Adjustment Processes Within Economic Evolution — Schumpeterian Approach

Abstract

This research is inspired by Schumpeter’s theory of economic development and aims at analysing the outcomes of innovative and non-innovative changes implemented within economic evolution. A multiplicity of outcomes of economic processes leads to complexity of the structure of economic evolution. In order to examine innovative processes, the role of the circular flow, i.e. a form of the economy, which for Schumpeter was both the starting and ending points in the analysis of economic development, should be taken into account. In this context, we determine a simple model of economic evolution in line with Schumpeter’s theory, using Hurwicz’s concept of the adjustment process. This allows us to examine an impact of accessed information on diversification of economic processes. It should be added that in the model presented, non-innovative changes also play important roles, which is coherent with Schumpeter’s theory. As a result, we prove, under some initial conditions coming from the mainstream of the Schumpeter’s thought, that the economy under study can evolve in the direction of equilibrium and take a form of circular flow.

The long-run equilibrium in the context of COVID-19 pandemic

“…In competitive economies the agents' activities can be interpreted as the information sent by market participants to others (compare to Hurwicz, 1987;Lipieta and Lipieta, 2017; Cwie ˛czek, 2020; Lipieta and Malawski, 2021). Therefore the triple…”

“…To reflect the fact that the frequency of introducing innovations is less than the frequency of manufacturing of the goods or technologies which are imitations, the model of economic evolution with discrete time is considered. The model was defined and widely analyzed in the research by Lipieta and Lipieta (2017). Below we only discuss those components of the model which are necessary for presenting the main results of this research.…”

“…Below we only discuss those components of the model which are necessary for presenting the main results of this research. In contrast to the mentioned research (Lipieta and Lipieta, 2017), in which a countable number of periods were considered, our current study is reduced to the analysis of two disjoint periods of time t=0 and t=1 assuming that, in every period, agents' activities on the market are not changed. Suppose that mt, nt∈{1, 2, …} as well as m1≥m0 and n1≥n0.…”

“…In competitive economies the agents' activities can be interpreted as the information sent by market participants to others (compare to Hurwicz, 1987; Lipieta and Lipieta, 2017; Lipieta and Ćwięczek, 2020; Lipieta and Malawski, 2021). Therefore the triplewhere:xˇk(t)∈Xk(t) is a plan of action of consumer k∈At at time t; xˇk(t)=0∈normalℛℓt if k∉At,yˇk(t)∈Yk(t) is a plan of action of producer k∈Bt at time t; yˇk(t)=0∈normalℛℓt if k∉Bt…”

“…In that state, in the perfect rationality framework, economic agents realize their aims on the market: the profits and utilities are as high as possible with the given constraints. In contrast to the model presented in the research by Lipieta and Lipieta (2017), the current research is reduced to the analysis of the changes in the economy in two consecutive and disjoint periods of time. It is assumed that innovation and imitation are endogenous as well as producers and consumers have full access to the knowledge on market activities.…”