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.
CITATION STYLE
Kurz, H. D. (2008). Innovations and profits. Schumpeter and the classical heritage. Journal of Economic Behavior and Organization, 67(1), 263–278. https://doi.org/10.1016/j.jebo.2007.08.003
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