Edited by L. Randall Wray and Mathew Forstater
Chapter 12: Innovation and Investment in Capitalist Economies, 1870–2000: Kaleckian Dynamics and Evolutionary Life Cycles
Jerry Courvisanos and Bart Verspagen INTRODUCTION Innovation is a concept that has recently been analysed with much empirical evidence to indicate its crucial role in the long-run dynamics of modern capitalism. Classical economics recognized that innovation embodied in the form of new machines through ﬁxed capital investment is the essential process for realizing economic development. Going forward in time, the 1990s strong growth path of the US economy and its satellites (like Australia) show the potency of innovation in helping to deliver this growth. This chapter aims to use Kaleckian theory with evolutionary features to analyse historical data on innovation in order to place this concept centrally within a post Keynesian analysis of endogenous investment. As Sawyer (1996, p. 107) notes ‘Kalecki’s analysis provides for an endogenous rate of growth, albeit one which rests on the stimulating effect of innovation on investment indicates’. This means Kalecki viewed innovation as inciting investment with consequent impact on cycles and growth. Courvisanos (2001) argues for a more inclusive role for innovation in the post Keynesian analysis through the untapped insights of Kalecki and linking them to evolutionary economics studies that has researched innovation very effectively in a long-run context over the last 15 years.1 This chapter attempts to do this with historical data as it shows the relation between innovation and investment, and its impact on the instability of business cycles and thus affecting the trend growth of these cycles. This way any strong upswing in a cycle must be related to the...
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