Path to Sustainable Development – a Kaleckian-Schumpeterian Synthesis
Chapter 1: The Political Economy of Innovation
1. The political economy 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...
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