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Contemporary Post Keynesian Analysis

Edited by L. Randall Wray and Mathew Forstater

Original articles by leading scholars of post Keynesian economics make up this authoritative collection. Current topics of the greatest interest are covered, such as: perspectives on current economic policy; post Keynesian approaches to monetary theory and policy; economic development, growth and inflation; Kaleckian perspectives on distribution; economic methodology; and history of heterodox economic theory. The contributors explore a variety of prevailing issues including: wage bargaining and monetary policy in the EMU; the meaning of money in the internet age; stability conditions for small open economies; and economic policies of sustainable development in countries transitioning to a market economy. Other enduring matters are examined through the lens of economic theorists – Kaleckian dynamics and evolutionary life cycles; a comparison between Keynes’s and Hayek’s economic theories; and an analysis of the power of the firm based on the work of Joan Robinson, to name a few.
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Chapter 12: Innovation and Investment in Capitalist Economies, 1870–2000: Kaleckian Dynamics and Evolutionary Life Cycles

Jerry Courvisanos and Bart Verspagen


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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