Greg Mankiw's Blog: Karl Rove channels Schumpeter -- Destructively Creative
...Mr. McCain's angry statement shows a lack of understanding of the insights of Joseph Schumpeter, the 20th century economist who explained that capitalism is inherently unstable because a "perennial gale of creative destruction" is brought on by entrepreneurs who create new goods, markets and processes. The entrepreneur is "the pivot on which everything turns," Schumpeter argued, and "proceeds by competitively destroying old businesses."
Most dramatic change comes from new businesses, not old ones. Buggy whip makers did not create the auto industry. Railroads didn't create the airplane. Even when established industries help create new ones, old-line firms are often not as nimble as new ones. IBM helped give rise to personal computers, but didn't see the importance of software and ceded that part of the business to young upstarts who founded Microsoft.
So why should Mr. McCain expect oil and gas companies to lead the way in developing alternative energy? As with past technological change, new enterprises will likely be the drivers of alternative energy innovation.
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Rediscovering Schumpeter: The Power of Capitalism
"Without innovations, no entrepreneurs; without entrepreneurial achievement, no capitalist returns and no capitalist propulsion...
the absolute relentlessness of creative destruction and entrepreneurship. In a free economy, they never stop—never. Schumpeter wrote that all firms must try, all the time, "to keep on their feet, on ground that is slipping away from under them." So, no serious businessperson can ever completely relax. Someone, somewhere, is always trying to think of a way to do the job better, at every point along the value chain. Whatever has been built is going to be destroyed by a better product or a better method or a better organization or a better strategy.
And also --
Read more -- -- Joseph Alois Schumpeter (1883-1950)
Read more -- -- Creative destruction
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