NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Has Creative Destruction Become More Destructive?

John Komlos

NBER Working Paper No. 20379
Issued in August 2014
NBER Program(s):   DEV   EFG

Schumpeter's concept of creative destruction as the engine of capitalist development is well-known. However, that the destructive part of creative destruction is a social cost and therefore biases our estimate of the impact of the innovation on NNP and on welfare is hardly acknowledged, with the exception of Witt (1996). Admittedly, during the First and Second Industrial Revolutions the magnitude of the destructive component of innovation was probably small compared to the net value added to employment, NNP or to welfare. However, we conjecture that recently the new technologies are often creating products which are close substitutes for the ones they replace whose value depreciates substantially in the process of destruction. Consequently, the contribution of recent innovations to NNP is likely biased upward. This note calls for a research agenda to estimate innovations into their creative and destructive components in order to provide improved estimates of their contribution to NNP, welfare, and employment.

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Document Object Identifier (DOI): 10.3386/w20379

 
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