Essays in Honour of Horst Hanusch
Edited by Andreas Pyka, Uwe Cantner, Alfred Greiner and Thomas Kuhn
Chapter 4: The Co-evolution of Technologies and Financial Institutions
4. The co-evolution of technologies and financial institutions Pier Paolo Saviotti and Andreas Pyka INTRODUCTION 1. The mutual dependencies of the industrial and financial realms of economies are at the heart of comprehensive neo-Schumpeterian economics (CNSE) (Hanusch and Pyka, 2007a). The relationships between these two pillars are characterized by subtle conditions, in particular stemming from the financial markets, which allow for only a narrow corridor of mutual support with respect to prolific economic development (Hanusch and Pyka, 2007b). In a series of papers (Saviotti and Pyka, 2004a, 2004b, 2004c), we have developed a model of economic development by the creation of new sectors, which allows us to study the mutual impact of industry development and financial availability on macroeconomic growth performance. In this chapter, we focus on the dynamics of the co-evolution of technologies and of financial institutions (Nelson, 1994). We examine the possibility that co-evolutionary forces can give rise to irregular and chaotic behaviour. In the framework of CNSE, this is more than a methodological exercise. In fact, the existence of deterministic chaos can be expected to affect patterns of economic development. The idea that biological evolution could occur at the edge of chaos has been formulated during the early years of the Santa Fe Institute by Langton (1990) and Kauffman (1993), among others (Mitchell Waldrop, 1992). The logic behind this idea was that, in the vicinity of chaos, evolution has a better chance to succeed in creating the complex and adaptable structures that characterize biological life than either...
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