Financing Innovation: An Application of a Keynes-Schumpeter-Minsky Synthesis

This research project integrates two research paradigms to understand the degree to which financial markets can be reformed in order to nurture value creation and :capital development” rather than value extraction and destruction.

Do financial innovations support value creation in the real economy or simply extract value from the real (productive) economy, thus undermining the value creation (and capital development) process? This project brings two visions together to provide rigorous analysis of competition in the financial sphere and how it interacts with competition in the industrial sphere. The first vision, called the Keynes-Minsky vision, puts effective demand front and center of economic analysis, and the second, Schumpeter-Minsky vision places innovation at the center of competition theory rather than relegated to the periphery of imperfect competition. This new framework helps to better understand the difference between creative destruction and destructive creation and its applicability to new periods of economic growth such as that which will hopefully result from the green technology revolution.