This article maps the continuation of the late Chris Freeman’s work on long waves as well as my own contributions along those lines. It begins with a brief summary of the contents of his 2001 book with Francisco Louca, As Time Goes By: from the Industrial Revolutions to the Information Revolution, where they, first, theoretically make the case for long waves in the capitalist economy on the basis of ‘reasoned history’ and they, then, qualitatively describe each of the successive technological revolutions and the transformations they bring. Next, the article presents the reasons for my own abandonment of the term “long waves” for that of “great surges” followed by the research consequences of shifting the focus from the rate of economic growth to the patterns of diffusion of each set of revolutionary technologies. Finally it draws the implications for policy making of the recurring sequence thus identified, which is the purpose Chris Freeman always pursued himself and encouraged us all to pursue.
Chris Freeman’s lecture represents an invaluable guide to Schumpeter’s theoretical framework. Two of the many themes deserve special attention. The first is the apparent contradiction between Schumpeter’s attachment to Walrasian equilibrium, and his advocacy of a theory of cyclic economic movement. The second is the economic role of institutions.
The aim of the paper is to study the interrelation between the dynamics of barriers to entry of a tech-taker industry, defined as evolution of the minimum efficient scale and the patterns of survival of a new firm entering the industry. Two regimes of innovation are considered, The first one is the Fordist regime of innovation, characterised by the dominance of static and dynamic scale economies and in which technical change is based on an incremental and cumulative learning processes of innovation and pervasive diffusion through routinised managerial behaviour. The second one is flexible-dynamic regime of innovation, in which the entrepreneurial activity origins discontinuity in the process of innovation until the constitution of a new different technological regime. Industry dynamics is quite different, by ranging between these two extreme archetypes. The Fordist regime of innovation somewhat recalls the version of the second Schumpeter of Capitalism, Socialism and Democracy, in which learning is cumulative and the industry’s performance is function of competitiveness already achieved by each firm. The flexible-dynamic regime of innovation resembles the first Schumpeter of Theory of Economic Development, in which no learning occurs and industrial innovation entirely relies on the “creative destruction” associated with the entry of new firms.
In this lecture from the end of the 1990s, until now unpublished, Chris Freeman analyses the possible reasons for the relative lack of receptivity awarded to Schumpeter’s Business Cycles. He suggests that the insufficient success may be due, not to the heavy style or the doubts about statistical validity, but rather to the weaknesses in the theory. According to Freeman, Schumpeter was right in pointing to the qualitative changes in the structure of the economy as the causes of the spring and ebb tides in growth rates. Where he was weak was in his theories of innovation, entrepreneurship and technology. The article analyses each of these theories, discussing their strengths and shortcomings, and then looks at how the neoSchumpeterians have been contributing to further the strengths and overcome the weaknesses. The article concludes inviting researchers to continue following Schumpeter’s pioneering insights into the theories of innovation and long cycles. RESUME. Dans cette conference de la fin des annees 1990, non publiee jusqu’a maintenant, Chris Freeman recherche les raisons possibles du relatif manque d’attention accorde au Business Cycles de Schumpeter. Il suggere que ce faible succes pourrait etre du non pas a la lourdeur du style ni aux doutes quant a la validite statistique, mais plutot a des faiblesses de la theorie. Selon Freeman, Schumpeter avait raison de montrer que les changements qualitatifs dans la structure de l’economie etaient la cause des flux et reflux de croissance. Mais il y a des faiblesses dans ses theories sur l’innovation, l’entrepreneuriat et la technologie. L’article analyse chacune de ces theories, discutant leurs points forts et leurs lacunes, et regarde ensuite comment les neo-schumpeteriens ont contribue a faire avancer les points forts et depasser les faiblesses. L’article conclut en invitant les chercheurs a poursuivre les idees pionnieres de Schumpeter dans les theories de l’innovation et des cycles longs.
The first edition of Theory of economic development was published in 1911. It is a well known fact that after his death Joseph Alois Schumpeter – the most quoted economist after Keynes – experienced a purgatorial season from which he emerged at the time of the first petroleum shock, at the beginning of the 1970s, when the concept of Kondratiev’s waves regained a leading role. Thereafter, Schumpeter was reevaluated once again, particularly during the years of the New economy, while new forms of entrepreneurship and innovation were arising, up until the second half of the 1990’s, when the financial logics bound to risk capital and the start-ups emerged. The importance thus gained by innovation as an essential rule (if not the main rule) of the competitive and strategic game, and the aim of the newly introduced industrial policies (consider the Schumpeterian state1) seem to highlight the perspicacity and the pertinence of Schumpeter’s vision of which Theory of economic development is the opening work.
Joseph A. Schumpeter developed a very well-known theory of entrepreneurs and entrepreneurship, centred on the concept of “new combinations”. According to him, innovation and entrepreneurship are destructive elements driving the system beyond an equilibrium position and setting in motion a competitive process, in order to reach a new equilibrium point. Though Austrian, Schumpeter was never a member of the Austrian School of Economics. However, his position as regards entrepreneurship is widely commented on by Austrian School members. In particular, Israel M. Kirzner devoted his research activity to develop an alternative concept of entrepreneurship rooted in Misesian human action and the concept of “alertness”. This paper aims to analyze and compare the two positions, in an attempt not so much to stress differences but to find possible common paths for further developments of the concept of entrepreneurship. developpements ulterieurs du concept d’entrepreneuriat.
The article aims at identifying and linking together the main insights of Thorstein Veblen regarding the theory of economic value. First of all, Veblen develops powerful arguments against the two main traditions of thought, which have attempted to justify the ability of the market to provide an objective measure of economic value, since the midnineteenth century, namely the marginalist or « neoclassical » paradigm and the liberal evolutionary thinking inspired by Herbert Spencer. Having put forward the autonomous and irreducible nature of the market values, Veblen lays the foundations of a theory of social value and socioeconomic progress, which is mainly focused on institutional issues. In this regard, Veblen’s approach prefigures some theses of another major institutionalist economist, Karl Polanyi. Taken together, both critical and positive Veblen’s insights remain thoughtprovoking, in order to readdress the issues of socioeconomic value and progress.
This article offers a presentation of the works by Thorstein Veblen, as well as some biographical elements. After a brief presentation of Veblen’s main intellectual influences and after presenting the author’s context of an America dominated by robber-barons at the turn of the XXth Century, this article presents his theory of socio-economic evolution based on a Darwinian perspective, his theory of the elite and of the leisure class, his theory of capital as means of predation and, finally, discusses the heritage Thorstein Veblen left in social sciences.
Veblen’s political orientation has been portrayed as nebulous. The absence of a systematic approach in his work leaves the door open to differing understandings of Veblen’s politics itself. All students of this intellectual agree that there is a radical component to his position, but there is no agreement as to how far his radicalism extends, nor even what the precise nature of his radicalism was. This opens the door to different understandings. The purpose of this paper is to attempt to position Veblen’s politics within the context of his analysis of the mature capitalism of his day – what may be called oligopolistic capitalism. His political perspective both informed and was informed by his economic theory of the capitalism that surrounded him. His critical economic examination of capitalism could not have been undertaken without his political orientation, and that examination of the “evolutionary” process of capitalism promoted the development and modification of his politics.
This article examines the recent process of financialization from the perspective of Veblen’s work on emulation, conspicuous consumption and desire. The rise of a particular sector, the financial, to a position of hegemony is a consequence of the capture and perversion of subject’s desire. This domination of symbolic value and libidinal investment over material or life value is a cause of instability and is a key contributor to the dynamics of crisis. The article will first develop a theoretical framework influenced by the work of Veblen before using it to analyse the financialization of the economy. The article will conclude with a brief discussion of potential solutions to the capture desire which focus around extricating desire from the social totality and directly it towards one’s peers in the commons.
Veblen’s concept of conspicuous consumption is often cited to explain why consumption habits in our consumer societies tend to be unsustainable and ever increasing. However, much more than blaming individual consumption habits Veblen sharply analyzed quite some of the societal and economic forces which drive the framework conditions for unsustainable consumption: the vested interests and the absentee ownership. The paper follows the path Veblen’s thoughts have taken trough economic and social literature over the last centuryand highlights how the actual sustainable consumption debate could make better use of Veblen’s insights e.g. in requesting the constitutive institutions for property. Opportunities for Strong Sustainable Consumption obviously presuppose radical changes, social innovations and thinking out of the box.
There are two basic ways to provide a critical view of the economy we live in and of mainstream accounts of it. The first one is to assess whether and how it can meet the procurement requirement, i.e. whether it can achieve the material reproduction of society. It typically includes analyses of the economy’s ability to achieve goals such as full employment, real and financial stability, a decent income for all. The second one is to assess whether, quite independently of its performance, it meets a social requirement, i.e. whether its overall setup is consistent with a range of generally accepted values. The aim of the paper is to focus on this second approach by discussing Veblen’s views of how and why business requirements intrinsically contrast the livelihood of the community. It contends that, in so far as Veblen’s intuition about such a contrast is correct, it should be possible to envisage an appropriate policy to deal with it. Unfortunately, Veblen’s discussion of possible alternatives is not very helpful, in this respect. The paper argues that this has to do with theoretical shortcomings in Veblen’s treatment of profit. The paper is structured as follows. Following the Introduction, Section 2 briefly summarizes the basic features of the Veblenian dichotomy. Section 3 discusses how technology fits into the dichotomy and the unsolved issues in Veblen’s theory. Section 4 points out what appears to be a policy stalemate. It discusses Veblen’s treatment of what he thought could be an alternative to the existing state of affairs. It suggests that Veblen’s notion of pecuniary gain is either too restrictive or too broad to conceive of an economy that overcomes the profitability-serviceability dichotomy. Section 5 contends that a proper understanding of the dichotomy and of possible policies to contrast it has to situate the dichotomy within market relations. Markets are depicted not only as a choice mechanism based on relative prices but as one where important social categories are turned into commodities despite their incompatibility with such a role. This typically Polanyian approach provides some insights on how to conceive of a policy that takes account of the dichotomy but does not waver between the forced acquiescence to the status quo and the millenarian expectation of an all-encompassing change. Our emphasis on the extension of contracted exchange suggests that policy may act on the degree of commodification of the economy and, in particular, of its fictitious commodities. It suggests that other criteria - typically those concerning people’s civil, political and social rights - may prevail over those of relative prices. It goes without saying that this is only a guideline for policy, not a road map. To some extent a guideline such as this one prevailed in some countries during the post Second World War ”golden age”. Neoliberalism has changed this. It has reinstated the principle whereby everything should be conceived of as a commodity, so that markets – contracted exchange based on relative prices - are the ultimate criterion for whatever change. The paper does not aim to discuss the insurgence of neoliberalism. It does suggest, however, that the dichotomy occurs - and should be contrasted – in relation not only to how business chooses the amount and composition of output but also to how it manages labor relations, the creation and application of technology and, more generally, of knowledge.
The aim of this paper is to analyse the effects of an increase of consumption on the part of the “leisure class” on the level of employment in a Veblenian theoretical perspective. It will be shown that an exogenous increase in the income of the leisure class determines an increase in the demand for luxury goods and hence an increase in the demand for labour in that sector. Consequently employment in the sector producing wage goods declines, as does the production of wage goods. Firms as a whole have fewer wage goods for the payment of workers and, since the unitary wage is fixed at the subsistence level, this produces a reduction in the demand for labour in both sectors. Therefore, the higher the rent/wage ratio, the higher the unemployment. It is called here “‘social waste related unemployment rate”.
The theoretical framework of the paper is the Veblenian theory of the business and financial cycle. Compared to similar, contemporary (K. Wicksell and I. Fisher) or later (H. Minsky and F. Vicarelli), models, the basic idea and the novelty are the identification of a gradual trend towards the financialisation of the economies. The core of the paper is represented by an econometric valuation, for OECD countries, during the period 1998-2009, that considers as regressors of investments, also a “financialisation” index concerning share and other equity of investment funds. A second econometric analysis is proposed to quantify the determinants of the process of financialisation, that in our interpretation depends also upon the relative profitability between finance sector and productive sector. The results of the analysis verify both the connection between real accumulation and financial accumulation, and the antinomy between the two sectors of an economy.
Veblen’s contribution to economic theory has received renewed interest (see, among others, Tilman, 2003), with particular reference to two distinct aspects. First, his approach to institutions – defined as a “special method of life and of human relations” (Veblen, [1889] 1975, 188) – has been re-proposed within the so-called new Institutionalism, with the aim of presenting a theory of economic behaviour (where instincts, habits, customs and transaction costs play a pivotal role) opposed to the mainstream “rational choice” view (see Hodgson, 1988). Second, attention has been devoted to his arguments on “conspicuous consumption” and emulation as well as the relation between consumption by the “leisure class” and the process of income distribution (see, among others, Bowles and Park, 2007). There is no doubt that Veblen provides significant economic and sociological categories which can also be useful in interpreting current macroeconomic dynamics, and that his theories on the functioning of the firm and on the path of income distribution are still relevant in the current context of global crisis. This special issue collects contributions of historians of economic thought, economists and sociologists specifically inte rested in using Veblen’s theories to interpret current phenomena. Marc-Andre Gagnon and Dimitri della Faille in “Thorstein Veblen, economiste iconoclaste” discuss the complexity of Veblenian thought, finding connections between biographical aspects of the American economist and the theoretical elements that characterize his works. In the central part of the article the authors analyze the theory of society’s socio-economic evolution and Veblen’s institutional theory highlighting the complex relationship that his thought has with the theory of evolution of C. Darwin and of H. Spencer. The article concludes with the lines of research that Veblen’s thought has left in inheritance to contemporary scholars. The contribution of John F. Henry sheds light on Thorstein Veblen’s political orientation. In the first section of “The political orientation of Thorstein Veblen” Henry provides a reconstruction of the Veblenian view on the functioning of a capitalist system, based on predatory exploitation by a ruling class over the working class, with selfless public welfare being interpreted as a political position close to Marx. In the second and final section of the article, the author shows that although Veblen did not consider himself Marxist and never openly declared his political position, he sympathized with the Bolshevik revolution and specifically observed the role of the soviet technician as a possible tool to overcome the inefficiency, waste and parasitism of the capitalist system. In conclusion the author points out the “marked similarity between the general theory of Marx and Veblen.”
In this paper, we support that public debt is the axis around which the whole credit system reproduces itself. At the macroeconomic level, the implications of this complex articulation between public and private debt is expressed through the two main purposes of monetary policy. Henceforth, central banks are enjoined to fight against the rise in the production prices of inputs, as well as, in the same time, to support the rise of securities on the financial markets. The policy of the Fed since the 2007 crisis clearly shows the conditions of realization as well as of the meaning of these two imperatives. This crisis management discloses indeed the subjection of the Treasury Department to the Fed and expresses the real content of the concept of “independence” of big central banks, namely the freedom of financial capital against public authorities.
This paper investigates the relevance of the no-Ponzi game condition for public debt (i.e. the public debt growth rate has to be lower than the real interest rate, a necessary assumption for Ricardian equivalence) and the transversality condition for the GDP growth rate (i.e. the GDP growth rate has to be lower than the real interest rate). First, on the unbalanced panel of 21 countries from 1961 to 2010 available in OECD database, those two conditions were simultaneously validated only for 29% of the cases under examination. Second, those two conditions were more frequent in the 1980s and the 1990s following changes towards more restrictive monetary policies. Third, in tune with the Keynesian view, when the real interest rate is higher than the GDP growth, it corresponds to 75% of the cases of the increases of the debt/GDP ratio and to only 43% of the cases of the decreases of the debt/GDP ratio (fiscal consolidation).
The aim of this contribution is to show the most controversial stylized facts that have led to contemporary crisis. The financialisation is described as a fundamental component of contemporary accumulation. The processes of financialization are not simply irregularities between the traditional categories of wages, rent, and profit, but rather a new type of accumulation adapted to the processes of social and cognitive production today. The process of valorization, i.e. the mechanisms of extraction of surplus value, moves beyond the factory gates, entering directly into the sphere of circulation of capital, the sphere of reproduction and distribution.
A basic hypothesis of this paper is that TNCs constitute a category of their own, based upon a centralisation of financial assets and a specific organisational structure (with the core role held by the holding company). TNCs can be defined as financial groups with industrial activities. Their business model has been deeply reshaped, as regards both their strategy and the management of their assets. Intangible assets, which make up the bulk of large TNCs’ stock capitalization, are analysed in this paper with the concept of goodwill (Veblen) and fictitious capital (Marx).
By analyzing the capitalist dynamics at work in the knowledge-based economy, cognitive capitalism has shown that the classical laws of value creation do not hold anymore. Rethinking the laws of value, however, is no easy task. The first section of this paper reconsiders Marx’s analysis of value, and demonstrates that Marx struggled by trying to mix two distinct and incompatible conceptions of value: the embodied labour approach and the social analysis of value. The paper argues that the former must be abandoned and that we need to focus only on the latter in order to better understand how value is being produced. To analyze the social production of value in cognitive capitalism, the second part of this paper builds on the case of the global pharmaceutical sector.
