Prices in Motion: Schumpeter's Contribution to Price Theory

25 Pages Posted: 12 Jun 2014

See all articles by Harry Bloch

Harry Bloch

Curtin University of Technology - Curtin Business School - School of Economics and Finance

Date Written: May 14, 2014

Abstract

Schumpeter distinguishes between the circular flow of economic activity and economic development. The former is characterised by equilibrium, while the latter involves discontinuous change that induces business cycles. Schumpeter argues that with development prices are generally in motion. Schumpeter’s theory of the business cycle has been heavily criticised. Specific criticisms relating to his price theory include its characterisation of prices stabilising near the Walrasian competitive equilibrium for a stationary economy and its prediction of a downward trend in prices over the longest cycles. This paper reviews Schumpeter’s theory and the critiques before suggesting a way forward to a revised theory of prices in motion.

Keywords: Schumpeter, Price theory, Evolutionary economics

JEL Classification: B25

Suggested Citation

Bloch, Harry, Prices in Motion: Schumpeter's Contribution to Price Theory (May 14, 2014). CRAE Research Paper No. 0052014. Available at SSRN: https://ssrn.com/abstract=2448636 or http://dx.doi.org/10.2139/ssrn.2448636

Harry Bloch (Contact Author)

Curtin University of Technology - Curtin Business School - School of Economics and Finance ( email )

Curtin University
GPO Box U 1987
Perth, 6845
Australia
+61 8 9266 2035 (Phone)
+61 8 9266 3026 (Fax)

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