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Has Creative Destruction become more Destructive?

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  • Komlos John

    () (Department of Economics, University of Munich, Ludwigstr. 33-IV, Munich 80539, Germany)

Abstract

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 and economic cost and therefore biases our estimate of the impact of the innovation on GDP is hardly acknowledged, with the notable exception of Witt (1996. “Innovations, Externalities and the Problem of Economic Progress.” Public Choice 89:113–30). Admittedly, during the First and Second Industrial Revolutions the magnitude of the destructive component of innovation was no doubt small compared to the net value added to GDP. However, we conjecture that recently the destructive component of innovations has increased relative to the size of the creative component as 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 GDP is likely upwardly biased. This note calls for further research in innovation economics in order to measure and decompose the effects of innovations into their creative and destructive components in order to provide improved estimates of their contribution to GDP and to employment.

Suggested Citation

  • 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.
  • Handle: RePEc:bpj:bejeap:v:16:y:2016:i:4:p:12:n:25
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    Cited by:

    1. Naude, Wim, 2019. "The race against the robots and the fallacy of the giant cheesecake: Immediate and imagined impacts of artificial intelligence," MERIT Working Papers 005, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    2. Sequeira, Tiago Neves & Gil, Pedro Mazeda & Afonso, Oscar, 2018. "Endogenous growth and entropy," Journal of Economic Behavior & Organization, Elsevier, vol. 154(C), pages 100-120.
    3. Moreira, Paulo Pires, 2017. "Why do Portuguese Railways Languish? An Application of Internalisation of Transport Related Externalities," MPRA Paper 79058, University Library of Munich, Germany.
    4. Jacques LE CACHEUX, 2017. "Croissance potentielle : la politique économique au royaume des aveugles ?," Working Papers 2016-2017_11, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Jun 2017.
    5. repec:eee:respol:v:47:y:2018:i:1:p:308-325 is not listed on IDEAS
    6. Daniel Andrei & Bruce I. Carlin, 2017. "Asset Pricing in the Quest for the New El Dorado," NBER Working Papers 23455, National Bureau of Economic Research, Inc.
    7. repec:eee:jebusi:v:100:y:2018:i:c:p:7-25 is not listed on IDEAS
    8. Naudé, Wim, 2019. "The Race against the Robots and the Fallacy of the Giant Cheesecake: Immediate and Imagined Impacts of Artificial Intelligence," IZA Discussion Papers 12218, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    creative destruction; Schumpeter; innovation;

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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