Editing Idea:Carlota Perez: Technological Revolutions and Financial Cycles (section)

= Carlota Perez: Technological Revolutions and Financial Cycles =

== Core Perspective ==

Carlota Perez provides a framework for understanding how technological revolutions unfold in predictable patterns, creating waves of creative destruction that systematically devalue old assets while generating new wealth. Her model explains why technological deflation occurs in surges rather than smoothly, and how financial capital and production capital dance through boom, bust, and golden age phases.

== The Revolutionary Pattern ==

=== Five Technological Revolutions ===

# '''Industrial Revolution''' (1771): Mechanization, factories, canals
# '''Age of Steam''' (1829): Railways, steam power, coal
# '''Age of Steel''' (1875): Electricity, heavy engineering
# '''Age of Oil''' (1908): Mass production, automobiles
# '''Age of Information''' (1971): Computers, telecoms, internet

=== Four Phases of Each Revolution ===

# '''Irruption''': Technology emerges, old economy continues
# '''Frenzy''': Financial speculation, bubble formation
# '''Turning Point''': Crisis, crash, reconfiguration
# '''Deployment''': Golden age, full potential realized

== The Deflation Dynamics ==

=== Installation Period (Irruption + Frenzy) ===
* '''Creative destruction accelerates''': Old industries collapse
* '''Asset bubble inflation''': Financial assets soar
* '''Real economy deflation''': Old products lose value
* '''Inequality surges''': Winners vs. losers diverge

=== Deployment Period (Post-crisis) ===
* '''Broad-based deflation''': New tech becomes cheap
* '''Productivity surge''': Full benefits realized
* '''Institutional alignment''': Regulations catch up
* '''Shared prosperity''': Benefits spread widely

== Value Creation and Destruction Patterns ==

=== During Frenzy Phase ===

#### What Gets Destroyed
* Traditional business models
* Old industry employment
* Established competencies
* Physical infrastructure value
* Social contracts

#### What Gets Created
* New industry champions
* Financial innovations
* Experimental business models
* Speculative wealth
* Future potential

=== During Deployment Phase ===

#### Value Stabilization
* Standards emerge
* Competition normalizes
* Prices find floor
* Quality improves
* Access broadens

== Impact on Different Stakeholders ==

=== Financial Capital ===
* '''Frenzy''': Decouples from production
* '''Bubble''': Massive paper wealth
* '''Crash''': Reality reasserts
* '''Deployment''': Reconnects with real economy

=== Production Capital ===
* '''Early''': Struggles for funding
* '''Frenzy''': Overinvestment in new
* '''Crash''': Shakeout and consolidation
* '''Deployment''': Sustainable growth

=== Workers ===
* '''Installation''': Job destruction, skill obsolescence
* '''Turning point''': Maximum pain
* '''Deployment''': New jobs, rising wages
* '''Golden age''': Broad prosperity

=== Government ===
* '''Laissez-faire''': During frenzy
* '''Crisis response''': After crash
* '''Regulatory reform''': New frameworks
* '''Active management''': Golden age policies

== The Current Revolution Analysis ==

=== Where Are We Now? ===

Perez suggests we're in late frenzy/turning point:
* '''Multiple bubbles''': Dot-com, housing, crypto, AI
* '''Institutional lag''': Regulations outdated
* '''Inequality extreme''': Benefits concentrated
* '''Potential visible''': But not realized

=== What Comes Next? ===

If pattern holds:
# '''Major crisis''': Financial reckoning
# '''Regulatory overhaul''': New social contract
# '''Deployment phase''': 2030s-2040s
# '''Golden age''': Broad prosperity possible

== Critical Quote ==

"Each technological revolution brings a paradigm shift not only in production and business organization but in governance, society, and even ideology and culture."

== The Deflation Paradox Explained ==

=== Why Deflation Comes in Waves ===

Perez's model explains:
# '''Technology clusters''': Innovations arrive together
# '''Investment cycles''': Capital flows create bubbles
# '''Institutional resistance''': Old systems fight change
# '''Crisis necessity''': Clearing required for progress
# '''Social learning''': Adaptation takes time

=== Asset Inflation vs. Goods Deflation ===

During technological revolutions:
* '''Financial assets''': Inflate during frenzy
* '''Consumer goods''': Deflate eventually
* '''Temporal mismatch''': Bubble precedes benefits
* '''Distribution problem''': Gains concentrated first

== Policy Implications ==

=== For Financial Regulation ===
* '''Bubble prevention futile''': Part of process
* '''Focus on aftermath''': Prepare for deployment
* '''Systemic risk management''': Contain contagion
* '''Patient capital''': Support long-term innovation

=== For Industrial Policy ===
* '''Don't pick winners''': During irruption
* '''Infrastructure investment''': During deployment
* '''Education critical''': Reskilling for new economy
* '''Standards helpful''': After shakeout

=== For Social Policy ===
* '''Safety nets essential''': During transition
* '''Redistribution necessary''': After frenzy
* '''New institutions''': Match new technology
* '''Golden age possible''': But requires action

== Connection to Other Economists ==

=== Building on Schumpeter ===
* Adds financial dimension
* Explains timing patterns
* Shows institutional role
* Predicts social cycles

=== Complementing Christensen ===
* Macro vs. micro view
* Systemic vs. firm level
* Historical patterns
* Financial role emphasized

=== Contrasting with Gordon/Cowen ===
* More optimistic long-term
* Sees deployment ahead
* Patterns repeat
* Golden age achievable

== Implications for Current Situation ==

=== The AI Revolution ===

Following Perez's framework:
# '''Irruption''': 2010s (deep learning breakthrough)
# '''Frenzy''': 2020s (AI bubble forming)
# '''Turning point''': Late 2020s? (Crisis ahead?)
# '''Deployment''': 2030s-2040s (Full benefits)

=== What This Means ===

For Deflation:
* '''Acceleration coming''': After turning point
* '''Broad-based''': Not just information goods
* '''Service automation''': Finally possible
* '''Abundance potential''': If managed well

For Stakeholders:
* '''Businesses''': Prepare for shakeout
* '''Workers''': Reskill urgently
* '''Investors''': Bubble awareness
* '''Policymakers''': Ready reforms

== Key Insights ==

=== Understanding Technological Deflation ===

# '''It's cyclical''': Not smooth or continuous
# '''Finance matters''': Capital allocation crucial
# '''Institutions lag''': Always behind technology
# '''Crises necessary''': Clear out old, enable new
# '''Golden ages possible''': But require work

=== Navigating the Revolution ===

* '''Timing matters''': Where in cycle determines strategy
* '''Bubbles inevitable''': Part of the process
* '''Regulation crucial''': For deployment success
* '''Distribution key''': Benefits must spread
* '''History rhymes''': Patterns repeat with variations

== The Ultimate Message ==

Perez offers hope: technological revolutions ultimately deliver broad prosperity and declining real prices, but only after financial excess, crisis, and institutional reform. We're not condemned to permanent stagnation or inequality - but achieving the golden age requires understanding where we are in the cycle and taking appropriate collective action.

[[Category:Person/Economist]]
[[Category:Perez]]
[[Category:Technological Revolutions]]
[[Category:Financial Cycles]]
[[Category:Bubbles]]
[[Category:Deflation]]
[[Category:Technological Revolutions]]
[[Category:Business Cycles]]