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Innovations and Profits Schumpeter and the Classical Heritage

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Kurz, Heinz D.

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Abstract 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.
Classification Sociology of Economics; Basic Research, General Concepts and History of Economics
Free Keywords Classical economics; Competition; Inventions; Innovations; Profits; Schumpeter; Technical progress; Unintended consequences; Wages; Waste disposal
Document language English
Publication Year 2008
Page/Pages p. 263-278
Journal Journal of Economic Behavior & Organization, 67 (2008) 1
DOI http://dx.doi.org/10.1016/j.jebo.2007.08.003
Status Postprint; reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)
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