Innovations and profits: Schumpeter and the classical heritage

Heinz Kurz

Journal of Economic Behavior & Organization, 2008, vol. 67, issue 1, 263-278

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.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:67:y:2008:i:1:p:263-278

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