This page follows previous blog page https://journeau.net/2017/01/28/socialize-innovation-and-knowledge/ which observes that recent innovations in effect most disseminating, hence socializing knowledge, whether for or not-for-profit (e.g. Wikipedia) but all for free or nearly so, in effect grew in places reputedly most capitalist.
Revisiting the literature on innovation, its consequences on welfare growth but also its constraints, the next series of pages will summarize some aspects of our purported thesis and attempted model and description of the organizational – hence also societal, political, cultural – conditions allowing the emergence and success of innovation or conversely hampering it and treating it as a threat.
This last occurrence is more frequent than commonly believed, and even the standard model, explaining that innovation has so few chances to reach its potential markets. Then, effectively most “anti-innovation” – in spite of heavily preaching support to its cause – societies result in impoverishment of their citizens, members or shareholders.
This somehow naturally derives from Schumpeter’s “Creative Destruction“, which focuses on its benefits as opposed to the previous focus on drawbacks by Marx, discoverer of a distinct but thought comparable underlying process when wondering about “how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented“.[3]
Obviously the farm tractor has destroyed millions of manual harvesters jobs, the computer has destroyed as many jobs of secretaries and accounting clerks and the Internet brings a swarm of innovations still both destroying and creating jobs, think of reactions to Uber and Air-BnB for instance. But this was less “by the conquest of new markets” and rather by innovative, more efficient, new “productive forces“, of course then getting the markets.
However, there is still a lack of understanding and predicting modeling about the type of society enabling innovation, hence where new added value jobs will be concentrated, as opposed to those where traditional jobs will ultimately also be lost but without, or much less, the gain of numerous highly paid jobs, typically driven where innovation is sourced.
In the next pages of this blog series we will focus on the state of the art, where it is useful to highlight as a starter a most recent publication about “Schumpeter and Schumpeterians on Economic Policy Issues”[1]
A summary about the value of innovation is extracted from its article by Kurz [2], revisiting a critique of Ricardo by Schumpeter by recalling “Ricardo’s ‘fundamental law of distribution’, according to which a rise in the real wage rate implies a fall in the general rate of profits, given the system of production in use” and then about “the circular flow”, with “no technical progress”, recalling that “rents would rise and the general rate of profits [but possibly also the real wage rate] would tend to fall.”
This helps understand the distance between 19th century Marx and disciples’ quite pessimistic conclusion and even misinterpretation, as opposed to 20th century Schumpeter and followers: with a limited rhythm of innovation from applied sciences at their time, the former primarily observed strategies of capitalists to prevent overproduction, born from competition and its rush to lowest marginal cost, through destruction of excessive production, when oligopolistic arrangements were not possible or not even legal.
The later got much more opportunity and historical depth to observe that, beyond the adjustments within the circular flows – on which the former were focusing, hence possibly inclined toward monopolies – there was also and more importantly in each creation of novel production organization a better “system of production“, whatever its improved components, from organizational to other scientific fields new technologies.
The picture, opposite to Marx’, comes as follows: depending the rhythm of innovation and its growth rate the ‘winners’ are the new categories, people and countries or regions that most innovate and disseminate and therefore precisely undercut their insufficiently efficient, typically monopolistic or most often oligopolistic or protected markets.
Most importantly the established “circular flow’ owners, which might count those so-called ‘capitalists’, or ‘bourgeois’, or as well and much more state-owned production systems, will fight innovation, considered as a threat, or at least need to control it and compel its impact on their markets to fit with their existing organization. They will obviously, by so doing, hamper it and only contribute to prevent the society where they have such capacity, and possibly the world, to benefit from the innovation.
While this is for the most part or should be well known, it is useful to recall and emphasize it in this introduction of our goals, which are the modeling of the societal, political, organizational conditions, if any, under which innovation, especially so-called ‘disruptive’ – that is to say most ‘creative-destructive‘ – will still be allowed to emerge.
A corollary might come back to the Marxian conclusion about the generalized, asymptotic decrease of the rate of profits. This kind of ‘heat death’ might derive from innovation becoming treated as a threat at global level but otherwise the decrease is rather on wages, in those places and categories of people and societies not yet, or not anymore, allowed or endowed or incited to contribute, by leaping, to the overwhelming innovative civilization.
One critical point for Schumpter was the capacity, characteristics and environment of the entrepreneur. These are important, and at stake in our next pages, but to be relativized to the cultural, political and regulatory environment where they may, or may not, operate.
[1] http://unice.fr/laboratoires/gredeg/contenus-riches/actualites/seminaires/numero-special-du-journal-of-evolutionary-economics, Vol.27, 2017
[2] H.D. Kurz, Is there a Ricardian Vice?, Infra
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