Innovation, Real Primary Commodity Prices and Business Cycles
MetadataShow full item record
Schumpeter emphasizes the role of innovation in explaining long-run economic development. This contrasts to the emphasis on scarcity in classical and neoclassical models. Our research shows the fruitfulness of Schumpeter’s approach in explaining movements in real prices of primary commodities since 1650. In models that emphasize resource scarcity, rising real prices of these products are identified as limiting growth. However, in examining the historical data we find a dominance of negative price trends across individual commodities, particularly when allowing for long-run cyclical behavior. We then provide examples to show how innovations for particular commodities have contributed to the negative price trends. Overall, innovation has meant that increased supplies of primary commodities have been available at reduced real prices, thereby providing a positive contribution to growth. Of course, as Schumpeter suggests, the development process associated with innovation is uneven, so price movements are heterogeneous across long-run cycles and commodities.
Showing items related by title, author, creator and subject.
Bloch, Harry; Fraser, Patricia; MacDonald, Garry (2012)We consider the response of both nominal and real commodity prices on world markets to real and nominal shocks by hypothesizing that nominal shocks can permanently affect nominal commodity prices, but can have only temporary ...
Bloch, Harry; Fraser, P.; MacDonald, Garry (2009)We consider the response of both nominal and real commodity prices on world markets to real and nominal shocks by hypothesizing that nominal shocks can permanently affect nominal commodity prices, but can have only temporary ...
A numerical study for a mining project using real options valuation under commodity price uncertaintyHaque, M; Topal, Erkan; Lilford, Eric (2014)Commodity price is an important factor for mining companies, as price volatility is a key parameter for mining project evaluation and investment decision making. The conventional discounted cash flow (DCF) methods are ...