Working Papers in Economics
Why Does Technology Advance in Cycles?
Abstract: Long-run technological progress is cyclical because
drastic innovations that introduce new technological opportunity are only
profitable at times when repeated incremental innovation has nearly
exhausted existing technological opportunity and driven entrepreneurial
profit and income growth towards zero. The article presents a
’technological opportunity model’ where endogenous drastic and incremental
innovations interact with exogenous discoveries in an idealized metric
technology space. New ideas are created by convex combinations of existing
ideas. Diminishing technological opportunity results in lower profits and
growth, which then makes costly and risky drastic innovations profitable
again. This relationship between intense drastic innovation intensity and
poor levels of economic growth receives some empirical support.
Keywords: technology; growth; long waves; cycles; techno-logical paradigms; innovations; (follow links to similar papers)
JEL-Codes: E37; O11; O31; (follow links to similar papers)
33 pages, March 21, 2001
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