Has Creative Destruction Become More Destructive?
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.
I appreciate comments from Michael Asch, Fiona Atkins, Dean Baker, Stuart Birks, Art Carden, Lawrence Cima, David Colander, Lee Craig, Charles Dannreuther, Wolfram Elsner, Gerald Friedman, Nick Kahn, Janos Kornai, Edward Leamer, John R. McNeill, Avner Offer, Barry Schwartz, Christian Schubert, Claire Smith, Peter Söderbaum, Paul C. Sutton, and Ulrich Witt on a previous version of the paper. They are obviously not responsible at all for any possible omissions or commissions that might remain. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Komlos John, 2016. "Has Creative Destruction become more Destructive?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-12, October. citation courtesy of