| Abstract: | A stochastic model of technical change is presented that accounts for the profiles of important macroeconomic variables observed in the US economy since the Civil War: labor productivity, the productivity of capital, and the profit rate. No production function exists, and the viewpoint is that of evolutionary economics. Innovation is described as a random, non-biased process, controlled by two parameters. The techniques of production used are selected according to their profitability. Under the assumptions of a rising labor cost and a temporary variation in the profile of innovation, it is possible to reproduce the historical trends of each variable over the three subperiods, 1869-1920, 1920-1960, and 1960-1989. For example, the model explains why the productivity of capital and the profit rate displayed first a downward, then an upward, and again a downward trend. The treatment of a deterministic approximation of the model permits a thoroughly analytical discussion of the various configurations of the variables depending on the values of the parameters. |
