CANTILLION EFFECT, JOSEPH SCHUMPETTER'S THEORY OF ECONOMIC DEVELOPMENT AND THE IMPACT OF INNOVATION ON WELFARE
Abstract
The article considers the problems of the impact of innovation activity on indicators of economic development and economic welfare. In the economic literature, innovation is mainly defined as one of the key factors of economic growth and increasing of productivity. However, there are a number of separate studies that indicate some negative consequences of innovation activity. But they do not have a general theoretical basis. Hence, the article analyzed the possible consequences of the impact of innovation activity on the state of market equilibrium. The approach used is based on the definition and classification of innovations according to the concept proposed by Schumpeter's development theory. The one mathematical model based on an approach to creating new value, known as the Cantillon effect, is proposed using analysis using the Irving Fisher’s formula. The second and third models focus on endogenous growth factors. The third model can also be used to assess the value of new knowledge. Therefore, applying a price premium as a bonus for invention and teaching other members of the community new knowledge is a completely justified mechanism for society to reward the inventor for introducing innovations. In general, mathematical models are considered that can provide a more specific theoretical explanation of the impact of various types of innovations on changes in the general equilibrium and economic welfare indicators. The possible social consequences of using the processes of "creative destruction" are also outlined. The consequences for the economy may differ somewhat in a market or command economy. The considered models show that in real economic processes the power of the agent making the decision in a command-and-administrative system or the results of accumulated past labor (capital) and the position of their managers (agents, creditors) in a market system are more decisive. Therefore, the decisive factor is not the choice of consumers and their preferences at all, as economic theory suggests.
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