Chapter

Capitalism as Creative, Chaotic Evolution by Structural Change

Richard M. Goodwin

in Chaotic Economic Dynamics

Published in print November 1990 | ISBN: 9780198283355
Published online November 2003 | e-ISBN: 9780191596315 | DOI: http://dx.doi.org/10.1093/0198283350.003.0001
 Capitalism as Creative, Chaotic Evolution by Structural Change

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As in meteorology, prediction in economics is hampered by highly irregular, chaotic dynamics. A two‐sector model is employed to examine the complementary growth theories of Schumpeter and Keynes showing that innovation can lead to a decline in output. A brief history of the chaos theory follows noting that linear systems subject to shocks can appear chaotic. Finally, a further model demonstrates that innovation may stimulate a boom and subsequent collapse in output.

Keywords: Cantor set; chaos theory; chaotic attractor; chaotic dynamics; growth theory; innovation; Keynes; output; prediction; Schumpeter

Chapter.  5264 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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