"Carry-on-Activity" and Process Innovation

Economic growth driven by the creation of new ideas, knowledge, and innovations is an interesting and challenging phenomenon to be modelled and analysed. Dominant approaches, like Romer’s endogenous growth models, Aghion-Howitt creative destruction growth models, RBC models, or the not so dominant ones, like that of the Neo-Austrians, of industrial structuralisms, or Nelson and Winter’s evolutionary theory, emphasize the need for modelling innovations in a comprehensive manner but fail to encapsulate the intrinsic indeterminacies of the innovational process in an insightful manner. Romer (1986, 1990, 1993), in his seminal works, has stressed the importance of modelling ideas and knowledge and showed how ideas can be encoded as information bit-strings, using the chemistry set metaphor. Zambelli (2004, 2005) developed the idea further, modelling an innovation process as a Turing Machine (TM) process and applied the TM metaphor within Romer’s endogenous growth model in an interesting way. But due to the time-less property of the production function, the dynamic interactions between the production and innovational processes could not be explored in detail. In this paper, we harness the intrinsic indeterminacies within the TM metaphor to model process innovations and analyse its dynamic interactions with the production processes within a time to build framework.