Comments on: Business Cycle Theory Explained by Joseph Schumpeter

By: At what point in Schumpeter time does Newmark’s original heresy become network orthodoxy in the bureaucrats boardroom? » Out With A Bang

Sun, 24 May 2009 18:33:15 +0000

[...] My first stop was here… http://www.dailyreckoning.com.au/business-cycle-joseph-schumpeter/2008/10/02/ [...]

By: Kanwaldeep

Kanwaldeep — Thu, 04 Dec 2008 04:52:40 +0000

Well, first we have to realise that the boom cycle is very long, eg the last one in US lasted from 1982 to 1999 ,, In such a boom cycle everything works - monetary policy works, intervention works , complex financial products work -- simply because the whole economy is undergoing a sea-change ... there are localized interruptions lasting for maybe one to two years at max (eg 1991) , but Fed intervenes and is apparently able to correct the problem ignoring the fact that we are in midst of an innovation boom ,, but after the so called schumpeterian boom has run its course,,the last of the immitators do nothing but waste money leading to a final announcement of sorts that the long innovation cycle is over,, but the Fed again tries intervention policies but they simply fail to work properly - to correct the bust Fed pumps in money but that money instead of being absorbed by the economy makes its way into asset inflation, the fed applies brakes, people slowly realise that prices just wont continue to rise indefinitely pull back and then there is another bust - and again everyone goes running to the fed for relief leading to another temporary boom and bust ... till another bunch of innovators come to the rescue ....

By: John

John — Thu, 02 Oct 2008 17:03:29 +0000

Innovation explains booms, but not busts. Say the world comes out with a new technology that increases productivity. At first, as business implement this technology, there is a significant increase in economic growth. Eventually, as the technology becomes saturated, growth slows back down to normal levels. However, there is no explanation as to why this process would lead to negative growth.