Schumpeterian Profits in the American Economy: Theory and Measurement

28 Pages Posted: 30 Apr 2004

See all articles by William D. Nordhaus

William D. Nordhaus

Yale University - Department of Economics; Cowles Foundation, Yale University; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2004

Abstract

The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. We first show the underlying equations for Schumpeterian profits. We then estimate the value of these profits for the non-farm business economy. We conclude that only a miniscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.

Keywords: Schumpeter, profits, innovation

JEL Classification: 030, 031, 04

Suggested Citation

Nordhaus, William D., Schumpeterian Profits in the American Economy: Theory and Measurement (April 2004). Cowles Foundation Discussion Paper No. 1457. Available at SSRN: https://ssrn.com/abstract=537242

William D. Nordhaus (Contact Author)

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Cowles Foundation, Yale University ( email )

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