A couple of weeks ago I purchased a new laptop computer, and I have enjoyed learning about its features since. But I also have the slightest tinge of sadness. You see, this computer will replace one I bought in 2004 – which at the time was the latest and greatest.
Now its best days are past, with its technology on the junk heap of computer history. In an indirect way, my situation reminds me of “creative destruction,” an important idea in economics that our political leaders like to ignore.
The term comes from Joseph Schumpeter, who used it to describe the “messy way” in which commerce within a free market changes. As W. Michael Cox and Richard Alm summarize Schumpeter’s argument: “lost jobs, ruined companies, and vanishing industries are inherent parts of the growth system.”
But those bad things are also essential to the development of new jobs, new companies, and new industries that enrich us – both figuratively and literally.
The problem with economic change, aside from the obvious dislocation that it causes, is that government keeps getting in the way. In the old school of politics, politicians tried to maintain the status quo, and prevent creative destruction. They used protective tariffs, bailouts, and other measures to keep alive favored industries, companies, and unions.
At the same time, a new school of politics has developed. It seeks not to stop economic change but dictate its direction.
The most obvious examples lie in “green” politics: Require people to purchase corn-based fuel when they gas up their cars; create regulations that effectively ban the incandescent bulb in favor of compact fluorescent lights; require utilities to purchase a certain percentage of their energy from “green” sources; hand out subsidies to “green” companies in hopes of creating an electric car, and of course, create mpg standards to nudge customers into buying cars that meet the political class’s vision of fuel economy.
Both schools of politics are, well, good for politicians. But they’re bad for the economy and for consumers. The old school of political “management” of change locks us into dial-up modems; the new school forces us to waste money on squiggly light bulbs.
Both, however, make us stupid.
Published in The Detroit News: http://detnews.com/article/20110112/MIVIEW/101120342/LaPlante–Creative-destruction#ixzz1AqTlhvU1