Schumpeter\u27s Creative Destruction: A Review of the Evidence

Thoughtful scholars from Adam Smith to Jared Diamond, have asked the same life-and-death question: why do some societies succeed, and others fail, in producing the goods that make life long, healthy and prosperous? Smith\u27s answer was basically that when societies adopt the rules of market capitalism, their economies grow,:and when they do not adopt the rules of market capitalism, their economies do not. Since Smith, other economists have developed more formal models of economic growth. The classic Solow growth model emphasized the investment of capital. Romer\u27s New Growth Theory, includes knowledge as a variable. What is mainly missing from both the new and the old growth theories is a useful discussion of incentives and entrepreneurship

Rothbard\u27s Intellectual Ancestry

Murray Rothbard is a prominent spokesman for neo-Austrian economics, yet the economics profession has not taken him seriously enough to investigate his claims. He and his disciples invite this neglect by treating the Rothbardian corpus more as creed-to-be-adhered-to than as theory-to-be-tested-and-improved-on. The profession\u27s neglect is nonetheless unwise. Even if neo-Austrian economics turns out to be unsound, it should be taken seriously because of the growing number of intelligent people who identify themselves as Austrians

Thriving at Amazon: How Schumpeter Lives in Books Today

Amazon.com’s “Search Inside the Book” feature provides a new and exciting tool for bibliometric research. Over the last few years, a growing number of books listed on Amazon. com reference Schumpeter in some way. As of May 3, 2007, Amazon listed 8,086 books that in some way refer to Schumpeter. Of these, I currently have names and titles of 3,719 books in the Schumpeter Amazon database. Of these, I have done content-analysis for 1,176 books that make reference to Schumpeter. The main result is that a significant number of the references to Schumpeter are related to creative destruction. The percent of Schumpeter-references where the reference is related to creative destruction is significantly higher for books on business than books on economics. I believe this is a case where market demand reflects intellectual value, even if academic economics has not done much to incorporate Schumpeter’s central ideas

Review of Cord and Hammond, eds. Milton Friedman: Contributions to Economics and Public Policy

Gary Becker, at a 2007 AEA reception for a documentary on Milton Friedman, gave a brief informal testimonial to his teacher, colleague, and friend. He told of sharing a cab, during which Friedman discussed economics with the cab driver. When they reached their destination, Friedman was slow to leave the cab, wanting to raise a few more ideas with the driver. Friedman was all about the ideas, and not at all about the status of the person discussing the ideas

F. A. Hayek on Constructivism and Ethics

Long before receiving his Nobel Prize, Friedrich von Hayek was well respected in the academic community. John Maynard Keynes had glowing praise for Hayek\u27s 1944 The Road to Serfdom. Milton Friedman and Paul Samuelson, antagonists on many issues, agree that Hayek\u27s 1945 The Use of Knowledge in Society was a major contribution to political-economic thought. These early works by Hayek led a writer for the Nation to express what must have been the view of a great many, that because [Hayek] is among the most thoughtful and consistent supporters of a market economy. . . those who disagree with him cannot ignore him. \u2

Keeping Our Cool: In Defense of Air Conditioning

In the last 15 years three books have been published that are critical of air conditioning (Cooper 1998; Ackermann 2002; Cox 2010). No books (or even articles) in those years have been primarily devoted to a general defense. Such a defense should make the following points. Air conditioners reduce disease and mortality, especially among the ill and aged. They reduce aggressive behavior, including road rage, assaults, and murders. They increase the quality and quantity of nighttime sleep. They improve student and worker productivity by reducing noise and increasing the ability to concentrate. They increase comfort and free choice

The State of Spencer

Before any words of title or content, the book begins with a photographic portrait of Spencer. He appears severe, smug, and slightly sad-as if he is about to chastise you for some distasteful breach of moral conduct. The portrait accurately forewarns the reader of the tone of the words that follow. Spencer’s essays read like secular sermons on the common theme that the road to hell on earth is paved with the good intentions of those who seek to expand the state

Using Video Clips to Teach Creative Destruction

Stories are memorable and convincing. One way to efficiently tell stories is through movie and video clips. I summarize several video clips that may be useful in teaching aspects of Schumpeter’s important theory of creative destruction. Among the clips discussed are: Hugh Laurie’s Protest Song, electric light segment from a documentary on the 1898 Trans-Mississippi Exposition, eBay Toy Boat Ad, Miss Princess Fun Brick Ad, Moscow toilet paper queue scene, the New York coffee aisle scene from Moscow on the Hudson, and Peck and DeVito’s speeches from Other People’s Money. JEL Codes: A2, O31, O4

The Effects of Spanish-Language Background on Completed Schooling and Aptitude Test Scores

We investigate the effect of speaking Spanish at home as a child on completed schooling and aptitude test scores using data on Hispanics who grew up in the U.S. from the NLSY79. We model the accumulation of traditional human capital and English fluency, leading to the joint determination of schooling and test scores. We find that speaking Spanish at home reduces test scores but has no significant effect on completed schooling. The reduction in test scores is more dramatic the higher the education of the parents and when the choice of home language is endogenous.Hispanics, language, aptitude, ability, NLSY79

The Creative Destruction of Labor Policy

While the consumer benefits from the new products and improved production processes due to creative destruction, the major downside to creative destruction is technological unemployment. However, policies adopted by government and by workers can increase the upside and reduce the downside. Governments can enable entrepreneurial innovation by allowing the labor market to be flexible. A government safety net is also considered. However, workers can become more resilient in attitude and frugal in spending in order to cope with technological unemployment, and can invest in more diversified and enduring human capital. The family can also provide a private safety net. The process of creative destruction is not a zero-sum game