The role of destructive mechanisms within economic evolution
Agnieszka Lipieta,Artur Lipieta +1 more
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TLDR
In this article , the Arrow?Debreu model is used to model some mechanisms that may appear within economic evolution, and it is shown that it is possible to design a mechanism that would transform the economic system under consideration toward a state of equilibrium without making the positions of any agents worse off.Abstract:
This research is inspired by Joseph Schumpeter?s understanding of economic
evolution. In his view, innovations promote economic development, whereas
imitations promote the diffusion of innovations, leading the economy through
a process that he defines as "creative destruction." A host of economists
tend to agree on the importance and consequences of innovations and
imitations within economic processes; however, opinions regarding creative
destruction tend to differ. One view purports that creative destruction
serves as a main variable, pushing the capitalist economic system toward
equilibrium through imitation processes. A contrary view suggests that an
equilibrium state actually promotes economic growth. Within this context,
our research aims to model some mechanisms that may appear within economic
evolution. Hurwicz?s concept of economic mechanisms is introduced in a
modified Arrow?Debreu model, as a way of examining Schumpeter?s ideas on the
role of creative destruction in economic processes that does not decrease
the positions of agents. In relation to this, the present work suggests that
it is indeed possible to design a mechanism that would transform the
economic system under consideration toward a state of equilibrium, without
making the positions of any agents worse off.read more
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