uebateu whethei oppoitunities
exist objectivelyas the notion of a lanuscape might suggestoi whethei they aie subjectively
cieateu (e.g., Alvaiez, Bainey, anu Anueison, 2u11; venkataiaman et al., 2u12). uiven oui focus on
the unpiestatable natuie of the phase space, we of couise uo not think that oppoitunities aie
necessaiily "objective," if that means "pie-existing." But oui aigument suggest that oppoitunities
aie also objective in the sense that they aie poiseu, latent anu possibleyet to be enableu by novel
inteiactions in the economic anu biological spheie. But oui aiguments suggest that oppoitunities
aie also objective in the sense that they aie poiseu, latent anu possiblebut nonetheless #.)4),
simply not actualizeu8 0ppoitunities aie not cieateu ex nihilo. Thus fiom oui peispective the
uiscoveiy-cieation uichotomy is a bit tenuous anu mis-leauing. We woulu iathei emphasize the
unpiestatable but possible natuie of oppoitunities.
Though we have sought to steei cleai of uebates about the subjectivity oi objectivity of
oppoitunity, what oui aiguments suggest is that entiepieneuis (anu humans moie geneially)
inueeu solve the afoiementioneu fiame pioblem, in finuing novel uses, functionalities anu
possibilities. It might be that entiepieneuiial aleitness (Kiiznei, 1978; Kiiznei, 1982), juugment
(Foss anu Klein, 2u11) oi any numbei of othei factois play a iole. Again, in this papei we uo not
uiiectly auuiess this issue, though we hope futuie woik uoes. 0ui specific emphasis has been on
the moie geneial inueteiminacy of economic evolution given the vast, unpiestatable uiiections that
evolution can take uue to poiseu anu latent functionalities that exist at the nexus of oiganisms, theii
tiaits (both pait anu whole) anu theii niches anu enviionments. Thus we have sought to steei
cleai of factois such as enactment, entiepieneuiial ueteimination anu will, effectuation, intei-
subjectivity, vaiious foims of social constiuction anu so foith (e.g., Alvaiez anu Bainey, 2uu7;
Saiasvathy, 2uu1; venkataiaman, et al., 2u12). Rathei, we offei alteinative mechanisms, baseu on
the biological anu natuial sciences, foi thinking about the emeigence of novelty.
2S
The thiiu implication of oui aiguments suggests the possibility of a moie nuanceu
uiscussion of how oiganisms anu contexts co-evolve, iathei than pitting one explanation against the
othei. 0ui focus aumitteuly has been on the siue of oiganisms anu theii possible uevelopment, but
theie is much ioom foi moie mouels that cleaily specify the iespective ioles of '"#. oiganism anu
context. Foi example, extant uebates in the oiganization anu economic sciences about micio-
veisus maciofounuations might inueeu be seen as uebates about whethei the oiganism oi its
enviionment ought to be the centei of focus when explaining outcomes. This uebate has iecently
manifesteu itself in many ways, specifically in extant uiscussions about whethei inuiviuuals shoulu
be emphasizeu ovei collective anu histoiical factois (e.g., Abell et al., 2uu8; Felin anu Foss, 2u11;
Wintei, 2u12) anu in iecent uebates about the impoitance of cognition veisus "contextual factois"
in the emeigence of economic novelty anu innovation (uavetti, 2u11; Wintei, 2u11). 0f couise all
of these factois, the micio anu macio, play a iole. 0iganisms biing with them vaiious poiseu
possibilities foi uevelopment, as illustiateu by oui lungfish example anu oui uiscussion of the
sciewuiivei. But these possibilities also uepenu on the context. To use a tiivial example, the
iemote contiol is possible because of the pie-existent Tv, pie-existent content, anu people sitting
anu watching Tv. The oppoitunity iepiesents a confluence of oiganism- anu enviionment-ielateu
factois: a complex mix of technologies, people anu suiiounuings coming togethei. Remote contiols
of couise weie not a possible, poiseu niche two million yeais ago. Thus the factois associateu with
novelty iepiesent a mix of bottom-up anu top-uown mechanisms, implicating multiple levels of
analysis anu uiffeient inteiacting foims of ianuomness, peihaps incluuing quantum ianuomness, as
in biology (mutations anu moleculai uynamics with a somantic consequence). Teasing out the
iespective +"!#4&'6#&"! of vaiious oiganism anu context-ielateu factois of couise iepiesents a tall
task. We hope that oui aiguments have auueu some nuance to this uiscussion, though aumitteuly
theie aie many auuitional uetails to be woikeu out. 0ppoitunities unuoubteuly iequiie a measuie
24
of "luck" anu seienuipity, though the unueilying piocesses aie also explainable in teims of the
emeigent novelty anu uevelopment that occuis at the nexus of oiganisms anu enviionments.
A final, fouith consiueiation peitains to questions of minu: what iole uoes the
entiepieneuiial minu play in all of this. Essentially, this is a question of the bounuaiies of the
aigument: uo the piocesses that shape natuie equally apply to human anu economic contexts. 0i
aie theie uiffeiences. In oui aiguments we have puiposefully saiu little about the human minu oi
intentionality, anu insteau have focuseu on how emeigent piocesses eviuent in natuie have uiiect
coiollaiies in economic settings. 0ui uiscussion of bounueu iationality, of couise, inevitably
implicates matteis of minu. Though oui concein heie is that bounueuness anu iationality
continues to be specifieu in computational anu algoiithmic teims, while we favoi othei, moie
geneiative alteinatives, in essence, effoits to solve the fiame iathei than NP pioblem. If the
entiepieneui solves the fiame pioblem, as we have aigueu, then the minu is not fully algoiithmic.
No algoiithm can pie-ueciue what to uo in novel enviionments whose natuie cannot be piestateu
(at the ielevant level of specificity). But the minu is geneiative anu peihaps somehow aleit to new
possibilities in the aujacent possible. The minu is not algoiithmic; no set of entailing laws can
uesciibe it.
9

The human minu itself of couise might be thought of as a poiseu iealm, scaicely
ueteiministic (Kauffman, 2u12). This aumitteuly is speculative, though the notion that the minu is
geneiative has much suppoit in fielus such as psychology, linguistics, anu philosophy (e.g., Block,
198u; Chomsky, 2uuS; Spelke et al., 1992). Foi example, we know that Skinneiian, behavioiist
input-output mouels of leaining, oi the notion of the minu as a Tuiing machine, aie giossly mis-
specifieu. Rathei, the human minu has iemaikable geneiative capacities, as foi example manifest in
the use of language (Chomsky, 19S9). Language inueeu iepiesents an analogue to the aujacent

9
As a mattei of fact, most physical uynamics aie not piogiammable eithei, even not in an appioximateu way;
mathematically, non-lineai continuous uynamics (anu the piocesses moueleu by these uynamics as well)
eventually uiveige fiom any computable appioximation, (Longo, 2uu9 anu 2u12).
2S
possible, that is, while the numbei of oui alphabetic letteis is uelimiteu, the possible constiuctions
of sense aie infinite. As put by Bumbolut, the minu makes "infinite use of finite means." But the
links between the minu anu the emeigence of novelty in economic settings ceitainly ueseive
auuitional attention.
PF D$%#1,8'$%
The puipose of this papei has been to ieact to iecent theoiies anu uebates about the
natuie of economic oppoitunity anu to highlight the beginnings of an alteinative. We fiist uiscuss
the cuiient focus on computational anu algoiithmic appioaches to economic activity, as manifest by
the use of limiteu biological metaphois anu tools associateu with seaich on a lanuscape oi phase
space. We highlight how the notion of bounueu iationalitycential to key theoiies in oiganization
science, entiepieneuiship anu stiategyis anchoieu on a computational view of seaich behavioi.
These appioaches pie-specify the phase space oi economic lanuscape anu then highlight the
computational bounuaiies anu limitations of actois. While this appioach impioves on efficient
maikets-type aiguments that focus on the seeming omniscience of economic actois, nonetheless
they also featuie some ciitical ueficiencies, paiticulaily in teims of explaining the emeigence of
novelty. Foi example, the cuiient focus on NP-completeness mis-specifies the pioblem at hanu. We
aigue that the fiame pioblem moie ieauily captuies the cential question foi explaining the
emeigence of novelty, both in natuie as well as in economic settings. We pioviue examples fiom
biology (lungfish), as well as common-uay suiiounuings (sciewuiiveis), to highlight how novel
uses anu functionalities emeige constantly, ones that cannot be piestateu noi listeu. Thus theie aie
vast empty spaces poiseu foi uevelopment, anu these possibilities cannot a piioii be listeu. We
aigue that computational anu algoiithmic tools anu metaphois, anu, moie geneially, the use of
mathematically piegiven phase spaces, mis-specify iathei than claiify oui unueistanuing of
novelty. In conclusion we pioviue some implications of oui aiguments, both by way of ieview anu
in an effoit to speculate about uiiections foi futuie ieseaich.
26


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