Quotable (#86)

Tim Wu vividly summarizes (p.28) Schumpeter’s shocking idea:

To understand Schumpeter we need to reckon with his very peculiar idea of “competition.” He had no patience for what he deemed Adam Smith’s fantasy of price warfare, growth through undercutting your competitor and improving the market’s overall efficiency thereby. “In capitalist reality as distinguished from its textbook picture, it is not that kind of competition which counts,” argued Schumpeter, but rather, “the competition from the new commodity, the new technology, the new source of supply, the new type of organization.” It is a vision to out-Darwin Darwin: “competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives.” Schumpeter termed this process “creative destruction.” As he put it, “Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.”

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