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Abstract: We propose a simple quantitative model of Schumpeterian economic dynamics.New goods and services are endogenously produced through combinations ofexisting goods. As soon as new goods enter the market they may compete againstalready existing goods, in other words new products can have destructiveeffects on existing goods. As a result of this competition mechanism existinggoods may be driven out from the market - often causing cascades of secondarydefects Schumpeterian gales of destruction. The model leads to a genericdynamics characterized by phases of relative economic stability followed byphases of massive restructuring of markets - which could be interpreted asSchumpeterian business `cycles-. Model timeseries of product diversity andproductivity reproduce several stylized facts of economics timeseries on longtimescales such as GDP or business failures, including non-Gaussian fat taileddistributions, volatility clustering etc. The model is phrased in an open,non-equilibrium setup which can be understood as a self organized criticalsystem. Its diversity dynamics can be understood by the time-varying topologyof the active production networks.



Author: Stefan Thurner, Peter Klimek, Rudolf Hanel

Source: https://arxiv.org/







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