![]() ![]() Monopolies and Resistance to Creative Destruction That is, technological progress and the destruction of existing products, production techniques, professions, businesses and industries are inextricably intertwined this relationship is as inevitable as the boom and bust cycles that are inherent in any industrial economy and as inevitable economic growth itself. It continues over time even if the entrepreneurs and others who make decisions about their businesses are not fully aware of it, which is often the case. Negative externalities from offshore production could include air and water pollution from transporting the products long distances via airplane or ship, pollution from lax environmental standards in the newly producing countries, and injuries to workers from minimal safety standards in those countries.Ĭreative destruction is fostered by advances in technology and the opportunities that entrepreneurs see to profit from such advances. Externalities occur when an activity results in costs or benefits to individuals or groups other than the person or group engaging in the activity. Moving production offshore could also be considered a type of creative destruction, at least if the negative externalities are not greater than the benefits. For example, a new production technique does not necessarily need to be some variation on the traditional model of paid workers making things in a centralized location at a factory, and it could be something as revolutionary as the creation of goods or services by many volunteers at dispersed locations connected by the Internet. The definition of a new product or production technique can be quite broad. This contrasts with a centrally planned economy, such as the former Soviet Union, in which such decisions are made mainly by a centralized government agency. Creative destruction definition by The Linux Information Project LINFOĬreative Destruction: A Brief IntroductionĬreative destruction is the dynamic process inherent in a free market economy (or one that is largely so) of existing products (i.e., goods and services), production techniques, professions, companies and even entire industries becoming obsolete and dying out as a result of technological advances (including the development of new or improved products, more efficient production techniques and better distribution methods).Ī free market economy is one in which decisions about production (i.e., what to produce, how to produce it and how much of it to produce) and prices are made by competing businesses that are primarily attempting to maximize their profits. ![]()
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