Evolutionary Selection and Keynes–Schumpeter Macroeconomics

This Element is a proposal for a new Keynes–Schumpeter approach to macroeconomics with co-evolving demand and supply.

This Element mentions the development of a stock-flow consistent agent-based macroeconomic model with Schumpeterian and Keynesian characteristics. In the long run, an evolutionary stable R&D strategy of firms emerges, leading to endogenous productivity growth. This title is also available as Open Access on Cambridge Core.This Element develops a stock-flow consistent agent-based macroeconomic model with Schumpeterian and Keynesian characteristics. On the Schumpeterian side, technological change is modelled as productivity growth as a result of research and development (R&D). The R&D strategies of firms are determined by an evolutionary selection process. On the Keynesian side, demand is endogenous on current income and the stock of households' financial wealth. In the long run, an evolutionary stable R&D strategy of firms emerges, leading to endogenous productivity growth. Demand adjusts endogenously to match labour-saving productivity growth, so that the employment rate is stationary, although with business cycle fluctuations. The authors use Monte Carlo simulations to analyze the emergence of an evolutionary stable R&D strategy, as well as the long-run properties of the model and the nature of business cycles. This title is also available as Open Access on Cambridge Core.