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SimonJ

Propery scrutiny needs to be applied to this book...

Reviewed in the United Kingdom on October 30, 2021

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This was an interesting book to read but I was somewhat disappointed having read rave reviews in the serious press. There are several issues. Firstly the central premise of the book is not original. Economists are agreed that there are two main sources of GDP growth (1) increasing inputs of land, labour and capital. Following the industrial revolution capital accumulation played a key role but so too did the expansion of the population and in particular the skill set/education of the labour force (2) total factor productivity (TFP) growth - this is usually calculated as the residual source of growth that cannot be attributed to (1), however it is rightly seen as the highest 'quality' source of growth as it is not necessarily subject to the same law of diminishing returns that impact (1) i.e. you cannot increase the proportion of the population going to university for ever. TFP is generally seen as encompassing both technological innovations and new ways of organising/doing things (i.e. Taylorism). Secondly, and this follows from the first point is that the authors use a lot of 'straw men' arguments to make themselves sound insightful. As well as my first point there are two glaring examples: the distinction and logic of basic research vs applied research - this is widely known - and also the clear and well understood point that inventing new machines does not cause unemployment as the Luddites claimed (yes there is a silly quotation from Bill Gates about taxing robots but 99.9% of economists are agreed that technology does not cause unemployment). Thirdly, I think the authors have latched on to Schumpeter's 'creative destruction' as a way to provide a catchy title and label throughout the book. In fact they are basically just using the term as a synonym for innovation. Strictly speaking this is not correct - Schumpeter was proposing a narrow way of talking about innovation and using the term would exclude the ongoing innovation that incrementalists would highlight. Fourthly, I think the authors are quite wrong to claim that the evidence that technological innovation is subject to declining returns is weak. On the contrary I think the evidence is quite clear - see the work of Robert Gordon or Jonathan Huebner. Consider the development of electricity and the internal combustion engine (both within a decade of each other in the nineteenth century) - in the last 50 years there have not been such revolutionary developments although to be sure there have been some advances. The authors mention pharmaceuticals as a possible example but then ignore it. The declining productivity of R&D in pharmaceuticals is quite clear. The vast majority of NCEs are me-too drugs whereas almost all the biggest innovations in the industry i.e. discovery of penicillin occurred when R&D budgets were a fraction of what they are today. To date the sequencing of the human genome has not had the transformative effect on R&D productivity that some claimed at the time. Fifthly I dislike the methodology of the book (a) it is teleological. For example they harp on about DARPA as a huge success. No doubt there is much to this - private industry would tend not to fund these types of research. However I would be willing to bet that if this book was written in the 1980s it would have gone all in on the success of MITI just as Chalmers Johnson did at the time. Quite funny that now the US is seen as having a decent industrial policy when all the policy wonks in the 1980s said it was Japan who had the right economic model (b) a lot of the references are to studies conducted by the authors themselves - so the argument is essentially circular. I got the clear impression that there was little attempt to seek to falsify the hypothesis which would be the hallmark of the scientific effort. Sixthly, the breadth of the book is both a blessing and a curse. It is admirable that the authors should try to extend their augments into as a many areas as possible. Unfortunately they have exposed their lack of expertise in many of these areas. For instance they discuss Keynes's General Theory but later say that the theory ran into problems in open economies such as Ireland. Anyone familiar with The General Theory would know that in it Keynes assumed a closed economy - it could never work (even on it's own terms) in an open economy for precisely that reason. Also the New Deal which was also mentioned is not properly discussed - under Roosevelt fiscal policy was actually tightened - see the seminal article by E. Carey Brown published in 1956 if you doubt this. Besides all these points I had a lot of other issues with the evidence presented in this book but that does not mean I do not think that innovation is not important. On the contrary as I stated at the beginning it is clearly a key part of TFP growth and we should be thinking how to stimulate this through institutional reforms and if carefully designed the tax system. However no where to the authors highlight the cost and in particular the opportunity cost of the various spending (and tax reduction) commitments they argue in favour of. This is another grave omission.

8 people found this helpful

louise batten

Had a rip in cover

Reviewed in the United Kingdom on August 25, 2021

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Looks a good read but book was sent damaged :(

Andrea

Aspettative alte. Delusione

Reviewed in Italy on August 15, 2021

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Come spesso accade ciò che potrebbe tranquillamente esser scritto in un articolo si trasforma in un libro. Tanti dati statistici, qualche concetto interessante ma veramente poca sostanza. Aspettative molto alte, essendo un libro post-covid. Non fornisce nessuna soluzione al post capitalismo ma si limita a indicare cose scontate.

2 people found this helpful

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Amazon Customer

Are you concerned about captitalism?

Reviewed in Spain on October 15, 2021

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A fresh innovative analysis on economic growth. It is provocative and rigorous, truly a reference in our reflections on the future of our societies, while questioning some current "politically correct" narratives, such as inequality. It is simply a must-read.

Antonio Madeira

excelente

Reviewed in Brazil on March 31, 2022

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Fácil leitura, excelente organização dos assuntos, rica base de dados. Aborda com rigor teórico e empírico as causas da inovação e do crescimento econômico.

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Dr. Gurbachan Singh

Great book but not in good physical condition

Reviewed in India on January 28, 2022

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The book is excellent but the physical condition it came in was very disappointing. Please take care when you place order.

Amazon Kunde

Great Read!

Reviewed in Germany on July 28, 2021

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One of the best books I have read this year. Insightfull, well researched and approachable. I would recommend it to anyone interested in economics, technology or politics in a heartbeat.

Aymeric CONRY

A book to read and understand the direction of our world..

Reviewed in France on July 13, 2021

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We are facing a pivotal moment and turning point: the Covid-19 pandemic has highlighted the need to re-consider our world, and prepare for the necessary shift our livelihood and society are requiring..

A. Menon

A Schumpterian analysis of the frictions we see in the modern economy

Reviewed in the United States on July 9, 2021

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There has been much said recently about the trends we see in the modern economy with regards to labor capital, globalization and environmental degradation. There are optimistic and pessimistic analysis and from an economic standpoint what is often focused on are the failures of the market in some capacity. The Power of Creative destruction has a different focus. It takes a look at the creative destruction forces that are at the core of the changes to the modern economy and analyzes their dynamics with numerous case studies substantiating the policy responses that should lead to best outcomes given the results of the studies. It is a very interesting and ultimately optimistic book that sees a partially renewed role of government due to the tendency of unchecked capitalism to morph into monopoly rent businesses resistant to change.

The book is broken into chapters each focusing on small themes that weave together to push the authors conclusions on the benefits of creative destruction for progress and the eventual labor demands they create, though they highlight the creation is not simultaneous with the destruction. The authors start by discussing the dynamics of labor gains and losses to businesses subject to greater competition and see them dependent on whether businesses are at the forefront of their industry or protected by barriers to entry. They use this example to highlight that where industries are strong, globalization leads to greater labor opportunities in automating industries. Thus automation per-se does not destroy jobs where automating firms are growing. The authors then discuss competition and how to think about the dynamics of competition on open and closed economies and the overall benefits of competition to generating productivity growth. They use the lens of patents to measure much of the process and technological improvements that are taking place. The authors tackle a whole host of current contentious ideas, including taxation and distribution of wealth. They focus on rents and the benefits of entrepreneurs to receive excess competition. They use studies like emigration of scientists as a function of taxes to show the need to reward innovators. The authors discuss the economic transitions that have generated growth and the rapid hollowing of the industrial US. They discuss how those frictions and move to the service sector have more favorable dynamics when there is government support for labor. They use the Nordic's for case examples of the benefits of labor policies to dampen the frictions of globalization. The author discuss globalization broadly and bring in the need of the state to be a key agent in protecting those affected with policies that take assignment of blame away from the individual. Their studies show the US as having extremely favorable conditions for entrepreneurs but poor protections for those affected by globalization whereas in much of continental Europe it is the opposite. They argue the need for both in these changing times.

The Power of Creative Destruction brings a fresh advocacy for entrepreneurial capitalism. There is an increasing pushback to such a growth model due to the destruction it can be seen to bring but the authors argue this is misreading the dynamics and that ultimately entrepreneurs drive growth and demand for labor. It is unfortunately impossible to really know but their arguments are substantiated and the case studies convincing in their narrower context. Nonetheless this is an insightful overview of an economic perspective that should be considered more as to why the economy grows. The author is a growth specialist who's textbook is well used in graduate school. It is a bit dry so at times if one is reading for one's own information it gets a bit boring but the content is rich.

4 people found this helpful

A clear argument for Schumpeterian economics

Reviewed in the United States on June 10, 2021

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Not for the casual reader, but with some background in economics and economic policy, this book should stimulate and satisfy. The argument is timely since government investment in scientific R & D has come back into fashion. A limpid translation from the French.

3 people found this helpful

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