Economics Dictionary of ArgumentsHome
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| Inventions: Inventions are new creations of the human spirit. They can be anything from simple tools to complex machines, processes, or ideas. Inventions often solve problems, improve existing technologies, or create new possibilities. See also Innovation, Technoloy, Progress, Technocracy, Economy._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Joseph A. Schumpeter on Inventions - Dictionary of Arguments
Sobel I 9 Invention/Innovation/Schumpeter/Sobel/Clemens: While invention is the creation or discovery of a new product or process, innovation is the successful introduction and adoption of a new product or process in the commercial marketplace. Innovation is basically the economic application of inventions. while Henry Ford did not invent the automobile, his innovation was the use of the assembly line and large-scale manufacturing that brought the price of the automobile within reach of the average family. In each of these cases, the innovator is different from the inventor, and it is the innovator’s role with which Schumpeter is concerned. Perhaps an even more important factor in distinguishing invention from innovation is that most inventions never turn into innovations - that is, not all inventions are profitable business ideas. Incentives/Schumpeter: According to Schumpeter in his later, and perhaps most famous, book Capitalism, Socialism, and Democracy (CSD)(1), “[i]n some cases, however, it is so successful as to yield profits far above what is necessary in order to induce the corresponding investment. These cases then provide the baits that lure capital on to untried trails” (CSD(1): 90). That is, the lure of profits is the incentive for entrepreneurial discovery and capital investment. This is one reason that government policies that reduce the rewards from innovation can be harmful to economic growth and prosperity. Taxation/innovation/Schumpeter: When regulations or taxes reduce the potential profitability of future innovations, fewer attempts are made to discover them. As Schumpeter notes in his book The Economics of Sociology and Capitalism (ESC)(2): Entrepreneurial profit proper … arises in the capitalist economy wherever a new method of production, a new commercial combination, or a new form or organization is successfully introduced. It is the premium which capitalism attaches to innovation … If this profit were taxed away, that element of the economic process would be lacking which at present is by far the most important individual motive for work toward industrial progress. Sobel I 10 Even if taxation merely reduced this profit substantially, industrial development would process considerably more slowly, as the fate of Austria plainly shows … there is a limit to the taxation of entrepreneurial profit beyond which tax pressure cannot go without first damaging and then destroying the tax object. (ESC(2): 113–114) Sobel I 11 Innovation/economicy/Sobel/Clemens: A growing, vibrant economy depends not only on entrepreneurs discovering, evaluating, and exploiting opportunities to create new goods and services, but also on the speed at which ideas are labeled as successes or failures by the profit-and-loss system. >Business failure/Schumpeter. Innovation/Schumpeter: „Yet innovations in the economic system do not as a rule take place in such a way that first new wants arise spontaneously in consumers and then the productive apparatus swings round through their pressure. We do not deny the presence of this nexus. It is, however, the producer who as a rule initiates economic change, and consumers are educated by him if necessary; they are, as it were, taught to want new things, or things which differ in some respect or other from those which they have been in the habit of using.“ (TED(3): 65) „To produce means to combine material and forces within our reach … To produce other things, or the same things by a different method, means to combine these materials and forces differently. In so far as the “new combination” may in time grow out of the old by continuous adjustment in small steps, there is certainly change, possibly growth, by neither a new phenomenon nor development in our sense. In so far as this is not the case, and the new combinations appear discontinuously, then the phenomenon characterizing development emerges. For reasons of expository convenience, henceforth, we shall only mean the latter case when we speak of new combinations of productive means. Development in our sense is then defined by the carrying out of new combinations.“ (TED(3): 65–66) 1. Schumpeter, Joseph A. (1942). Capitalism, Socialism, and Democracy [CSD]. Harper & Brothers. 2. Schumpeter, Joseph A. (1991). The Economics of Sociology and Capitalism [ECS]. Edited by Richard Swedberg. Princeton University Press. 3. Schumpeter, Joseph A. (1934). The Theory of Economic Development [TED]. Harvard University Press._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
EconSchum I Joseph A. Schumpeter The Theory of Economic Development An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle, Cambridge/MA 1934 German Edition: Theorie der wirtschaftlichen Entwicklung Leipzig 1912 Sobel I Russell S. Sobel Jason Clemens The Essential Joseph Schumpeter Vancouver 2020 |
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