Economics Dictionary of ArgumentsHome
| |||
|
| |||
| Creative destruction: Creative destruction, coined by Joseph Schumpeter, describes the process where innovation leads to the destruction of old economic structures and the creation of new ones. Essentially, new technologies and business models replace outdated ones, driving economic progress. See also Disruption, Technical progress, Innovation._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
| Author | Concept | Summary/Quotes | Sources |
|---|---|---|---|
|
Joseph A. Schumpeter on Creative Destruction - Dictionary of Arguments
Sobel I 13 Disruption/Creative destruction/Schumpeter/Sobel/Clemens: ((s) Schumpeter does not use the term disruption) „The fundamental new impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates … that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.“(1) Creative destruction*/Schumpeter/Sobel/Clemens: In Schumpeter’s words it is the creation of a new combination of resources. We also think of it as progress—something that makes the future better than the past: like the invention of the time-saving clothes dryer, microwave oven, or the rapid transportation afforded by the airplane. What we do not always remember is that it is destructive in that the old way of doing things often dies off as a result. Perhaps the most well-known contribution of Joseph Schumpeter is his discussion of this evolutionary process and the term “creative destruction” that he used to describe it in his 1942 book Capitalism, Socialism, and Democracy (CSD)(1)*. (…) examples of Schumpeter’s process of creative destruction: Perhaps the most frequently used is the case of the automobile replacing the horse and buggy. Sobel I 14 Creative destruction/Schumpeter: „The essential point to grasp is that in dealing With capitalism we are dealing With an evolutionary process ... Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary ... The fundamental new impulse that sets and keeps the capitalist engine in motion comes from the new consumers' goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates ... the same process of industrial mutation ... that incessantly revolutionizes the economic structure from within, incessantly destroying the Old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in ... Every Piece of business strategy acquires its true significance only against the background of that process and within the situation created by it.“ (CSD: 82—84)(1) Sobel I 15 Sobel/Clemens: Schumpeter himself was much more concerned with the market system as a process than any specific outcome it may generate at a point in time -and to him, this process is "never stationary" but is continuously ongoing - perennial. Creative destruction is indeed central to Schumpeter's theory of economic development -how market-based societies progress though time. In his 1934 book, The Theory of Economic Development (TED)(2), he discussed the different types of changes he considered part of this process of creative destruction: This concept covers the following five cases: (1) The introduction of a new good - that is one with which consumers are not yet familiar - or of a new quality of a good. (2) The introduction of a new method of production, that is one not yet tested by experience in the branch of manufacture concerned, which need by no means be founded upon a discovery cientifically new, and can also exist in a new way of handling a commodity commercially. (3) The opening of a new market, that is a market into which the particular branch of manufacture of the country in question has not previously entered, whether or not this market has existed before. (4) The conquest of a new source of supply of raw materials or half-manufactured goods, again irrespective of whether this source already exists or whether it has first to be created. (5) The carrying out of the new organization of any industry, like the creation of a monopoly position (for example through trustification) or the breaking up of a monopoly position. (TED: 66)(2) Obviously, Schumpeter's view of this process included not just one new good (the automobile) replacing an old one (horse and buggy), but also included changes to production processes (like the assembly line or franchising), as well as the opening of new sources of supply or new markets. >Creative destruction/Kirzner. * The term "creative destruction", while sometimes attributed to Schumpeter, was actually first used by a German economist and sociologist named Werner Sombart, in his 1913 book, War and Capitalism. Nonetheless, Schumpeter is the one who popularized the term and brought it to the forefront of economic theory in his writings about capitalism as an evolutionary process. 1. Schumpeter, Joseph A. (1942). Capitalism, Socialism, and Democracy [CSD]. Harper & Brothers. pp.82-84. 2. Schumpeter, Joseph A. (1934). The Theory of Economic Development [TED]. Harvard University Press._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
EconSchum I Joseph A. Schumpeter The Theory of Economic Development An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle, Cambridge/MA 1934 German Edition: Theorie der wirtschaftlichen Entwicklung Leipzig 1912 Sobel I Russell S. Sobel Jason Clemens The Essential Joseph Schumpeter Vancouver 2020 |
||
> Counter arguments against Schumpeter
> Counter arguments in relation to Creative Destruction
Authors A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Concepts A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
