Abstract

SOLIS ROSALES, Ricardo  and  CRUZ ROMERO, Miguel Angel. Circular Flow and Economic Development in the Monetary Thought of Joseph Alois Schumpeter. Econ: teor. práct [online]. 2021, n.54, pp.17-36.  Epub July 02, 2021. ISSN 2448-7481.  https://doi.org/10.24275/etypuam/ne/542021/solis.

The objective of the paper is to examine, from a theoretical perspective, the incidence of the money-investment-innovation triad in Schumpeter’s theory of development. In comparison with the circular flow, development implies the appearance of new agents and concepts. The credit created by banks is a substitute for the savings in financing the accumulation, therefore, the conditions under which the savings and investment mechanism evoked by the classic authors change. In the development there are banks that provide capital in exchange for an interest, and there are innovative entrepreneurs who use it. This means that the investment is not financed with savings but with bank credit, created “out of nothing” so in a first interpretation its volume seems to be unlimited. Implementation of innovation implies increased capital, new prices and the emergence of positive bank interest derived from equally positive profits for companies.

Keywords : Savings; credit; innovation; investment; monetary disequilibrium; B1; E22; E40; O31.

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