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Has Creative Destruction Become More Destructive?

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  • John Komlos
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 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.

Suggested Citation

  • John Komlos, 2014. "Has Creative Destruction Become More Destructive?," NBER Working Papers 20379, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20379
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    21. 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.

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    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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