Creative Creation Economist Joseph Schumpeter’s signal contribution to economics was to put innovation at the core of economic development. He saw beyond the field’s obsession with marginal cost analysis and price-based competition, understanding that this fixation was merely a function of the ability to model such features of the landscape cleanly, with little regard for their ultimately secondary, and perhaps even trivial, role in shaping competition among firms: [I]n capitalist reality as distinguished from its textbook picture, it is not [price] competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization…– competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives.i Schumpeter memorably labeled the outcome of this type of competition “creative destruction,” … Continue reading →