Innovation as an Economic Driver (06:35)
Joseph Schumpeter questioned the notions and terms of neoclassical economics, and demonstrated that an economy in competitive equilibrium will not develop unless there is innovation. New technology in the industrial revolution led to exponential economic growth. Prof. Carlota Perez explains how innovation impacts growth.
Schumpeter theorized that an entrepreneur identifies an invention and markets it, destroying the old to create new. Successful entrepreneurs discuss the need to be self-assured, deal with criticism and failure, and have a drive to create.
Failures and Investments (05:08)
After WWI, Schumpeter became finance minister for the Austrian Republic, but was fired and moved to banking. As a bank president, he invested in new technologies, using a funding method common for today's digital startups. Contemporary entrepreneurs discuss the importance of early stage investments.
Steve Jobs and Apple (03:39)
Jobs is an example of Schumpeter's entrepreneur who sees the potential of an invention and creates something new. When Jobs first saw the graphical user interface, he knew it would be the model for computers of the future.
Keynes and Economic Depression (09:31)
After his investments failed, Schumpeter wrote a book about the theory of money. He began teaching economics at Harvard where the theories of his rival John Maynard Keynes were dominant. Schumpeter saw the shortfalls in Keynes' attempt to address the economic crisis of the 1930s.
Boom and Bust Cycles (05:54)
Schumpeter theorized that innovation drives cycles of growth and recession, and the latter is an important part of progress in capitalism. His book “Business Cycles” made little impact. A seminar about the book highlighted the preeminence of Keynes economic philosophy.
Digital Revolution and Productive Speculation (04:46)
Schumpeter’s idea of productive boom and bust cycles gained appreciation during the dot-com bubble. While the speculative bubble was productive, the 2008 financial bubble was more destructive to the economy. As the center of Schumpeter’s capitalist system, banks need to consciously invest in the real economy.
Creative Destruction (05:39)
In “Capitalism, Socialism, and Democracy,” Schumpeter writes about innovation through disruption of a current industry; disruption became a buzzword for entrepreneurs in the technology boom. Stan Metcalfe argues that the costs of creative destruction often require state intervention because economic transition can be turbulent.
Government Role in Innovation (05:14)
As WWII began, the depression ended and Keynesian public investment programs were revitalizing the economy. Schumpeter’s vision inspires economists today. Mariana Mazzucato explains how the government funding of smart phone technologies illustrates a new direction. The government should actively invest in innovation instead of solely repairing market failures.
Credits: Schumpeter: The Man Who Invented Capitalism (00:34)
Credits: Schumpeter: The Man Who Invented Capitalism
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