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A struggle of incomplete visions: Creative destruction vs. The economy of knowledge

Author

Listed:
  • James McClure

    (Ball State University)

  • Nathanael Snow

    (Ball State University)

  • David Thomas

Abstract

Hayek (1945) challenged Schumpeter’s (1942) thesis that, absent creative destruction, capitalism and socialism would become indistinguishable. Creative destruction aside, Hayek argued that given the ever-changing circumstances confronting producers and consumers, continually adjusting market prices are the only known means by which the plans of producers and consumers can rapidly be coordinated toward mutual gain. Unfortunately, by setting aside inquiry into creative destruction per se, Hayek missed opportunities to discover: 1) the unique knowledge problem applicable to new product research and development, 2) an economically sound explanation for the process of creative destruction in replacement of Schumpeter’s non-economic one. Subsequent developments in economics (e.g.: Israel Kirzner, Ludwig Lachmann, Peter Lewin, and Deirdre McCloskey) set the stage for an introduction of the role of sequestered capital in business cycle theory.

Suggested Citation

  • James McClure & Nathanael Snow & David Thomas, 2025. "A struggle of incomplete visions: Creative destruction vs. The economy of knowledge," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 38(1), pages 37-53, March.
    • Handle: RePEc:kap:revaec:v:38:y:2025:i:1:d:10.1007_s11138-023-00629-9
    DOI: 10.1007/s11138-023-00629-9
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    References listed on IDEAS

    as
    1. Deirdre Nansen McCloskey, 2022. "Schumpeter the incomplete rhetorician," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 35(4), pages 423-443, December.
    2. Patinkin, Don, 1973. "In Search of the "Wheel of Wealth": On the Origins of Frank Knight's Circular-Flow Diagram," American Economic Review, American Economic Association, vol. 63(5), pages 1037-1046, December.
    3. Roger W. Garrison, 2004. "Overconsumption and Forced Saving in the Mises-Hayek Theory of the Business Cycle," History of Political Economy, Duke University Press, vol. 36(2), pages 323-349, Summer.
    4. McClure, James E. & Thomas, David Chandler & Spector, Lee C., 2021. "A Retrospective Look At “The Hayek Story”: Roundaboutness, Sticky Consumption, And Sequestered Capital," Journal of the History of Economic Thought, Cambridge University Press, vol. 43(1), pages 83-102, March.
    5. Peter Lewin, 1997. "Capital in Disequilibrium: A Reexamination of the Capital Theory of Ludwig M. Lachmann," History of Political Economy, Duke University Press, vol. 29(3), pages 523-548, Fall.
    6. Israel Kirzner, 1999. "Creativity and/or Alertness: A Reconsideration of the Schumpeterian Entrepreneur," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 11(1), pages 5-17, January.
    7. James E. McClure & David Chandler Thomas, 2018. "Can sticky consumption cause business cycles?," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 31(1), pages 51-72, March.
    8. McClure, James E. & Thomas, David Chandler, 2017. "Explaining the timing of tulipmania's boom and bust: historical context, sequestered capital and market signals," Financial History Review, Cambridge University Press, vol. 24(2), pages 121-141, August.
    9. Kirzner, Israel M, 1999. "Creativity and/or Alertness: A Reconsideration of the Schumpeterian Entrepreneur," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 11(1-2), pages 5-17.
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    Keywords

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    JEL classification:

    • P11 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Planning, Coordination, and Reform
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • O00 - Economic Development, Innovation, Technological Change, and Growth - - General - - - General
    • B00 - Schools of Economic Thought and Methodology - - General - - - History of Economic Thought, Methodology, and Heterodox Approaches

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