The System Dynamics of Collective Knowledge: from Gradualism and Saltationism to Punctuated Change.

The economics of localized technological change provides an original framework to model the dynamics of introduction of new technologies as the result of the interaction between the inducement to change the technology, generated by the mismatch between plans and expectations, and the characteristics of the system. Collective knowledge emerges when knowledge widening leads to knowledge deepening. The interplay between networking costs and knowledge supermodularity can explain both punctuated and gradual change. Smooth, Marshallian dynamics can easily generate major Schumpeterian discontinuities. The divide between the theories of discontinuous and gradual growth can be reconciled when the essence of the Schumpeterian and Marshallian approach is properly combined. Small variations in the parameters can generate either gradual or discontinuous changes. Punctuated technological change is likely to take place when the interplay between positive and negative knowledge externalities leads to the creation of commons of collective knowledge and hence new technological systems. The correct appreciation of the interactions between individual action and the characteristics of the environment makes room for a system dynamics framework able to explain in a single context both Marshallian gradualism and Schumpeterian saltationism.