Editing Joseph Schumpeter (section)

===Cycles and long wave theory===
Schumpeter was the most influential thinker to argue that long cycles are caused by innovation and are an incident of it. His treatise on how business cycles developed was based on Kondratiev's ideas which attributed the causes very differently. Schumpeter's treatise brought Kondratiev's ideas to the attention of English-speaking economists. Kondratiev fused important elements that Schumpeter missed. Yet, the Schumpeterian variant of the long-cycles hypothesis, stressing the initiating role of innovations, commands the widest attention today.<ref name="ReferenceB">Freeman, Christopher, ed. Long Wave Theory, International Library of Critical Writings in Economics: Edward Elgar, 1996</ref>
In Schumpeter's view, technological innovation is the cause of both cyclical instability and economic growth. Fluctuations in innovation cause fluctuations in investment and those cause cycles in economic growth. Schumpeter sees innovations as clustering around certain points in time that he refers to as "neighborhoods of equilibrium" when entrepreneurs perceive that risk and returns warrant innovative commitments. These clusters lead to long cycles by generating periods of acceleration in aggregate growth.<ref>Rosenberg, Nathan. "Technological Innovation and Long Waves." In Exploring the Black Box: Technology, Economics, and History, 62–84. Cambridge, UK: Cambridge University Press, 1994.</ref>

The technological view of change needs to demonstrate that changes in the rate of innovation govern changes in the rate of new investments and that the combined impact of innovation clusters takes the form of fluctuation in aggregate output or employment. The process of technological innovation involves extremely complex relations among a set of key variables: inventions, innovations, diffusion paths, and investment activities. The impact of technological innovation on aggregate output is mediated through a succession of relationships that have yet to be explored systematically in the context of the long wave. New inventions are typically primitive, their performance is usually poorer than existing technologies and the cost of their production is high. A production technology may not yet exist, as is often the case in major chemical and pharmaceutical inventions. The speed with which inventions are transformed into innovations and diffused depends on the actual and expected trajectory of performance improvement and cost reduction.<ref name="jstor.org">{{cite journal |last=Mansfield |first=Edwin |date=May 1983 |title=Long Waves and Technological Innovation |journal=The American Economic Review |volume=73 |issue=2 |pages=141–145 |jstor=1816829}}</ref>