What is the Profit Cycle Theory in Economics?

It focuses upon the meso-level of industries, beneath the macro-level of the economy and above the micro-level of individuals and firms, and attempts to construct a historically dynamic approach. It has five sequential stages of profitability and competitive structure through which an industry will evolve with generalizable patterns of employment, locational behavior and local and regional development implications. Wave theories assert that internal change within regions is the explanation for local and regional development. Transitions between long waves occur through a process of what Schumpeter called “creative destruction”: downswings cause a ‘bunching’ of innovations and stimulate entrepreneurial activity to lay the foundations of structural change and a successive ‘techno-economic’ paradigm. It argues that aggregate growth figures at the local and regional level concealed hierarchical spatial structures of interrelations with implications for job quality and regional functional specialization. Capital accumulation and the social forces of class conflict are integral to Marxist political economy and emphasize the critical role of external forces in shaping economic and social change in localities and regions within the spatial division of labor.

The post What is the Profit Cycle Theory in Economics? appeared first on interaksyonph.