The Intersection of Supporting Local Restaurants and the Impact of Innovation on Profits


Hatched by Glasp

Sep 05, 2023

4 min read


The Intersection of Supporting Local Restaurants and the Impact of Innovation on Profits


In these challenging times, it is more important than ever to support our local communities and businesses. One particular industry that has been heavily impacted by the COVID-19 pandemic is the restaurant industry. Restaurants, which are often the heart and soul of our communities, have faced numerous challenges, including closures, reduced capacity, and financial strain. To aid in their recovery, various initiatives and funds have been introduced, such as the Restaurant Workers' Community Foundation COVID-19 Emergency Relief Fund. In this article, we will explore the ways in which we can support local restaurants and communities while also delving into the impact of innovation on profits.

Supporting Local Restaurants and Communities:

1. Order Takeout or Delivery:

One of the most direct ways to support local restaurants is by ordering takeout or delivery. Many restaurants have adapted their operations to offer these services, allowing customers to enjoy their favorite meals from the comfort of their homes. By ordering from local restaurants, we not only satisfy our cravings but also help these establishments generate revenue during a time of decreased foot traffic.

2. Purchase Gift Cards:

Another way to support local restaurants is by purchasing gift cards. This not only provides immediate financial assistance to the restaurant but also allows you or your loved ones to enjoy a meal at a later date. Gift cards can also make great gifts for occasions such as birthdays or holidays, supporting local businesses while spreading joy.

3. Spread the Word:

Word-of-mouth can be a powerful tool in supporting local restaurants. Share your positive experiences with friends, family, and on social media platforms. Leave positive reviews online to help increase visibility and attract more customers. By becoming a vocal advocate for your favorite local eateries, you can contribute to their success and encourage others to support them as well.

The Impact of Innovation on Profits:

Innovation plays a crucial role in shaping profits and the overall economy. William Nordhaus, in his study "Who Gains from Innovation?", explores the implications of new technology on profits. He highlights three key aspects: the role of innovational profits in total profits, the impact of innovation on stock market returns, and the effect of technology on aggregate demand.

1. Capturing Social Returns:

The extent to which innovators can capture the social returns of innovation varies across industries. In sectors where knowledge is in the public domain, productivity improvements are often passed on to consumers in the form of lower prices. However, in industries with strong patents and well-defined products, such as pharmaceuticals, innovators have the potential to capture a significant portion of social gains in what Nordhaus refers to as "Schumpeterian profits."

2. Parameters of Schumpeterian Profits:

Nordhaus identifies three key parameters that determine the Schumpeterian profit margin: the rate of innovation-driven total factor productivity, the instantaneous appropriability ratio, and the depreciation rate on Schumpeterian profits. The instantaneous appropriability ratio measures the fraction of the social surplus captured by the innovator in the first year, while depreciation accounts for factors that erode these profits over time, such as patent expiration or non-enforcement, competition, and the introduction of superior goods and services.

3. The Greenspan Effect:

Nordhaus also explores the role of Schumpeterian profits in aggregate demand through the "Greenspan effect." This effect refers to the impact of rising productivity on consumption and overall economic growth. Nordhaus suggests that the Greenspan effect on aggregate demand through consumption is approximately one-quarter of the effect on potential output. This highlights the importance of innovation and its influence on economic prosperity.


Supporting local restaurants and communities is a vital endeavor, especially during times of crisis. By ordering takeout or delivery, purchasing gift cards, and spreading the word, we can contribute to the survival and recovery of our favorite local eateries. Simultaneously, understanding the impact of innovation on profits provides us with insights into the dynamics of our economy. As we navigate these challenging times, let us remember the importance of supporting local businesses and embracing innovation as a catalyst for growth and progress.

Actionable Advice:

  • 1. Make it a habit to order takeout or delivery from local restaurants at least once a week.
  • 2. Purchase gift cards from local restaurants for future use or as thoughtful gifts.
  • 3. Share your positive experiences with local restaurants on social media and leave reviews to help boost their visibility and attract more customers.

Remember, the choices we make today can have a lasting impact on the well-being of our communities and the businesses that define them. Let us come together and support our local restaurants during these challenging times.

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