Two-dimensional Constrained Chaos and Time in Innovation: An analysis of industrial revolution cycles

         
Author Name YANO Makoto (Chief Research Officer, RIETI) / FURUKAWA Yuichi (Faculty Fellow, RIETI)
Creation Date/NO. February 2019 19-E-008
Research Project Evidence-based Policy Study on the Law and Economics of Market Quality
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Abstract

Many issues in cycles and fluctuations cannot be explained without multiple state variables. Time needed for innovation is one such issue. This study uncovers, and provides a new characterization for, ergodic chaos with two state variables and builds a model of innovation highlighting time in innovation and intellectual property protection. We demonstrate that the explosive industrial takeoffs and Kondratieff's long waves over the past two centuries and a half may be explained as a single equilibrium phenomenon. Time in innovation tends to stabilize chaotic innovation dynamics. Intellectual property protection is a necessary condition for chaotic takeoffs from the no-innovation phase.