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 5: Investment in Implementing Innovation

Jerry Courvisanos

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


The innovation process supplies the ‘impulse,’ the innovation process explains why current profits should loom so large in the calculations of ‘routine entrepreneurs,’ but the ‘adaptation mechanism’ is Mr. Kalecki’s. (Rothbarth, 1942, p.227) From innovation capacity to innovation performance The previous chapter examined in detail the link between innovation stimulus and innovation capacity as specified in Figure 4.1, the dilemmas that arise in the process of investing in innovation, and the implications for cycles and crises. This is the innovation ‘impulse’ referred to in the opening quotation above. The present chapter focuses on the bridge between innovation capacity and innovation performance in Figure 4.1. Two interconnected mechanisms operate across this bridge to deliver innovation performance. One is the Schumpeterian ‘combination mechanism’ of selecting and combining factors of production, or in the language of innovation management, ‘mobilizing resources’ (Jolly, 1997). Using Marx’s reproduction schema, the second is Kalecki’s ‘adaptation mechanism’ that adapts innovation capacity to bring forward innovation into the marketplace. This requires investment in implementing innovation through physical capital stock, with the other resources that are selected – land and labour – and combined once the desired investment in capital stock is determined and financed. Courvisanos (1996) specifies the Kaleckian adaptation mechanism in which the investment (in capital stock) process is cyclical, and central to cyclical patterns of economic activity (or business cycles). Uncertainty about expectations of future profitable returns determines the level of susceptibility, and it is this susceptibility level that governs the extent of instability of investment cycles....

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