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Welfare Creation and Destruction in a Schumpeterian World

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  • Christian Schubert

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Abstract

Economic change, while promoting innovation and growth, at the same time generates "gales of creative destruction". It is still largely unclear what this concept implies for the task of assessing welfare (and, correspondingly, the need for and scope of policy-making) in a novelty-generating, knowledge-based economy. Is novelty desirable per se? Is a rise of living standards due to innovation always worth the risks involved? Standard welfare economics is inherently incapable of answering these questions. By examining Joseph Schumpeter's explicit and implicit reasoning on welfare and linking his thoughts to recent ideas, within normative economics, on how to redefine "well-being" when preferences are variable and inconsistent, we argue that in an evolving economy, well-being should not be conceptualized in static preference-satisfaction terms, but rather in partly procedural terms of "effective preference learning".

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Paper provided by Philipps University Marburg, Department of Geography in its series Papers on Economics and Evolution with number 2009-14.

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Date of creation: Nov 2009
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Handle: RePEc:esi:evopap:2009-14

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Keywords: Joseph Schumpeter; Creative Destruction; Endogenous Preferences; Welfare Economics Length 41 pages;

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References

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  1. Bruno S. Frey & Alois Stutzer, 2001. "What Can Economists Learn from Happiness Research?," CESifo Working Paper Series 503, CESifo Group Munich.
  2. Schumpeter, Joseph A., 1947. "The Creative Response in Economic History," The Journal of Economic History, Cambridge University Press, vol. 7(02), pages 149-159, November.
  3. Markus C. Becker & Thorbj¯rn Knudsen, 2002. "Schumpeter 1911: Farsighted Visions on Economic Development," American Journal of Economics and Sociology, Wiley Blackwell, vol. 61(2), pages 387-403, 04.
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  7. Ursula Backhaus, 2002. "Seventh Chapter Of The Theory Of Economic Development," Industry and Innovation, Taylor & Francis Journals, vol. 9(1-2), pages 93-145.
  8. U. Witt & C. Schubert, 2008. "Constitutional Interests in the Face of Innovations: How Much Do We Need to Know about Risk Preferences?," Papers on Economics and Evolution 2008-03, Max Planck Institute of Economics, Evolutionary Economics Group.
  9. Fabrizio Zilibotti, 2007. "”Economic Possibilities for Our Grandchildren” 75 Years after: A Global Perspective," IEW - Working Papers 344, Institute for Empirical Research in Economics - University of Zurich.
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  12. N. De Liso & G. Filatrella, 1999. "On technology competition," Working Papers 337, Dipartimento Scienze Economiche, Universita' di Bologna.
  13. Joseph A. Schumpeter, 1949. "English Economists and the State-Managed Economy," Journal of Political Economy, University of Chicago Press, vol. 57, pages 371.
  14. Elliott, John E, 1980. "Marx and Schumpeter on Capitalism's Creative Destruction: A Comparative Restatement," The Quarterly Journal of Economics, MIT Press, vol. 95(1), pages 45-68, August.
  15. Ulrich Witt, 2002. "How Evolutionary Is Schumpeter'S Theory Of Economic Development?," Industry and Innovation, Taylor & Francis Journals, vol. 9(1-2), pages 7-22.
  16. Witt, Ulrich, 1996. " Innovations, Externalities and the Problem of Economic Progress," Public Choice, Springer, vol. 89(1-2), pages 113-30, October.
  17. Robert Sugden, 2004. "The Opportunity Criterion: Consumer Sovereignty Without the Assumption of Coherent Preferences," American Economic Review, American Economic Association, vol. 94(4), pages 1014-1033, September.
  18. Soete,Luc & Weel,Bas,ter, 1999. "Schumpeter and the Knowledge-Based Economy: On Technology and Competition Policy," Research Memorandum 004, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  19. Peter E. Earl & Jason Potts, 2004. "The market for preferences," Cambridge Journal of Economics, Oxford University Press, vol. 28(4), pages 619-633, July.
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Cited by:
  1. Christian Schubert, 2012. "Is novelty always a good thing? Towards an evolutionary welfare economics," Journal of Evolutionary Economics, Springer, vol. 22(3), pages 585-619, July.

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