Analysis of the Interaction Between Endogenous Technological Innovation, Institutional Regulation, and Economic Long Wave: A Perspective from Nonlinear Dynamics

The capitalist economy has experienced several economic long waves after the industrial revolution. The previous explanations for their causes have primarily focused on a single factor such as technology or institution, which has limitations and flaws. In this paper, the cause of economic long waves is explained by employing the nonlinear interaction and nonequilibrium evolution mechanisms in complex economics. Moreover, the relationships between endogenous technological innovation, institutional regulation, and economic long waves are examined. The research results show that technological innovation is driven by the economic long wave movement. In particular, the phases of depression, recovery, and prosperity within these waves may serve as catalysts for further innovation. The free market can exhibit endogenous instability. The dual regulation of productive and distributive institutions can ensure stable and efficient economic development and achieve broad social benefits. However, in a context of individual decentralized decision making, the institutional structures often deviate from the optimal outcome. This deviation, to a certain extent, leads to structural economic crises. The integration and interaction between technological innovation and institutional regulation jointly drive the long wave movement and the accumulation cycle of the economy. This paper proposes a feasible method for studying economic long waves, offering insights that could promote sustainable and robust economic development.