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Economics and the new economy: the invisible hand meets creative destruction

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Author Info
Leonard I. Nakamura
Abstract

In the 18th century, Adam Smith offered his theory of the invisible hand and the view that perfect competition is the main spur to economic efficiency. The theory of the invisible hand, as it has evolved in modern economic thought, treats creative activity as being outside the scope of economic theory. In the 20th century, Joseph Schumpeter offered an alternative perspective: creativity is an economic activity. He argued that a capitalist market system rewards change by allowing those who create new products and processes to capture some of the benefits of their creations in the form of short-term monopoly profits, a situation that promotes what Schumpeter called "creative destruction." What should the fundamental paradigm of economics be: creative destruction or the invisible hand? In this article, Leonard Nakamura offers some possible answers to this question.[Adobe Acrobat (.pdf)

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Publisher Info
Article provided by Federal Reserve Bank of Philadelphia in its journal Business Review.

Volume (Year): (2000)
Issue (Month): Jul ()
Pages: 15-30
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Handle: RePEc:fip:fedpbr:y:2000:i:jul:p:15-30

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Related research
Keywords: Economic development ; Productivity ; Wages;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Chen, Yi Vivian & Heston, Alan & Lipsey, Robert, 2000. "International and interarea comparisons of income, output and prices," Journal of Asian Economics, Elsevier, vol. 11(3), pages 363-364, December. [Downloadable!] (restricted)
    Other versions:
  2. Robert Summers & Alan Heston, 1999. "The World Distribution of Well-being Dissected," NBER Chapters, in: International and Interarea Comparisons of Income, Output, and Prices, pages 479-508 National Bureau of Economic Research, Inc. [Downloadable!]
  3. Suzanne Scotchmer, 1999. "On the Optimality of the Patent Renewal System," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 181-196, Summer. [Downloadable!] (restricted)
  4. Leonard I. Nakamura, 1995. "Measuring inflation in a high-tech age," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 13-25. [Downloadable!]
  5. Joseph E. Stiglitz, 1996. "Whither Socialism?," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691825, December.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. McCauley, Joseph l., 2004. "Thermodynamic analogies in economics and finance: instability of markets," MPRA Paper 2159, University Library of Munich, Germany. [Downloadable!]
  2. Thomas M. Fullerton, Jr., 2001. "Educational attainment and border income performance," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q III, pages 2-10. [Downloadable!]
  3. Leonard I. Nakamura, 2001. "Education and training in an era of creative destruction," Working Papers 00-13R, Federal Reserve Bank of Philadelphia. [Downloadable!]
  4. Haydar, Akyazi & Seyfettin, Artan, 2006. "The reflections of new economy on monetary policy and central banking," MPRA Paper 603, University Library of Munich, Germany, revised 27 Sep 2006. [Downloadable!]
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This page was last updated on 2009-12-12.

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