Innovations and profits: Schumpeter and the classical heritage
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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- 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.
- Martin L. Weitzman, 1995.
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- Burgstaller,Andre, 1994. "Property and Prices," Cambridge Books, Cambridge University Press, number 9780521419031, December.
- Heinz D. Kurz & Neri Salvadori, 2001. "Classical Economics and the Problem of Exhaustible Resources," Metroeconomica, Wiley Blackwell, vol. 52(3), pages 282-296, 08.
- Coase, R H, 1976. "Adam Smith's Views of Man," Journal of Law and Economics, University of Chicago Press, vol. 19(3), pages 529-546, October.
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