From General Equilibrium to Schumpeter

Martin Shubik and William D. Sudderth

Journal of Economic Dynamics and Control, 2015, vol. 61, issue C, 269-282

Abstract: A simple model of cost innovation in a monetary economy is presented that illustrates the essentially dynamic model of Schumpeter involving breaking the circular flow of capital is logically consistent with the General Equilibrium (GE) model of an exchange and production economy. The GE model as presented by Arrow, Debreu and McKenzie is a non-process model; and the original theory deals with the non-constructive proofs of existence of competitive equilibria (CEs). To associate this theory with GE it is necessary to recast the basic model as a process model. The GE model is enlarged and specified as a playable game by adding rules to describe the mechanisms that carry process.

Keywords: Cost innovation; Schumpeter; Circular flow; Strategic; Market games; Turnpike theorems (search for similar items in EconPapers)
JEL-codes: C73 D24 G32 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:61:y:2015:i:c:p:269-282

DOI: 10.1016/j.jedc.2015.08.009

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