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Schumpeter''s Theory of Creative Destruction

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2.0 Creative destruction Schumpeter’s main message is that the process of creative destruction describes the type of competition in capitalism that may cause considerable improvements in the quality as well as quantity of everyone’s lives. As far as capitalism, socialism and democracy is concerned, Schumpeter had a lot of view concerning the process of creative destruction, but all the people who use the phrase presently do not support these views. The process of creative destruction in the original idea that was developed by Schumpeter and in the more recent account is a process that involves technological advances as the main source or economic development as well as improvement in the quality of lives.

In the two accounts, a considerable part of the motivation to come up with advancing innovations is the possibility of achieving monopoly profits. In the traditional sense, the key source of monopoly profits is through patent rights but at present, a full account of monopoly profits also entail a network of external factors as a source. Further from what the two accounts share, the original idea that was supported by Schumpeter claims that large firms that are monopolistic have the highest ability and likelihood to come up with better advancing innovations.

This is the account that is usually associated with the views that were held by Schumpeter even though the current version identifies smaller organizations as the ones that have the highest likelihood to come up with new advancing innovations. Schumpeter claim implied that the new process or product that comes from a vibrant advancing innovative competition is more crucial in the appreciation of capitalism. On the other hand, the static typical idea of price competition puts emphasis on the markets, which are not concentrated as a way of lowering the prices in a setting where goods and services are assumed constant.

4.0 Capitalism as a revolutionary economic system The important point to remember concerning capitalism in Schumpeter’s view is that it is an evolutionary process that was initially stressed by Karl Marx. By nature, capitalism is a type of evolution in the economy that may never be motionless and this element of dynamism has three salient attributes that include those within the system that occur in response to exogenous changes.

This takes place discontinuously instead of smoothly. The results that are associated with it are qualitative and this essentially displaces the older balance while coming up with radically newer equilibriums.

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