Schumpter, creative destruction and "the churn"

Here's a great summary of some of Joseph Schumpter's work from the 1930's on the changing of industry ("The Churn - The Paradox of Progress", Fed. Reserve Bank of Dallas [1992]). The article points out how job loss, growth and repurposing is ultimately a good thing for our economy in times of transition. Specifically, the article addresses "the churn" which is a shorthand way of describing how jobs are created and destroyed, often times casting the employed into unemployment or into new unfamiliar jobs. How is this helpful? Well, jobs lost in one area are inevitably replaced in others. For example, in 1900, the top 3 jobs were farmers, agricultural laborers and general laborers. In 1991, the top 3 jobs were retail salespersons, teachers and secretaries. In all, more menial types of employment were replaced by more intellectual, higher-paid and higher-skilled types of labor. That's a good thing®.

The article makes a persuasive case that a professor of mine, Yale Braunstein, made the other day in class:

Throughout the 20th century, the demise of old industries and the creation of new ones coincided with rising incomes and huge net gains in employment in the United States. The transition, however, has been bumpy and uneven. Job losses can be traumatic for workers and their families. Yet, seen as a whole, the American experience certainly confirms Schumpeter�s thesis that an economy can�t progress without the revitalization that brings job destruction. Intervention to save jobs almost always fails. Policies designed to protect jobs retard economic progress and, ultimately, destroy jobs by short-circuiting the vital process of innovation. It is for this reason that we must stop focusing only on the number of jobs; we must also concentrate on the composition of jobs. Added emphasis should be placed on high pay, high productivity and high educational embodiment.

This is where some groups like the RIAA just don't get it. The only thing they still do that is hard for an artist to do herself is marketing... and people are working on that. The RIAA needs to recognize that technology has evolved to the point where they can't support the business models that they did in the past. Further, as Brian Eno and Peter Gabriel have noticed recently, making music is more fun, rewarding and easy if you do it yourself with help from your friends. Posted by joebeone at Enero 29, 2004 08:14 AM