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from Part II - A Positive Theory for Complexity Economics
Published online by Cambridge University Press: 03 November 2022
This chapter is the final component of this book’s complexity theory of economic evolution, but not the least: it brings together all the elements developed in previous chapters to build a general macro theory of innovation and economic growth. As debated in Chapter 3, in economic theory, there is no real consensus across schools on the nature of growth. There is, however, consensus on the idea that growth originates from the cumulative effect of innovation. In Chapter 8, a theory of creative destruction was developed that explains, at the very least, productivity growth from cumulative process innovation. To a lesser degree, it explains product innovation and product diversity growth. In this chapter, it is shown that process and product innovation have a co-evolutionary role in generating economic growth in a demand-led model of economic evolution. From there, a closed set of relationships is derived to represent the macroeconomic connection and causation between innovation, productivity, employment, production, investment and demand, offering a complete model of endogenous economic growth based on innovation.
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