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Francois, Patrick, and
Huw Lloyd-Ellis. 2003. "Animal Spirits Through Creative Destruction ."
,
93(3): 530-550.
Show Article Details
DOI: 10.1257/000282803322156972
Abstract:We show how a Schumpeterian process of creative destruction can induce rational, herd behavior by entrepreneurs across diverse sectors as if fueled by "animal spirits." Consequently, a multisector economy, in which productivity improvements are made by independent, profit-seeking entrepreneurs, exhibits regular booms, slowdowns, and downturns as part of the long-run growth process. Our cyclical equilibrium has higher average growth, but lower welfare than the corresponding acyclical one. We show how a negative relationship can emerge between volatility and growth across cycling economies, and assess the extent to which our model matches several features of actual business cycles.
Authors:
Francois, Patrick
Lloyd-Ellis, Huw
JEL Classifications:
:
None
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