Innovations and profits. Schumpeter and the classical heritage

  • Kurz H
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Abstract

The paper discusses the problem of innovations and profits from a Schumpeterian perspective using the analytical tools of modern classical economics. The concept of "circular flow" is formalised and Schumpeter's zero-profits assumption investigated. Next a typology of process innovations is discussed using a simple two-sector framework. In Schumpeter profits are transitional phenomena. In the conditions contemplated, increases in labor productivity will lead to rising real wages. The argument is generalized to product-cum-process innovations in systems with joint production where a bad that is costly to dispose of is transformed into a good that can be marketed profitably. © 2007 Elsevier B.V. All rights reserved.

Author-supplied keywords

  • Classical economics
  • Competition
  • Innovations
  • Inventions
  • Profits
  • Schumpeter
  • Technical progress
  • Unintended consequences
  • Wages
  • Waste disposal

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Authors

  • Heinz D. Kurz

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