In my mind and in my car/we can’t rewind/we’ve gone to far. Of Video Killed the Radio Starabout what technological progress can destroy, the British pop group The Buggles scored a worldwide hit in 1979. Economic studies on this theme also appear to be receiving international recognition: on Monday, economists Joel Mokyr, Philippe Aghion and Peter Howitt were awarded the Nobel Prize for Economics.
The Nobel Prize for Economics is not a ‘real’ Nobel Prize; the award for economists was established in 1968 by the Swedish Central Bank, in honor of the tricentennial and in memory of Alfred Nobel.
The jury committee that awards the Nobel Prizes praised the three economists for their research into “innovation-driven economic growth”. Concept is central to that research ‘creative destruction’which was made great by the influential Austrian economist Joseph Schumpeter. He described in the early twentieth century how continuous innovation causes a new technology to replace and destroy the old; just as the telephone line made telegraph operators redundant. Schumpeter’s work is still seen as an important way to explain the dynamic functioning of market capitalism.
Industrialization
To the effect and consequences of creative destruction Philippe Aghion and Peter Howitt did a lot of theoretical research. They share half of the prize of 1 million euros. The 69-year-old Frenchman Aghion is affiliated with knowledge institutes INSEAD, the Collège de France and the London School of Economics.
Canadian Peter Howitt (79), who works as a macroeconomist at the prestigious American Brown University, is a leading economist who applies Schumpeter’s approach to economics in a modern way. Howitt developed an arithmetic model with Aghion in 1992 that creative destruction showed: if a company conquers the market with a new product, another company with an existing product is displaced. The underlying message is that innovation can also cause displacement.
The other half of the money goes to Joel Mokyr, who was born in Leiden and moved to Israel as a child. The now 79-year-old economic historian is affiliated with the American Northwestern University. Mokyr conducted important research into the conditions for economic growth through technological progress.
In the book A Culture of Growth (in 2017 by NRC reviewed, five balls) Mokyr describes how the Enlightenment and British industrialization could take place. He investigated the circumstances that allowed European countries to develop into scientific and industrial superpowers – while that growth could just as easily have taken place on other continents. Mokyr regularly uses his native country in his publications, including by comparing the industrialization of the Netherlands and Belgium in the nineteenth century.
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Still relevant
In their studies, Aghion and Howitt point out that it sounded negative creative destruction can also ensure ‘sustainable’ economic growth, provided that governments ensure that there are alternatives for the losers of technological progress. “When the combustion engine was invented, coachmen suddenly became redundant. As a government, you have to find new jobs for all those people, otherwise technological innovation will cost society more than it yields,” says political science lecturer Roel van Engelen from the University of Amsterdam.
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In 2018, correspondent Peter Vermaas interviewed Philippe Aghion, who at the time defended major reforms by French President Emmanuel Macron
According to Van Engelen, the example of the combustion engine also shows that ‘sustainable growth’ does not necessarily mean a more sustainable climate. “Schumpeter, much more than Karl Marx, for example, was very positive about economic growth. It became the most important thing to strive for. The committee also agrees with this and I appreciate that, especially in these times. The ecological ceiling on what the earth can deliver is not taken into account in the pursuit of growth.” Van Engelen sees Schumpeter’s theory of creative destruction much of the current zeitgeist returns. “Look at the rise of technology based on AI, and what consequences that has now. It shows that Schumpeter’s theory is still very relevant.”
And what Video Killed the Radio Star Regarding: The Buggles’ hit was in 1981 the first music video on music channel MTV, but did not become the prelude to radio stations becoming completely redundant. Music videos are barely seen on MTV these days, while the many surviving radio stations worldwide continue to play the song to this day. Not all creative destruction is equally destructive.
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