This book moves from the consideration that the dominant equilibrium theory is not suited to deal properly with economic changes like innovation and growth, which are, in the nature of structural changes, taking place through processes in real time. It proposes an alternative out‐of‐equilibrium analytical framework that requires a reconstruction of the basic analytical blocks of an economic paradigm. These building blocks (production, money, the human resource, and the market) are analysed in the first part of the book. This makes it possible to look at economic change as a process sketched ou ... More

This book moves from the consideration that the dominant equilibrium theory is not suited to deal properly with economic changes like innovation and growth, which are, in the nature of structural changes, taking place through processes in real time. It proposes an alternative out‐of‐equilibrium analytical framework that requires a reconstruction of the basic analytical blocks of an economic paradigm. These building blocks (production, money, the human resource, and the market) are analysed in the first part of the book. This makes it possible to look at economic change as a process sketched out by the way in which successive disequilibria between supply and demand interact sequentially at each moment of time and over time. Whereas in equilibrium models the evolution of the economy is determined by the ‘fundamentals’ (technology, preferences, and institutions), here the outcome is heavily influenced by how the process of change itself develops, the sequential decisions taken, and the policies followed. The main analytical issue appears to be, then, the viability of the economic process through which change takes place and the coordination mechanisms required to assure it, rather than the nature of the original shock. The model proposed in the second part of the book is a heuristic tool that makes it possible to explore various alternative evolution paths of the economy, as the result of different kinds of real and monetary shocks. The main result that emerges is that central phenomena—growth, unemployment, and inflation—are neither exclusively demand side nor exclusively supply side issues. They essentially depend on how the different factors involved are coordinated over time. In this light, policy recommendations appear entirely different and in some cases, opposite to those advocated by the dominant equilibrium theory, thus giving a new perspective on the recent past of the western economies.