I’m thrilled to hear that the Economist has just launched a new column about business, innovation and entrepreneurship in honor of Joseph Schumpeter (1883-1950), the brilliant Austrian economist who,
argued that innovation is at the heart of economic progress. It gives new businesses a chance to replace old ones, but it also dooms those new businesses to fail unless they can keep on innovating (or find a powerful government patron). In his most famous phrase he likened capitalism to a “perennial gale of creative destruction”. For Schumpeter the people who kept this gale blowing were entrepreneurs. He was responsible for popularising the word itself, and for identifying the entrepreneur’s central function: of moving resources, however painfully, to areas where they can be used more productively. But he also recognised that big businesses can be as innovative as small ones, and that entrepreneurs can arise from middle management as well as college dorm-rooms.
Schumpeter’s work on the dynamism of high-tech markets (later married with Clayton Christensen‘s concept of “disruptive innovation“) is one of the most persistent themes across cyber-libertarian thinking of all stripes on a wide variety of issues. You can listen to an interview with the new column’s author on the Economist podcast here (MP3). One important point the author makes is that Schumpeter realized that celebrating capitalism did not preclude criticizing individual capitalists when justified and vice versa—something all too often forgotten today.