Munich Personal RePEc Archive

Schumpeter's paradox reconsidered: The need for a theory of circular flow

Seo, Takashi (2021): Schumpeter's paradox reconsidered: The need for a theory of circular flow.

[img]
Preview
PDF
MPRA_paper_106802.pdf

Download (224kB) | Preview

Abstract

This study focuses on the well-known theme of Schumpeter’s system of economic theory. Specifically, the study discusses Schumpeter’s paradoxical stance on Walras’ general equilibrium theory, which Louçã (1997) called Schumpeter’s paradox. We reconsider the significance of the notion of circular flow in business cycle theory, after recognising the continuity from static to dynamic theory, and then to business cycle theory that integrates these theories. In doing so, we focus on the fact that Schumpeter called the equilibrium in the cyclical process a circular flow or a stationary process and proposed his own concept of neighbourhoods of equilibrium, which was not found in Walras’ general equilibrium theory. Through such an analysis, we propose that Schumpeter’s paradox is eased to some degree and that the theory of circular flow should be explored further.

Logo of the University Library LMU Munich
MPRA is a RePEc service hosted by
the University Library LMU Munich in Germany.