Creating Disequilibrium, and Benefiting Society - Isaac M. Morehouse - Mises Institute

Creating Disequilibrium, and Benefiting Society - Isaac M. Morehouse - Mises Institute: "Classical economists often treated economic growth as a mechanistic operation that happened at a stable rate as a result of unchanging levels of investment and production — as if economies simply grew on their own as long as production was steady and inputs were not disrupted. The problem with this view is that, quite simply, the real world doesn't work that way. In 1911, economist Joseph Schumpeter's Theory of Economic Development radically changed this view, and his insights are still relevant today.

Schumpeter stressed the role of the entrepreneur in economic growth and argued that, far from a static maintenance of equilibrium in production, it was the entrepreneurial ability to cause disequilibrium that created wealth. The constant innovation of these economic actors shakes the economy up, breaking down old methods and building up newer and better ones.
It's not just increases in production that create wealth but a radical reforming of the way production itself is done. Think Henry Ford's assembly line. Such entrepreneurial innovations disrupt the unrealistic ideal of a stationary economy. They do destroy the old order — like the classic example of buggy makers losing their jobs when the automobile took hold — but they cause growth because what they create is more valuable than what they replace. Can you imagine halting the progress of the automobile in order to preserve buggy makers?"

"The entrepreneur, by seeing and acting on different combinations of existing knowledge, products, and services, disrupts the economic order and creates growth. There is evidence of this "creative destruction" all around us: every year millions of jobs are created and destroyed, yet the overall long-term trend is continued economic growth.


$25 $20

Finally a shirt to fight back!
The growth could not happen without both creation and destruction; it is the driver of growth, not a problem to be solved. If the economy were static — if jobs were never lost, prices never shifted up or down, investments never enjoyed large profits or major losses — we would not live in a stable utopia but a stagnant subsistence economy.

Don't be afraid to disrupt the economy. Look for ways that things can be done differently — goods, services, and production methods that can be rearranged, new technologies that can be better used. Right now, as the economy reshuffles, there are more opportunities to generate change than ever — the kind of dynamic change that we need to grow out of this slump.

Don't just sit there, create some disequilibrium!"