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Schumpeterian economic development and financial innovations: a conflicting evolution

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  • ÜLGEN, FARUK

Abstract

Although in the Schumpeterian process of entrepreneurial innovations money and financial markets are assumed to affect economic development, Schumpeter does not explicitly study financial evolution and its effects on real dynamics. In order to fill this gap, this article suggests a Minsky-inspired interpretation of Schumpeterian institutional dynamics in monetary terms. It then develops a specific Schumpeterian analysis of the evolution of financial institutions and regulatory mechanisms in the wake of the 2007-08 crisis and points to major consequences of financial innovations on economic stability. It appears that unlike the creative destruction process of entrepreneurial innovations, in a liberalised/deregulated environment financial innovations move banks from their crucial role of financing long-term economic evolution and lead to reckless finance. Thus, financial market dynamics put economies on a destructive path. Such an evolution calls for active and tight rational regulation in order to shape capitalist finance towards more stable and welfare-enhancing strategies.
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  • Ülgen, Faruk, 2014. "Schumpeterian economic development and financial innovations: a conflicting evolution," Journal of Institutional Economics, Cambridge University Press, vol. 10(02), pages 257-277, June.
  • Handle: RePEc:cup:jinsec:v:10:y:2014:i:02:p:257-277_00
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    Cited by:

    1. Agnès Festré & Odile Lakomski-Laguerre & Stéphane Longuet, 2017. "Schumpeter and Schumpeterians on economic policy issues: re-reading Schumpeter through the lens of institutional and behavioral economics. An introduction to the special issue," Journal of Evolutionary Economics, Springer, vol. 27(1), pages 3-24, January.
    2. Faruk Ülgen, 2015. "From liberal finance inconsistency to relevant systemic regulation : an institutionalist analysis," Post-Print halshs-01166696, HAL.
    3. Faruk Ülgen, 2014. "Financialized capitalism and the irrelevance of self-regulation : a Minskyian analysis of systemic viability," Post-Print halshs-01111162, HAL.

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