A Keynes + Schumpeter model to explain development, speculation and crises

By Giancarlo Bertocco, Andrea Kalajzić

PKES Working Paper 1916

July 2019

Recently, Dosi and his co-authors have developed a ‘Keynes+Schumpeter’ model which “endogenously generates self-sustained growth patterns together with persistent economic fluctuations ...”. The aim of this work is twofold. First, to show that the K+S model developed by Dosi and his co-authors does not allow to explain the instability that characterizes a capitalist economy. This limitation is due to the fact that the model overlooks some key elements of Schumpeter’s analysis. The second objective is to show that a solid K+S model can be built starting from the elements of Schumpeter’s theory neglected by Dosi and his co-authors.

Keywords: bank money, innovations, crisis

JEL classification: O11 O16 O42