Creative Destruction: Ironically Beneficial

Amelia Angus

Aparicio – afternoon

“Creative destruction is not just something that might happen in a market economy. It is something that must happen” [1]. Creative destruction refers to the incessant product and process innovation mechanism by which new production units replace outdated ones. In the modern world, businesses are constantly competing which each other to be the best, but sometimes businesses are closed because of creative destruction. Although creative destruction seems like a bad thing for the economy and the workers of a business, it actually helps the economy in the long run by getting rid of unproductive businesses while proving that humans are being productive.

In Naked Economics, Charles Wheelan describes a situation in which creative destruction takes place in the modern world. Customers at Al’s Glass and Hardware in Illinois shop at Wal-Mart and realize that the goods are much cheaper there. “Wal-Mart opens a giant store just outside of town; several years later, the small shops on Main Street are closed and boarded up” [2]. Wal-Mart uses low prices to attract customers who want to buy cheap goods and save part of their income. Creative destruction is inevitable, and although the government tries to “protect the affected workers,” employees are still laid off and in a panic to find a new job. Creative destruction ultimately opens up new job opportunities and creates an incentive for workers to find new jobs.

With this in mind, when my family and I traveled to New York City a couple of months ago, we used Uber to commute the majority of our trip. It was too cold to walk back to the hotel one night, so a cab driver drive who was desperate for a customer drove us back. We struck up a conversation with the taxi driver who told us that Uber was taking all of his customers and was beginning to wipe out the taxi business. Although taxis are convenient and quick, the Uber app provides ratings and a brief background of the driver, unlike taxis. This is an example of creative destruction which could potentially wipe out the taxi system leaving taxi drivers unemployed. Not only is Uber faster, cheaper and safer, but it also will increase economic growth in the long run by providing more job opportunities and gaining more business.

The economy is constantly evolving, and people are always coming up with new ideas to make our lives more convenient. Without creative destruction, our economy would never advance. “A market economy inspires hard work and progress not just because it rewards winners, but because it crushes losers” [3]. Although competition between businesses wipes out industries, it leaves room for improved ones and creates incentives for people to work harder and help the economy progress.

[1] Wheelan, Charles. “Incentives Matter.” In Undressing the Dismal Science, 47. Naked Economics. New York, NY: W. W. Norton & Company, 2010.

[2] Wheelan, Charles. “Incentives Matter.” In Undressing the Dismal Science, 47. Naked Economics. New York, NY: W. W. Norton & Company, 2010.

[3] Wheelan, Charles. “Incentives Matter.” In Undressing the Dismal Science, 46. Naked Economics. New York, NY: W. W. Norton & Company, 2010.

 

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