Thursday, October 13, 2005

Was Schumpeter Wrong?

One of the classic arguments in economics is Austrian economist Joseph Schumpeter's discussion of "creative destruction" which suggested that as new technologies come on line they destroy the old order. But a paper I just found on the internet by Amar Bhidé suggests that Schumpeter did not get it right. A good deal of innovation in society comes from products and services which do not replace existing products or services. Amar Bidhé, in a paper written in 2004 (then published in a book later that year),does a good analysis of why Schumpeter's arguments may be a bit outdated. He suggests that many new technologies are actually additive. While, for example, mainframe purchases are a smaller percentage of a larger market, they are still an important part of the total computer market. It is an interesting twist to an old argument

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