Has Creative Destruction Become More Destructive?

22 Pages Posted: 18 Aug 2014 Last revised: 29 Sep 2014

See all articles by John Komlos

John Komlos

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: August 2014

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

Komlos, John, Has Creative Destruction Become More Destructive? (August 2014). NBER Working Paper No. w20379. Available at SSRN: https://ssrn.com/abstract=2482142

John Komlos (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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