Question

How much do you think Schumpeterian creative destruction explains the American economic experience and why? How do biotech and digital technological innovations fit this answer?

Answer 1

Schumpeterian theory is based on innovation by entrepreneur. Innovation occurs by breaking the circular flow of income in which the economy is in. This occurs by the process of 'creative destruction'. Innovation is facilitated by provision of ample bank credit to the entrepreneur who innovates in the desire for profits.

The American botech and digital technological innovations fit in this. Consider an example of Apple which is considered the number 1 innovatove company in the world. Starting from ipods to the the initial phase of iphones now it has launched the highly sophisticated iphone 11 with multiple features like face recognition and all. Now with the usage of the latest iphone, the usage of the first iphone has reduced considerably. The market share of the first iphone must be close to zero. Hence, a process of 'creative destruction' has ensued in which the declined usage og initial iphones have paved the way for a higher usage of the latest ones. Similar is true for biotech innovations as well.

The process of innovations is well explained by the Schumpeterian theory because it can well fit the contemporary situation.