The empirical side of the project will focus on specific sectors, mainly biotechnology and the emerging green technology sector, as well as related macro aggregates.
Core questions will centre around:
- Understanding the relationship between financial markets and the real economy, specifically the degree to which financial markets penalize innovation and value creation rather than reward it;
- Understanding the relationship between new investment flows and the value and rate of profit of the existing capital stock; investigating its implications for the profitability of new technologies, and their investment-attractiveness to firms and financial institutions;
- Understanding the relationship between publicly funded early-stage research and development (R&D) and privately funded commercialization of innovative enterprise and its intellectual property rights;
- Understanding the ‘external economies’ (of networking and clustering) which promote the growth of innovative companies and innovation-sponsoring investment groups, and connect the two; and
- Evaluating the possibilities for world-wide economic recovery around a new green growth trajectory, and new financial institutions and instruments geared to it.
The goal of this project is to identify the micro-level obstacles to channeling of investment into new growth-promoting technologies and the macro-level effects of disruptive innovation, by applying Minsky’s insights on financial innovation and the Evolutionary-Schumpeterian insights on “real sector” innovations. Given institutional barriers worsened by the financial crisis, the role of the government must increase. However, exactly how the government can play that role, and how it can encourage private finance, is an open question to be addressed by this study. Finally, the role of government at the macro level for the generation of adequate demand and aggregate profits will be discussed. For example, in spite of subsidies provided to green tech we are currently witnessing failures due to the macroeconomic environment in which firms operate. This macroeconomic environment can, in turn, be destabilized by micro-level financial innovation around new technologies – as it was, for example, when finance mobilized behind ‘new economy’ enterprise which became the Dot-Com bubble of 2000-01, and when private equity groups evolved into highly leveraged shadow banks before the larger crash of 2008. The Keynes/Minsky approach (with input from Godley’s sectoral balance approach) will be used to assess the important role played at the macro level by government.