The Entrepreneurial Multiplier

Louis Galambos and Franco Amatori

Since the Keynesian revolution in economics, a standard part of the profession’s analytical framework and an argument for government support for investment has been the multiplier concept.  This classical multiplier works through consumption in an equilibrium model.  Our contention is that there is also an Entrepreneurial Multiplier that works directly through investment by incentivizing or forcing investments in innovation in a dynamic, disequilibrium model.  These investments have been analyzed as “spill-overs” or “bottlenecks” or Schumpeter’s style of emulation.  We suggest that the surges of innovation in capitalism were even broader than Schumpeter contended and that they can best be explored using a multiplier paradigm.  We start that exploration by briefly examining selected patterns of entrepreneurship in the first, second, and third industrial revolutions.  Our emphasis is on the sequences of innovations, the manner in which they are multiplied, and their economic, cultural and political consequences.  We have begun to add a comparative element to a paper that began as an American history and we have made considerable headway with the first industrial revolution in Lombardy.  We will add analyses of European innovations in aluminum and 3D manufacturing as this work progresses.