New combinations in the economy and correction principle of 'creative destruction'

Abstract

The paper investigates and develops J. Schumpeter's approach to economic development. The author proposes the model of a new combination appearance and those possible consequences, which this introduction causes in economic system. The presented model shows that the emergence of a new combination (sector) is not based only on the resource withdrawing from the former combination, but it requires the creation of a new resource. Thereby, the principle of 'creative destruction' is modified and the principle of 'combinatorial augmentation' is suggested. Fundamentally the important condition for economic evolution is to create a new resource for the new combination, not just borrowing resources from the old combinations to the new ones. It has received basic conditions for financing of new combinations in the growth phase and depression of the economy. It has demonstrated the necessary condition for creation a new resource for the new combination by the numerical solution of optimization models, not just borrowing resource.