Technological Revolutions and Financial Capital by Carlota Perez Summary

Technological Revolutions and Financial Capital examines how financial markets and technological innovations drive economic cycles. Perez argues that each technological revolution (e.g., steam engines, information age) triggers an "installation phase" of speculative investment, followed by a market crash, then a "deployment phase" of sustained growth. The book links financial bubbles to technological diffusion, using 200+ years of economic history as evidence.

Economists, policymakers, and business leaders analyzing tech-driven economic shifts will benefit most. It’s also valuable for investors studying market cycles or students exploring innovation economics. Perez’s framework helps readers understand modern challenges like AI regulation and green energy transitions through historical patterns.

Yes — it’s acclaimed for blending rigorous analysis with actionable insights. The book won praise for predicting the 2008 crisis and remains relevant to debates on cryptocurrency, automation, and sustainable growth. Its five-phase model is widely cited in tech policy and economic research.

Perez identifies two main phases:

• Installation: New technologies attract speculative investments, decoupling financial markets from real productivity.
• Deployment: Post-crash reforms enable broad adoption, creating lasting growth.

These phases repeat across five historical revolutions, from steam power to digital tech.

Bubbles form during the "frenzy" sub-phase of installation, as investors overvalue unproven technologies. Perez shows how railroads (1840s), electricity (1920s), and dot-com (1990s) booms all followed this pattern, with crashes resetting the system for sustainable growth.

A techno-economic paradigm is the infrastructure, skills, and regulations needed to maximize a revolution’s potential (e.g., highways for automobiles). Perez argues mismatches between old paradigms and new technologies create economic turbulence until institutions adapt.

While Schumpeter focused on "creative destruction," Perez adds financial dynamics. She shows how speculation accelerates initial tech adoption but requires later regulatory intervention to prevent inequality and instability.

1. Industrial Revolution (1771)
2. Steam/Railways (1829)
3. Steel/Electricity (1875)
4. Mass Production/Automobiles (1908)
5. Information/Digital Tech (1971)

Each lasted 40-60 years and reshaped global economies.

During installation phases, stock prices detach from company fundamentals as investors bet on future tech potential. For example, 1990s dot-com valuations ignored profit metrics, mirroring 1920s auto industry speculation.

The book’s framework explains current AI/blockchain speculation as part of the ongoing information revolution’s installation phase. Perez suggests upcoming regulatory shifts could channel these technologies into a sustainable "green golden age".

Some economists argue her model oversimplifies regional differences or underestimates political factors. However, most praise its predictive power, especially regarding post-crisis recoveries like the 2008-2012 tech resurgence.

Perez explores modern applications in her upcoming book The Social Shaping of Technological Revolutions and through her work at University College London’s Institute for Innovation and Public Purpose.