Full text: Trend and Cycle

of the profit margin in the same way as in the case of process 
innovation in a single industry I treated before. 
If one considers the emergence of new and the disappearance of old 
industries this suggests a rather simple interpretation of 
maturity: A new industry will experience a phase of expansion 
while the circle of buyers and users of the new product widens up 
to a practical maximum. After that is reached growth of the output 
declines to the level of replacement demand.There is saturation. 
So,even without considering the case where the product goes 
entirely out of use, we have a general pattern of maturity as long 
as we consider individual industries only. The protagonists of the 
have tried to use this pattern to explain maturity for 
as a whole. For this purpose one has to assume either 
the existence of a dominant industry^or technique which, when it 
matures, drags the whole economy down in its own decline. Or else 
one has to assume that innovations transforming the whole economy 
appear in swarms so as to synchronise the life cycle of quite a 
number of industries which grow and decline uniso**o* 
This generalisation, in so far as one may be willing to accept it, 
only leads to further questions about the reasons for dominance or 
clustering of innovations. What is certainly true is that this 
type of maturity is relevant for the structural crises of 
important industries which become especially tragic when they are 
concentrated in certain regions. 
The question which concerns us here is whether the pattern of 
aggressive competition which I used in Maturity and Stagnation to 
describe the impact of process innovations on a single industry is 
still relevant in these cases of major product innovation. The 
answer is that all product innovations in due course lead to a 
succession of improvements of the production method as a natural 
consequence of the process of learning which proceeds as 
production goes on. Product innovation is followed by process 
innovation and a cheapening of the product which in turn permits 
the full exploitation of a potential market (Freeman 1982).This 
means that the picture which I drew of the role of aggressive 
competition in an industry is in principle relevant for all cases 
of product innovation, too.The reduction of the extra profits 
created by the innovation to a normal level depends on the 
aggressive competition of firms which are struggling for room in 
the market to match their capacity. The accent,however, is now 
strongly on the role of the new entrants which I neglected in my 
book . 
5 What do we expect of a theory of the cycle, what is it good 
for? There are economists who see not sense in it at all because 
every cycle is different, and the historical individuality 
precludes any generalisat ions.According to another opinion , 
diametrically opposed to the first, the theory ought to 
demonstrate the instability of capitalism under all 
circumstances,that is, also in the absence of exogenous 
disturbances. But in the world as it is,and with respect to a 
theory which, realistically speaking, can only contain a part of 
this world,there exist these exogenous disturbances; for practical 
J^ong wav^ 
the economy

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