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Innovations and profits: Schumpeter and the classical heritage

  • Kurz, Heinz D.

The paper discusses the problem of innovations and profits from a Schumpeterian perspective using the analytical tools of modern classical economics. The concept of "circular flow" is formalised and Schumpeter's zero-profits assumption investigated. Next a typology of process innovations is discussed using a simple two-sector framework. In Schumpeter profits are transitional phenomena. In the conditions contemplated, increases in labor productivity will lead to rising real wages. The argument is generalized to product-cum-process innovations in systems with joint production where a bad that is costly to dispose of is transformed into a good that can be marketed profitably.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 67 (2008)
Issue (Month): 1 (July)
Pages: 263-278

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Handle: RePEc:eee:jeborg:v:67:y:2008:i:1:p:263-278
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  1. Martin L. Weitzman, 1998. "Recombinant Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 331-360, May.
  2. Coase, R H, 1976. "Adam Smith's Views of Man," Journal of Law and Economics, University of Chicago Press, vol. 19(3), pages 529-46, October.
  3. Heinz D. Kurz & Neri Salvadori, 2001. "Classical Economics and the Problem of Exhaustible Resources," Metroeconomica, Wiley Blackwell, vol. 52(3), pages 282-296, 08.
  4. repec:cup:cbooks:9780521419031 is not listed on IDEAS
  5. Christian Gehrke, 2003. "The Ricardo Effect: Its Meaning and Validity," Economica, London School of Economics and Political Science, vol. 70(277), pages 143-158, February.
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