Abstract
We examine the role of banks in the Schumpeterian innovative evolution. The banks are equipped with a decision making mechanism, selecting innovations to shape the economic development of the whole economy. This process is based on the risk analysis across projects suggested by innovators. To study this problem we expand the static Arrow-Debreu theory of general economic equilibrium by the addition of a system of banks, the role of which is to extend credits and loans to firms and households, respectively, to allow the former to implement innovations. Then, to dynamize our setting, we employ a qualitative theory of dynamical systems, where the basic forms of economic life distinguished by Schumpeter, namely the circular flow and economic development, are modeled by cumulative and innovative extensions of the production system, respectively. In particular, we specify the sufficient conditions to guarantee the preservation of the rules of circular flow of the consumption sphere within the innovative development of the whole economy, which delivers a deeper insight into the intrinsic logic of Schumpeterian evolution.
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Ciałowicz, B., Malawski, A. (2011). The Role of Banks in the Schumpeterian Innovative Evolution: An Axiomatic Set-up. In: Pyka, A., Derengowski Fonseca, M. (eds) Catching Up, Spillovers and Innovation Networks in a Schumpeterian Perspective. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-15886-5_3
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