NABET, NABET 2011

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A FRACTAL MODEL OF CREATIVE DESTRUCTION
Johnnie Burdette Linn

Last modified: 2011-09-07

Abstract


Under Joseph Schumpeter’s model of creative destruction, introduction of new products and industries does not increase the number of dimensions of the economic universe but causes changes in that universe as old products and industries are destroyed.  A fractal model is used to show how successive new products and industries occupy a hierarchy of niches in economic space.  Firms, industries, or commodities fill voids in a Sierpinksi triangle. The number of dimensions of a Sierpinski triangle can be deduced from the Herfindahl-Hirschman index of its voids. From observed Herfindahl-Hirschman indices of market concentration, the number of dimensions of the economic universe can be ascertained.  The number of dimensions is likely to be about 25.