Cycles, Crises and Innovation

Cycles, Crises and Innovation

Path to Sustainable Development – a Kaleckian-Schumpeterian Synthesis

Jerry Courvisanos

Cycles, crises and innovation are the major economic forces that shape capitalist economies. Using a critical realist political economy approach, the analysis in this fine work is based on the works of Michał Kalecki and Joseph Schumpeter – both of whom identify these three dynamic forces as plotting the path of economic development. Jerry Courvisanos’ thought-provoking book examines how the rise of capital through investment enshrines innovation in profit and power which in turn determines the course of cycles and crises. The author concludes by arguing for strategic intervention by transformative eco-innovation as a public policy path to ecologically sustainable development.

Chapter 1: The Political Economy of Innovation

Jerry Courvisanos

Subjects: economics and finance, economic psychology, economics of innovation, history of economic thought, innovation and technology, economics of innovation


Human knowledge and human power meet in one; for where the cause is not known the effect cannot be produced. Nature to be commanded must be obeyed; and that which in contemplation is as the cause is in operation as the rule. (Bacon (1620) 2000, p.47) Introduction The history of economic thinking on innovation presented in this chapter frames the discussion throughout the book. The analysis conducted below adopts a political economy approach by examining the institutions of power affecting the conduct of innovation within the context of cycles and crises. As Bacon notes in the opening quotation, innovation is based not only on knowledge – which is always raised as central to innovation – but also on power which is rarely acknowledged. The two together create a command over nature and society that determines the cyclical crises that are characteristic of economic development. Thus, this chapter is a macroeconomic foundation to innovation, upon which the microeconomic issues of creativity and entrepreneurship are built in the following chapters. The methodology for the analysis of innovation in this chapter, and throughout the book, is critical realism. Critical realism contends that event regularity does not explain anything. Instead, critical realism looks at the nature of being (or ontology) as socially constructed with underlying causal mechanisms that produce observable events. This chapter, through the economic thought on innovation, identifies the various causal mechanisms specified in the literature. From critical realism, objects are seen as possessing inherent structures and causal powers (or generative mechanisms). It is...

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