Innovation apologetics

Rakesh Bhandari bhandari at phoenix.Princeton.EDU
Sat Jun 5 08:51:49 PDT 1999


To understand how the market generates innovations or a continuous structural morphogenesis of the economy is only half the problem. Consider the following problems: Why (or whether) innovations come in swarms; what their relation is to cyclical behavior; whether the innovation induced, albeit only potential, new equilibrium of higher real wages, higher consumption and output will not be realized due to a lack of effective demand since as fewer inputs are now required per unit of output there may be a lowered demand for labor and hence consumption demand; whether in the face of such excess capacity, sufficient innovatory investment will be forthcoming to pull the economy out of its downturn (recall Brenner's theory of the rigidities that may prevent such innovatory investment--repetitive investment can be of no help if excess capacity has already built up). It's a matter of learning difference equations and chaos theory to follow Schumpeter's student (and teacher) Richard Goodwin who seemed less interested in triumphalist propaganda for the market. Perhaps that why complicated thinkers like Goodwin and Moses Finley left the country in the wake of McCarthyism.

yours, rakesh



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