creative destruction

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Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages by Carlota Pérez

agricultural Revolution, Big bang: deregulation of the City of London, Bob Noyce, Bretton Woods, capital controls, commoditize, Corn Laws, creative destruction, David Ricardo: comparative advantage, deindustrialization, distributed generation, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, Hyman Minsky, informal economy, joint-stock company, Joseph Schumpeter, knowledge economy, late capitalism, market fundamentalism, new economy, nuclear winter, offshore financial centre, post-industrial society, profit motive, railway mania, Robert Shiller, Robert Shiller, Sand Hill Road, Silicon Valley, Simon Kuznets, South Sea Bubble, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, trade route, tulip mania, Upton Sinclair, Washington Consensus

It is precisely this systemic character that makes the whole question of technical change so crucial in understanding capitalist development. A. From Technological Innovations to Institutional Revolutions The notion of ‘creative destruction’, very much influenced by Nietzsche, was a significant element in the European Zeitgeist of the early twentieth century, as the nature of progress by innovation. Much in the same spirit as that of the Renaissance, it was seen as Mankind’s noble and pleasurable duty to invent,23 to break the forces of inertia that threatened to chain and enslave society in a cult of status quo. It was the German economist Werner Sombart, in his Krieg und Kapitalismus, who first used the term ‘the creative spirit of destruction’ in economics.24 Today we usually credit Schumpeter with the notion of ‘creative destruction’ as the way to describe the contradictory nature of technological revolutions.25 In fact, he understood innovation, be it new products, new processes or simply new ways of doing things, as the very essence of the capitalist engine of growth.

The recession creates the conditions for institutional restructuring and for re-routing growth onto a sustainable path. 36 The Propagation of Paradigms: Times of Installation, Times of Deployment Degree of diffusion of the technological revolution Figure 4.1 37 Two different periods in each great surge INSTALLATION PERIOD Turning point DEPLOYMENT PERIOD Time big-bang Next big-bang This chapter takes a broad look at the interrelated technological, economic and institutional changes involved in the process. A. Creative Destruction and Social Polarization Schumpeter’s notion of ‘creative destruction’ aptly portrays the effects of radical innovations. When the core products of a technological revolution start coming together, they inevitably clash with the established environment and the ingrained ways of doing things. Arkwright’s water frame was a clear threat to hand spinners both in England and in India. The Liverpool–Manchester railway announced the demise of the horse-drawn carriage for long-distance passenger travel, affecting various occupations from innkeepers to veterinarians.53 The Suez Canal practically eliminated sailing ships from the route to India, while, by cutting travel time from three months to one, it made obsolete the network of huge cargo depots in England, threatening the power of the big 53.

He saw capitalism as a ‘process of industrial mutation ... that inces- 23. 24. 25. For a discussion of this tradition, see Reinert and Daastøl (1997). Sombart (1913) p. 207. Schumpeter (1942:1975) Ch. VII, p. 83. 22 The Social Shaping of Technological Revolutions 23 santly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.’26 Due to the double nature of the process of creative destruction, Schumpeter saw innovation not only as the force propelling progress but also as the cause of recurring recessions and in general of the cyclical behavior of growth rates and other economic magnitudes. Yet, in spite of his awareness of social and institutional factors, Schumpeter remained very much attached to market equilibrium forces as the determining factor and to the economy alone as the place where the transformation was absorbed.


pages: 383 words: 81,118

Matchmakers: The New Economics of Multisided Platforms by David S. Evans, Richard Schmalensee

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Airbnb, Alvin Roth, big-box store, business process, cashless society, Chuck Templeton: OpenTable, creative destruction, Deng Xiaoping, if you build it, they will come, information asymmetry, Internet Archive, invention of movable type, invention of the printing press, invention of the telegraph, invention of the telephone, Jean Tirole, John Markoff, Lyft, M-Pesa, market friction, market microstructure, mobile money, multi-sided market, Network effects, Productivity paradox, profit maximization, purchasing power parity, QR code, ride hailing / ride sharing, sharing economy, Silicon Valley, Snapchat, Steve Jobs, Tim Cook: Apple, transaction costs, two-sided market, Uber for X, Victor Gruen, winner-take-all economy

See also critical mass; ignition money side of the platform, 33–34, 93–94 Monster, 50, 124 Motorola, 113, 116 M-PESA, 164, 167–181, 205 additional services in, 178–180 critical mass for, 170–171 economic development and, 180–181 how it works, 170 ignition at, 174–178 pricing in, 173 M-Shwari, 178–179 MSN, 82 multi-homing, 28 multisided platforms building, 35–37 challenges of, 9 communication and trust in, 58–61 as communities, 137 critical issues to address in, 36–37 critical mass for, 9–12, 14, 68, 69–83 definition of, 8 designing, 35–37 differentiation in, 28 discovery of/research on, 14–17 economic influence of, 205–206 economic rules and, 1–2, 12–14 evaluating new/potential, 149–164 examples of, 17–18 foundational, 40 friction reduction by, 55–68 future of, 197–206 governance of, 135–148 groups connected by, 1 growth/prominence of, 37–51 history of, 2–3, 12–14, 39–40, 198, 199–201 how many sides to have in, 109–110 identifying, 18–19 ignition of, 35–37, 68–83 pioneering, 37 pricing in, 85–100 retail transformed by, 183–196 technology in turbocharging, 19–20, 39–51 thick markets and, 30 traditional economic rules and, 1–2 value creation and division in, 57–58 MySpace, 28, 74, 138 governance of, 146–148 Video, 82 near-field communication (NFC) chips, 158, 159, 160–161, 162, 163 Netflix, 105, 191, 192 network effects, 21–31 behavioral externalities and, 136–140 creative destruction and, 49 definition of, 21 demand interdependency and, 32–33 direct, 22–25, 29, 137 first-mover advantages and, 23–24 indirect, 25–30, 136–137, 203 mastering, 27–30 number of platform sides and, 109–110 positive and negative, 22–23, 29 pricing and, 32 on shopping malls, 193 value creation/division and, 57–58 newspapers advertising in, 200–201 creative destruction and, 50 pricing, 94, 96, 99–100 pricing of, 32 New York Times, 184, 192–193 Nokia, 111, 112, 118 omnichannel retailing, 194–196 Open Handset Alliance (OHA), 115–116 open source licensing, 115–116 OpenTable, 7–8, 9–14 creative destruction and, 50 critical mass for, 9–12 ecosystem for, 103–104 fee structure of, 10, 13–14, 82, 90, 95 friction solved by, 57, 152 ignition strategy at, 79, 80, 82, 155 network effects at, 21, 25 no-show policy, 144 table management system, 10 thickness of market, 30 time to reach ignition, 164 two-sided platform of, 16–17 operating systems.

With them, matchmakers have an ever-increasing source of dynamism. In 1942, the economist Joseph A. Schumpeter described the results of innovation in market economies:28 [The] process of industrial mutation … incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one … [This process] must be seen in its role in the perennial gale of creative destruction. These turbocharged matchmakers are the forces behind a gale of “creative destruction” that is revolutionizing economies worldwide. There is plainly more to come, but new turbocharged matchmakers have already roiled existing industries. In some cases, they have created value by reducing frictions without threatening existing firms. OpenTable, for example, helps white-tablecloth restaurants work more efficiently by reducing the amount of labor they need for taking reservations and reducing the number of empty tables.

The prices of taxi medallions—which provide a permanent right to drive a taxicab in some cities—are falling.34 Medallion prices declined 23 percent in New York City between 2013 and 2015.35 In part III of this book, we present case studies of two major examples of creative destruction. In 2007, a multisided platform that uses mobile phones to move money between people started in an impoverished country in Africa. It grew explosively. As a result, it leapfrogged the traditional banking industry as well as payment cards. Meanwhile, in the United States, creative destruction has swept through one of the largest sectors of the economy—retail trade. It has completely destroyed some categories, such as video-rental stores, forced existing players to reinvent their businesses, and resulted in an accelerating wave of innovation in how people shop and buy.

The Age of Turbulence: Adventures in a New World (Hardback) - Common by Alan Greenspan

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air freight, airline deregulation, Albert Einstein, asset-backed security, bank run, Berlin Wall, Bretton Woods, business process, call centre, capital controls, central bank independence, collateralized debt obligation, collective bargaining, conceptual framework, Corn Laws, corporate governance, corporate raider, correlation coefficient, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, currency peg, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, double entry bookkeeping, equity premium, everywhere but in the productivity statistics, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, full employment, Gini coefficient, Hernando de Soto, income inequality, income per capita, invisible hand, Joseph Schumpeter, labor-force participation, labour market flexibility, laissez-faire capitalism, land reform, Long Term Capital Management, Mahatma Gandhi, manufacturing employment, market bubble, means of production, Mikhail Gorbachev, moral hazard, mortgage debt, Myron Scholes, new economy, North Sea oil, oil shock, open economy, Pearl River Delta, pets.com, Potemkin village, price mechanism, price stability, Productivity paradox, profit maximization, purchasing power parity, random walk, reserve currency, Right to Buy, risk tolerance, Ronald Reagan, shareholder value, short selling, Silicon Valley, special economic zone, the payments system, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, trade liberalization, trade route, transaction costs, transcontinental railway, urban renewal, working-age population, Y2K, zero-sum game

"I hope you will allow me to agree with the reasons you've given for lowering the rate," he said, "without signing on to your brave-new-world scenario, which I am not quite ready to do." Actually that was fine. I didn't expect the committee to agree with me—yet. Nor was I asking them to do anything. Just ponder. T he fast-paced high-tech boom is what finally gave broad currency to Schumpeter's idea of creative destruction. It became a dot-com buzz phrase—indeed, once you accelerate to Internet speed, creative destruction is hard to overlook. In Silicon Valley, companies were continually remaking themselves and new businesses were constantly flaring up and flaming out. The reigning powers of technology—giants like AT&T, Hewlett-Packard, and IBM—had to scramble to catch up with the trend, and not all succeeded. Bill Gates, the world's biggest billionaire, issued an all points bulletin to Microsoft employees comparing the rise of the Internet to the advent of the PC—upon which, of course, the company's great success was based. 167 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright.

This ethos of bigness had its roots in late-nineteenth-century economic cartelization that was fostered in part by the needs of the military. In the decades immediately following World War II, creative destruction in Europe was largely "creative." Most of the "destruction" of what would have been obsolescent facilities after the war had been done by the bombing during it. The stress of the capitalist process and the need for an economic safety net through the 1970s were minimal. German business expanded rapidly even in the face of formidable regulatory and cultural constraints. By the late 1970s, however, the German economic miracle was fading. West Germany had largely worked through the backlog of reconstruction demand that so buoyed its economy. Demand was easing off and economic growth slowed. Creative destruction—the need for painful economic changes and redeployment of economic resources—largely dormant since the war, reemerged.

G lobalization, the extension of capitalism to world markets, like capitalism itself, is the object of intense criticism from those who see only the destructive side of creative destruction. Yet all credible evidence indicates that the benefits of globalization far exceed its costs, even beyond the realm of economics. For example, economist Barry Eichengreen and political scientist David Leblang, in a paper delivered in late 2006, found "evidence [during the 130-year span from 1870 to 2000] of positive relationships running in both directions between globalization and democracy." They found "that trade openness promotes democracy . . . The impact of financial openness on democracy [is] not as strong but still point[s] in the same direction [and] .. . democracies are more likely to remove capital controls." Accordingly, we should focus on addressing and assuaging the fears induced by the dark side of creative destruction rather than imposing limits on the economic edifice on which worldwide prosperity depends.


pages: 369 words: 94,588

The Enigma of Capital: And the Crises of Capitalism by David Harvey

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accounting loophole / creative accounting, anti-communist, Asian financial crisis, bank run, banking crisis, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, call centre, capital controls, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, deskilling, equal pay for equal work, European colonialism, failed state, financial innovation, Frank Gehry, full employment, global reserve currency, Google Earth, Guggenheim Bilbao, Gunnar Myrdal, illegal immigration, indoor plumbing, interest rate swap, invention of the steam engine, Jane Jacobs, joint-stock company, Joseph Schumpeter, Just-in-time delivery, land reform, liquidity trap, Long Term Capital Management, market bubble, means of production, megacity, microcredit, moral hazard, mortgage debt, Myron Scholes, new economy, New Urbanism, Northern Rock, oil shale / tar sands, peak oil, Pearl River Delta, place-making, Ponzi scheme, precariat, reserve currency, Ronald Reagan, sharing economy, Silicon Valley, special drawing rights, special economic zone, statistical arbitrage, structural adjustment programs, the built environment, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, Thorstein Veblen, too big to fail, trickle-down economics, urban renewal, urban sprawl, white flight, women in the workforce

The Apache believe that wisdom sits in places, and indigenous groups everywhere, from Amazonia to British Columbia and the mountains of Taiwan, celebrate their long-standing and unbreakable bond with the land wherein they dwell. The long history of creative destruction on the land has produced what is sometimes called ‘second nature’ – nature reshaped by human action. There is now very little, if anything, left of the ‘first nature’ that existed before humans came to populate the earth. Even in the remotest regions of the earth and in the most inhospitable environments, traces of human influence (from shifts in climatic regimes, traces of pesticides and in the qualities of the atmosphere and the water) bear the imprint of human influence. Over the last three centuries marked by the rise of capitalism, the rate and spread of creative destruction on the land has increased enormously. In the early years this activity was generally conceptualised in terms of a triumphalist human domination over nature (partly offset by aesthetic sentiments that romanticised the relation to nature).

It is also abundantly clear that the reproduction of capitalism entails the making of new geographies and that the making of new geographies through creative destruction of the old is one very good way to deal with the perpetually present capital surplus disposal problem. But this search for a geographical ‘fix’ to the problem of surplus absorption also constitutes an ever-present danger. While there are innumerable parallels now being drawn between the crisis of the 1930s and the current one, the one potential parallel that is almost totally ignored is the collapse of international collaboration, the descent into geopolitical rivalries and the vast tragedy of one of the greatest of all episodes of creative destruction in human history: the Second World War. 8 What is to be done? and Who is Going to do it? At times of crisis, the irrationality of capitalism becomes plain for all to see.

The irrational way to do this in the past has been through the destruction of the achievements of preceding eras by way of war, the devaluation of assets, the degradation of productive capacity, abandonment and other forms of ‘creative destruction’. The effects are felt not only throughout the world of commodity production and exchange. Human lives are disrupted and even physically destroyed, whole careers and lifetime achievements are put in jeopardy, deeply held beliefs are challenged, psyches wounded and respect for human dignity is cast aside. Creative destruction is visited upon the good, the beautiful, the bad and the ugly alike. Crises, we may conclude, are the irrational rationalisers of an irrational system. Can capitalism survive the present trauma? Yes, of course. But at what cost?


pages: 355 words: 63

The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics by William R. Easterly

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Andrei Shleifer, business climate, Carmen Reinhart, central bank independence, clean water, colonial rule, correlation does not imply causation, creative destruction, endogenous growth, financial repression, Gini coefficient, Gunnar Myrdal, Hernando de Soto, income inequality, income per capita, inflation targeting, interchangeable parts, inventory management, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, large denomination, manufacturing employment, Network effects, New Urbanism, open economy, Productivity paradox, purchasing power parity, rent-seeking, Ronald Reagan, selection bias, Silicon Valley, Simon Kuznets, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, trade liberalization, urban sprawl, Watson beat the top human players on Jeopardy!, Yogi Berra, Yom Kippur War

In our lighting example, high-cost light producers kept getting pushed asideby lower-cost lightproducers.Candleslost out to whale oil lamps, which in turn lost out to kerosene lamps, which inturn lost out to electric lighting.Candlemakers,whalers, and kerosene refiners have successively been driven out of business by new technologies. This is not a new insight. The economist Joseph Schumpeter noted as long ago as 1942 that the process of economic growth ”incessantly revolutionizesthe economic structure from 178 Chapter 9 within, incessantly destroying the oldone, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.”12 The economists Philippe Aghion and Peter Howitt have stressed this kind of approach to growth in recent research.13 They note that the process of creative destruction complicates incentives for innovation. They give more reasons why a free market economy could have a rate of technological innovation that is too slow. Innovators cannot capture all of the returns to their innovation because others can imitate them (Apple never got the full returns to its innovative graphical userinterface because Microsoft imitated it with Windows).

In 1997, there was still only one Internet-linked computer for every twentythree people in the United States, but the number of Internet-linked computers is growing at 50 percent a year.17 In many poorcountries, the Internet is growing even faster, as they can skip some of the intermediate steps and jump to the frontier. Mexico already has 36 Creative 181 Internet service providers, including one in its most backward state of Chiapas. Vested Interests and Creative Destruction Another insight of creative destruction is that there will be losers as well as winners from economic growth. As growth proceeds, old industries die and new ones are created. Growth alters the landscape, turning farms intofast-food restaurants and factory sites. And because growth involves losers as well as winners, it’s easy to see why there has always been a vocal antigrowth faction, even aside from the concern for the environment.

(This effect offsets the advantages of backwardness for imitation and leaping to the frontier mentioned earlier. On balance, backwardness seems to be a disadvantage becauseof the complementaryinvention effect.) New inventions will happenwhere they can draw onexisting inventions. This is path dependence again. Third, sometimes new inventions give new life to existing inventions, as opposed to the creative destruction emphasized for most of this chapter.41 This does not invalidate creative destruction; the two processes can live side by side, with some technologies destroyed by newinventions and other technologies perpetuatedbyeverextending invention. Finally, technological change will accelerate over time. If new inventions are complementary to existing technology, their rate of return will increase as technology advances, meaning faster technological progress.


pages: 361 words: 81,068

The Internet Is Not the Answer by Andrew Keen

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3D printing, A Declaration of the Independence of Cyberspace, Airbnb, AltaVista, Andrew Keen, augmented reality, Bay Area Rapid Transit, Berlin Wall, bitcoin, Black Swan, Bob Geldof, Burning Man, Cass Sunstein, citizen journalism, Clayton Christensen, clean water, cloud computing, collective bargaining, Colonization of Mars, computer age, connected car, creative destruction, cuban missile crisis, David Brooks, disintermediation, Donald Davies, Downton Abbey, Edward Snowden, Elon Musk, Erik Brynjolfsson, Fall of the Berlin Wall, Filter Bubble, Francis Fukuyama: the end of history, Frank Gehry, Frederick Winslow Taylor, frictionless, full employment, future of work, gig economy, global village, Google bus, Google Glasses, Hacker Ethic, happiness index / gross national happiness, income inequality, index card, informal economy, information trail, Innovator's Dilemma, Internet of things, Isaac Newton, Jaron Lanier, Jeff Bezos, job automation, Joseph Schumpeter, Julian Assange, Kevin Kelly, Kickstarter, Kodak vs Instagram, Lean Startup, libertarian paternalism, lifelogging, Lyft, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Martin Wolf, Metcalfe’s law, move fast and break things, move fast and break things, Nate Silver, Network effects, new economy, Nicholas Carr, nonsequential writing, Norbert Wiener, Norman Mailer, Occupy movement, packet switching, PageRank, Paul Graham, peer-to-peer, peer-to-peer rental, Peter Thiel, Plutocrats, plutocrats, Potemkin village, precariat, pre–internet, RAND corporation, Ray Kurzweil, ride hailing / ride sharing, Robert Metcalfe, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Silicon Valley ideology, Skype, smart cities, Snapchat, social web, South of Market, San Francisco, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, TaskRabbit, Ted Nelson, telemarketer, The Future of Employment, the medium is the message, the new new thing, Thomas L Friedman, Tyler Cowen: Great Stagnation, Uber for X, urban planning, Vannevar Bush, Whole Earth Catalog, WikiLeaks, winner-take-all economy, working poor, Y Combinator

In his 1942 magnum opus Capitalism, Socialism and Democracy, Schumpeter used the term “Creative Destruction” to describe the constant cycles of disruptive invention and reinvention that drive capitalism. “This process of Creative Destruction is the essential fact about capitalism,” Schumpeter insisted. “It is what capitalism consists in and what every capitalist concern has got to live with.”106 Internet economics, therefore, needs to be understood as a historical narrative rather than as just a static set of market relationships. In both the Web 1.0 and 2.0 periods, the Internet mostly disrupted media, communications, and retail. And so, in the twenty years after Jim Clark and Marc Andreessen founded Netscape in April 1994, Schumpeter’s gale of creative destruction mostly swirled around the photography, music, newspaper, telecommunications, movie, publishing, and retail industries.

The guy, who might have been outfitted to hang out at the Battery, was wielding a sledgehammer with which he was energetically smashing some plastic objects into smithereens. REALLY CREATIVE DESTRUCTION, the magazine’s headline screamed in letters as black as the dude’s goatee and glasses.8 One doesn’t need to be a semiotician to grasp the significance of seeing this picture—with its “move fast and break things” message—in Rochester, of all places. Much of Rochester’s industrial economy had itself been smashed into smithereens over the last twenty-five years by a Schumpeterian hurricane of creative destruction. The significance of that magazine cover was, therefore, hard to miss: the sledgehammer mirrored the destructive might of the digital revolution; while the plastic objects being destroyed represented the broken city itself.

Indeed, Uber is so disrupting the livelihoods of these professional taxi drivers that in June 2014 there were strikes and demonstrations in many European cities, including London, Paris, Lyon, Madrid, and Milan, against its introduction.118 And yet Uber remains an iconic company in Silicon Valley, where it is “seen as the messiah” and the next $100 billion Internet sensation by San Francisco’s tech crowd.119 Marc Andreessen certainly admires the customer-friendliness of the mobile service. “You watch the car on the map on your phone as it makes its way to you,” he said, complimenting the app’s real-time user interface. “It’s a killer experience.” What’s making its way to us, however, is more than just an image of an Uber limousine blinking across our mobile screen. It’s the creative destruction inflicted by distributed capitalist networks like Uber or Airbnb, in which anyone can become a cabdriver or a hotelier. And Marc Andreessen—whose Mosaic Web browser opened the Internet’s moneyed second act—is right. Uber is certainly going to be a “killer experience” for its early investors, who stand to make 2,000 times their initial outlay.120 But while a lucky handful of investors turned $20,000 angel investments in Uber into $40 million fortunes, the consequences of this casino-style economy are much more troubling for the rest of us.


pages: 366 words: 94,209

Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity by Douglas Rushkoff

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3D printing, activist fund / activist shareholder / activist investor, Airbnb, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, bank run, banking crisis, barriers to entry, bitcoin, blockchain, Burning Man, business process, buy low sell high, California gold rush, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, centralized clearinghouse, citizen journalism, clean water, cloud computing, collaborative economy, collective bargaining, colonial exploitation, Community Supported Agriculture, corporate personhood, corporate raider, creative destruction, crowdsourcing, cryptocurrency, disintermediation, diversified portfolio, Elon Musk, Erik Brynjolfsson, ethereum blockchain, fiat currency, Firefox, Flash crash, full employment, future of work, gig economy, Gini coefficient, global supply chain, global village, Google bus, Howard Rheingold, IBM and the Holocaust, impulse control, income inequality, index fund, iterative process, Jaron Lanier, Jeff Bezos, jimmy wales, job automation, Joseph Schumpeter, Kickstarter, loss aversion, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, Marshall McLuhan, means of production, medical bankruptcy, minimum viable product, Naomi Klein, Network effects, new economy, Norbert Wiener, Oculus Rift, passive investing, payday loans, peer-to-peer lending, Peter Thiel, post-industrial society, profit motive, quantitative easing, race to the bottom, recommendation engine, reserve currency, RFID, Richard Stallman, ride hailing / ride sharing, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, social graph, software patent, Steve Jobs, TaskRabbit, The Future of Employment, trade route, transportation-network company, Turing test, Uber and Lyft, Uber for X, unpaid internship, Y Combinator, young professional, zero-sum game, Zipcar

And why shouldn’t companies optimize for victory? Whether it’s MOOCs replacing in-person college courses, Web sites replacing stores, apps replacing newspapers, or streaming MP3s replacing radio, it’s only creative destruction. Either get with the program or get run over by it. That’s the sanguine interpretation of creative destruction, held by the winners since industrialism began. If you’re the unhappy victim of a plant closing, the resident of an abandoned community, or the owner of an undercut small business, you are an unfortunate but necessary sacrifice to business innovation and free-market competition. Free-market advocates celebrate creative destruction as the way that scrappy young upstarts come and unseat the most powerful companies on the block. But Schumpeter also suggested that each new winner takes over its sector in a much more complete way than its predecessors, potentially destroying more businesses and opportunities than it creates—certainly in the short term.

A traditional livery service must legally assume liability for all on-the-clock drivers, whether they’re currently transporting a passenger or not.25 This is how Uber can be valued at over $18 billion while many of its drivers make below minimum wage after expenses. Meanwhile, the company’s path to success involves destroying the dozens or hundreds of independent taxi companies in the markets it serves. On the surface, it’s the creative destruction of centralized taxi commissions and bureaucracy. The result, however, is the elimination of independently operating businesses and their replacement with a single platform. Former business owners become Uber’s unprotected contractors.* Market pricing and competition are replaced by a monopoly’s algorithmic price-fixing. Creative destruction? Perhaps—but with a twist: the new businesses of the digital era aren’t stand-alone companies like stores or manufacturers but, as they say, entire platforms. This makes them capable of reconfiguring their whole sectors almost overnight.

What algorithms do to the trading floor, digital business does to the economy. In the purely rational light of the computer program, a digital corporation is optimized to convert cash into share price—money and value into pure capital. Most of the people enabling this have no reason to believe it is harmful to the business landscape, much less to human beings. At worst, argue today’s generation of technopreneurs, we are undergoing a whole lot of “creative destruction.” That’s the process, first coined by Marx but popularized by Austrian-American economic philosopher Joseph Schumpeter,20 through which the economy achieves a natural churn. Simply put, it’s a description of how young companies with superior technologies or processes invariably unseat established ones. Old ways of doing things are replaced by better ones. There’s pain, as companies go out of business and people lose jobs, but ultimately there’s gain, as the new market establishes itself.


pages: 504 words: 126,835

The Innovation Illusion: How So Little Is Created by So Many Working So Hard by Fredrik Erixon, Bjorn Weigel

Airbnb, Albert Einstein, asset allocation, autonomous vehicles, barriers to entry, Basel III, Bernie Madoff, bitcoin, Black Swan, blockchain, BRICs, Burning Man, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, Clayton Christensen, Colonization of Mars, commoditize, corporate governance, corporate social responsibility, creative destruction, crony capitalism, dark matter, David Graeber, David Ricardo: comparative advantage, discounted cash flows, distributed ledger, Donald Trump, Elon Musk, Erik Brynjolfsson, fear of failure, first square of the chessboard / second half of the chessboard, Francis Fukuyama: the end of history, George Gilder, global supply chain, global value chain, Google Glasses, Google X / Alphabet X, Gordon Gekko, high net worth, hiring and firing, Hyman Minsky, income inequality, income per capita, index fund, industrial robot, Internet of things, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, Just-in-time delivery, Kevin Kelly, knowledge economy, labour market flexibility, laissez-faire capitalism, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market design, Martin Wolf, mass affluent, means of production, Mont Pelerin Society, Network effects, new economy, offshore financial centre, pensions crisis, Peter Thiel, Potemkin village, price mechanism, principal–agent problem, Productivity paradox, QWERTY keyboard, RAND corporation, Ray Kurzweil, rent-seeking, risk tolerance, risk/return, Robert Gordon, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, Steve Ballmer, Steve Jobs, Steve Wozniak, technological singularity, telemarketer, The Chicago School, The Future of Employment, The Nature of the Firm, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, transportation-network company, tulip mania, Tyler Cowen: Great Stagnation, University of East Anglia, unpaid internship, Vanguard fund, Yogi Berra

Of all the internet start-ups, for example, three-quarters fail because of “premature scaling” alone, according to the Startup Genome Report.32 Yet here we are, with rising venture capital investment in internet start-ups – many of them rushing to scale up their businesses faster than the others. Joseph Schumpeter, the Austrian-born economist, argued along the same lines and, partly inspired by German scholar Werner Sombart, portrayed the capitalist innovation process as “a perennial gale of creative destruction.” For Schumpeter, creation and destruction were part of the same process of economic renewal. In fact, in his “vision of capitalism,” the entry of new technologies and entrepreneurs, and the exit of the old, were the central dynamic of progression.33 Capitalism in this school of thought is not a reflection of the way Karl Marx had treated capital accumulation. A capitalist is not necessarily someone who is rich.

Apart from a surge in the mid-1990s, the trend since the late 1970s has been going down. Business investment is generally following the same declining trend as total investment in Western economies. Again, take the United States as an example. Compared to other Western economies, the US economy has followed a pattern of economic growth that is less reliant on a big trade sector but more dependent on Schumpeterian innovation and creative destruction. Figure 2.4 tells the story of business investment in the US economy between 1975 and 2014. The trend of US business investment has been declining since the late 1970s, when measured as a share of GDP.36 Private investment as a share of business capital stock is on the same trend.37 Just as for the West as a whole, there was a spurt in the 1990s, and during that period productivity growth in the US accelerated too as the business sector invested more money in absorbing new technology.

Rentiers make the economy hidebound. 4 THE RISE AND RISE AGAIN OF CORPORATE MANAGERIALISM The modern large Western corporation and the modern apparatus of socialist planning are variant accommodations to the same need. John Kenneth Galbraith, The New Industrial State Modern corporate behavior increasingly conforms to the spirit of managerialism. Gray capital helped to shape such corporations, but firm managers equally assisted in the gradual corrosion of capitalism. Today, the appetite for creative destruction, the zeitgeist of capitalism, is all too often displaced by a custodian corporate culture that is defensive about the future and protective of its privileges. It is a culture that incubates habits, strategies and models that cannot be married with uncertainty or a disposition for radical innovation and life-or-death competition. Managerialism has become an undisputed meta-ideology of the business world.


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Race Against the Machine: How the Digital Revolution Is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy by Erik Brynjolfsson

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Amazon Mechanical Turk, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, business process, call centre, combinatorial explosion, corporate governance, creative destruction, crowdsourcing, David Ricardo: comparative advantage, easy for humans, difficult for computers, Erik Brynjolfsson, factory automation, first square of the chessboard, first square of the chessboard / second half of the chessboard, Frank Levy and Richard Murnane: The New Division of Labor, hiring and firing, income inequality, intangible asset, job automation, John Markoff, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Khan Academy, Kickstarter, knowledge worker, labour mobility, Loebner Prize, low skilled workers, minimum wage unemployment, patent troll, pattern recognition, Paul Samuelson, Ray Kurzweil, rising living standards, Robert Gordon, self-driving car, shareholder value, Skype, too big to fail, Turing test, Tyler Cowen: Great Stagnation, Watson beat the top human players on Jeopardy!, wealth creators, winner-take-all economy, zero-sum game

For information about quantity discounts, email info@raceagainstthemachine.com www.RaceAgainstTheMachine.com Library of Congress Cataloging-in-Publication Data Brynjolfsson, Erik Race against the machine : how the digital revolution is accelerating innovation, driving productivity, and irreversibly transforming employment and the economy. p. cm. eISBN 978-0-9847251-0-6 1. Technological innovations – Economic Aspects. I. McAfee, Andrew. II. Title. eBooks created by www.ebookconversion.com Contents 1. Technology’s Influence on Employment and the Economy 2. Humanity and Technology on the Second Half of the Chessboard 3. Creative Destruction: The Economics of Accelerating Technology and Disappearing Jobs 4. What Is to Be Done? Prescriptions and Recommendations 5. Conclusion: The Digital Frontier 6. Acknowledgments To my parents, Ari and Marguerite Brynjolfsson, who always believed in me. To my father, David McAfee, who showed me that there’s nothing better than a job well done. Chapter 1. Technology’s Influence on Employment and the Economy If, in like manner, the shuttle would weave and the plectrum touch the lyre without a hand to guide them, chief workmen would not want servants.

And what, if anything, can be done about it? Chapter 2 discusses digital technology, giving examples of just how astonishing recent developments have been and showing how they have upset well-established ideas about what computers are and aren’t good at. What’s more, the progress we’ve experienced augurs even larger advances in coming years. We explain the sources of this progress, and also its limitations. Creative Destruction: The Economics of Accelerating Technology and Disappearing Jobs Chapter 3 explores the economic implications of these rapid technological advances and the growing mismatches that create both economic winners and losers. It concentrates on three theories that explain how such progress can leave some people behind, even as it benefits society as a whole. There are divergences between higher-skilled and lower-skilled workers, between superstars and everyone else, and between capital and labor.

And these days, that means essentially all industries; even the least IT-intensive American sectors like agriculture and mining are now spending billions of dollars each year to digitize themselves. Note also the choice of words by Basu and Fernald: computers and networks bring an ever-expanding- set of opportunities to companies. Digitization, in other words, is not a single project providing one-time benefits. Instead, it's an ongoing process of creative destruction; innovators use both new and established technologies to make deep changes at the level of the task, the job, the process, even the organization itself. And these changes build and feed on each other so that the possibilities offered really are constantly expanding. This has been the case for as long as businesses have been using computers, even when we were still in the front half of the chessboard.


pages: 1,205 words: 308,891

Bourgeois Dignity: Why Economics Can't Explain the Modern World by Deirdre N. McCloskey

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Admiral Zheng, agricultural Revolution, Albert Einstein, BRICs, British Empire, butterfly effect, Carmen Reinhart, clockwork universe, computer age, Corn Laws, creative destruction, dark matter, David Ricardo: comparative advantage, Donald Trump, Edward Lorenz: Chaos theory, endogenous growth, European colonialism, experimental economics, financial innovation, Fractional reserve banking, full employment, George Akerlof, germ theory of disease, Gini coefficient, greed is good, Howard Zinn, income per capita, interchangeable parts, invention of agriculture, invention of air conditioning, invention of writing, invisible hand, Isaac Newton, James Watt: steam engine, John Maynard Keynes: technological unemployment, John Snow's cholera map, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, long peace, means of production, Naomi Klein, New Economic Geography, New Urbanism, Paul Samuelson, purchasing power parity, rent-seeking, road to serfdom, Robert Gordon, Ronald Coase, Ronald Reagan, sceptred isle, Scientific racism, Scramble for Africa, Shenzhen was a fishing village, Simon Kuznets, Slavoj Žižek, spinning jenny, Steven Pinker, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, tulip mania, union organizing, Upton Sinclair, urban renewal, V2 rocket, very high income, working poor, World Values Survey, Yogi Berra

Yet most changes do damage some people — from “creative destruction,” in the phrase of Werner Sombart’s (18631941) made famous by Joseph Schumpeter (1883-1950). Win-lose is usual. Think of the new fold-up-and-carry canvas lawn chairs, which once sold for $40 and now for $6, which have bankrupted companies making the older aluminum chairs. They in turn had bankrupted the old wooden folding deck chairs, which in turn had bankrupted the still older Adirondack non-folding wooden chairs. Chicago prospers mightily, and windily proclaims its might, and so St. Louis comparatively does not. Steam puts waterpower out of business, slowly. Buggy whips lose their appeal. WalMart cheapens goods to the poor but drives local monopolies in retailing out of business. Creative destruction is not only economic. If innovating in the production of sugar or the organization of corporations creates some losers as well as a lot of winners, so do most artistic or intellectual innovations.

The Institution of Douglass North .............................................. 272 Chapter 26: Institutions Cannot be Viewed Merely as IncentiveProviding Constraints................................................................................. 273 Chapter 27: Nor Did The Glorious Revolution Initiate Private Property ........................................................................................................................ 285 Chapter 28: And So the Chronology of Property and Incentives Has Been Mismeasured ...................................................................................... 301 Chapter 29: And Anyway the Entire Absence of Property is not Relevant to the Place or Period ................................................................. 310 Part XII. Science, Bourgeois Dignity, and the Industrial Revolution. 319 Chapter 30: The Cause was Not Science ................................................. 320 Chapter 31: But Bourgeois Dignity and Liberty Entwined with the Enlightenment.............................................................................................. 329 Part XIII. Creative Language, Creative Destruction, Creative Politics338 Chapter 32: It was Not Allocation, but Language .................................. 339 8 Chapter 33: Dignity and Liberty for Ordinary People, in Short, were the Greatest Externalities .................................................................................. 350 Chapter 34: They Warrant Not Political or Environmental Pessimism, but an Amiable Optimism ......................................................................... 360 Works Cited .................................................................................................... 376 The Argument of Bourgeois Dignity: Why Economics Can’t Explain the Modern World ................................................................................................. 409 A précis of the entire argument of the book ........................................... 409 Works Mentioned ........................................................................................ 416 9 Part I.

As Christine MacLeod puts it, by the standard of the “aristocratic cultural hegemony” of earlier times “the inventor was an improbable hero,” but by the middle of the nineteenth century in Britain the inventor had become just that.27The Dutch, then the British, then the Americans, and then many other people for the first time on a big scale looked with favor on the market economy, and even on the creative destruction coming from its profitable innovations. American westerns praised bourgeois cattlemen.28 Japanese salarymen became heroes of novels. The world began to revalue the bourgeois towns. In 2005 the francophone English writer Alain de Botton spoke of his boring home town, Zurich, whose “distinctive lesson to the world lies in its ability to remind us of how truly imaginative and humane it can be to ask of a city that it be nothing other than boring and bourgeois.”


pages: 382 words: 92,138

The Entrepreneurial State: Debunking Public vs. Private Sector Myths by Mariana Mazzucato

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Apple II, banking crisis, barriers to entry, Bretton Woods, California gold rush, call centre, carbon footprint, Carmen Reinhart, cleantech, computer age, creative destruction, credit crunch, David Ricardo: comparative advantage, demand response, deskilling, endogenous growth, energy security, energy transition, eurozone crisis, everywhere but in the productivity statistics, Financial Instability Hypothesis, full employment, G4S, Growth in a Time of Debt, Hyman Minsky, incomplete markets, information retrieval, intangible asset, invisible hand, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, natural language processing, new economy, offshore financial centre, Philip Mirowski, popular electronics, profit maximization, Ralph Nader, renewable energy credits, rent-seeking, ride hailing / ride sharing, risk tolerance, shareholder value, Silicon Valley, Silicon Valley ideology, smart grid, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, total factor productivity, trickle-down economics, Washington Consensus, William Shockley: the traitorous eight

It is not just about setting up a new business (the more common definition), but doing so in a way that produces a new product, or a new process, or a new market for an existing product or process. Entrepreneurship, he wrote, employs ‘the gale of creative destruction’ to replace, in whole or in part, inferior innovations across markets and industries, simultaneously creating new products including new business models, and in so doing destroying the lead of the incumbents (Schumpeter 1949). In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. Each major new technology leads to creative destruction: the steam engine, the railway, electricity, electronics, the car, the computer, the Internet. Each has destroyed as much as they have created but each has also led to increased wealth overall.

It was indeed Leonardo’s work with Ford that inspired the first meetings and work that led to another research project, funded by the Institute for New Economic Thinking (INET), in which Randy Wray and I are today banging heads: a project on how to bring together the thinking of Joseph Schumpeter on innovation and Hyman Minsky on finance, to understand the degree to which finance can be turned into a vehicle for creative destruction rather than its current obsession with Ponzi-like destructive creation. Amongst other friends and colleagues who have provided inspiration through interaction and feedback, I want to mention Fred Block, Michael Jacobs, Paul Nightingale and Andy Stirling, the latter two from SPRU, my new academic home. SPRU, founded by Chris Freeman, is one of the most dynamic environments in which I have worked – a place where innovation is understood to be at the core of capitalist competition, and where rather than mythologizing the process, it is studied ‘critically’ – in both its rate and its direction.

It builds on the notion of the ‘Developmental State’ (Block 2008; Chang 2008; Johnson 1982) pushing it further by focusing on the type of risk that the public sector has been willing to absorb and take on. While Chapters 3 and 4 look at sectors, Chapter 5 focuses on the history of one particular company – Apple – a company that is often used to laud the power of the market and the genius of the ‘garage tinkerers’ who revolutionize capitalism. A company that is used to illustrate the power of Schumpeterian creative destruction.4 I turn this notion on its head. Apple is far from the ‘market’ example it is often used to depict. It is a company that not only received early stage finance from the government (through the SBIC programme, which is related to the SBIR programme discussed in Chapter 4), but also ‘ingeniously’ made use of publicly funded technology to create ‘smart’ products. In fact, there is not a single key technology behind the iPhone that has not been State-funded.


pages: 398 words: 108,889

The Paypal Wars: Battles With Ebay, the Media, the Mafia, and the Rest of Planet Earth by Eric M. Jackson

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bank run, business process, call centre, creative destruction, disintermediation, Elon Musk, index fund, Internet Archive, iterative process, Joseph Schumpeter, market design, Menlo Park, Metcalfe’s law, money market fund, moral hazard, Network effects, new economy, offshore financial centre, Peter Thiel, Robert Metcalfe, Sand Hill Road, shareholder value, Silicon Valley, Silicon Valley startup, telemarketer, The Chicago School, the new new thing, Turing test

While this is an impressive track record by most standards, it’s far short of what our group initially hoped to accomplish. I may not have fully appreciated it when I accepted the CEO’s invitation to join what was then a tiny startup, but it stands to reason that the creation of most technology ventures is by necessity a tumultuous process. Joseph Schumpeter, a Harvard economist, dubbed the process of entrepreneurs unleashing new innovations into the marketplace as “creative destruction” because it invariably shakes up the existing economic order.1 Looking back, this term is certainly appropriate to describe what PayPal set out to do, and it also hints at the turbulence that accompanied our efforts. Vigorous competition provided one source of that tumult. A torrent of competitors, including multinational banks and established Internet players, also saw the profit potential of our startup’s payment system and raced to construct their own versions.

Scheming Mafioso, capricious regulators, opportunistic lawyers, savvy online identity thieves, volatile capital markets, an antagonistic press—collectively these external challenges proved more daunting than we could have ever foreseen. The modern business environment itself turned out to be more hostile to our band of entrepreneurs than even our fiercest competitor. While Schumpeter intended to imply a certain level of instability when he coined the phrase “creative destruction,” he didn’t mean to suggest that entrepreneurs should have to worry more about these non-competitive threats than about the products they wanted to bring to market. And yet, as PayPal’s experience suggests, today’s innovators must often do just that. These daunting threats and the blood, sweat, and tears they extracted make PayPal’s story all the more important to tell. While this book documents the amazing exploits of the talented men and women I had the pleasure of working alongside, it is primarily a cautionary tale told firsthand from the high tech trenches.

Every successful company needs some form of a big-picture vision to guide its decision-making processes. Management teams also need to motivate their employees by making them feel that their company is somehow special. Both cases certainly applied to Confinity. But those observations alone don’t diminish the magnitude of Peter’s vision. Even though he never used the exact words, he was pledging to turn Confinity into nothing less than an initiator of the “creative destruction” that Joseph Schumpeter described sixty years earlier. He genuinely seemed to believe that this little startup had the ability to upend the world’s financial systems by giving consumers unparalleled power over their own finances. Say what you will about this vision’s credibility, but in the days that followed his speech I became convinced that Peter wasn’t the only person in the office who believed it.


pages: 386 words: 122,595

Naked Economics: Undressing the Dismal Science (Fully Revised and Updated) by Charles Wheelan

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affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, capital controls, Cass Sunstein, central bank independence, clean water, collapse of Lehman Brothers, congestion charging, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, Daniel Kahneman / Amos Tversky, David Brooks, demographic transition, diversified portfolio, Doha Development Round, Exxon Valdez, financial innovation, fixed income, floating exchange rates, George Akerlof, Gini coefficient, Gordon Gekko, greed is good, happiness index / gross national happiness, Hernando de Soto, income inequality, index fund, interest rate swap, invisible hand, job automation, John Markoff, Joseph Schumpeter, Kenneth Rogoff, libertarian paternalism, low skilled workers, lump of labour, Malacca Straits, market bubble, microcredit, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, open economy, presumed consent, price discrimination, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, race to the bottom, RAND corporation, random walk, rent control, Richard Thaler, rising living standards, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, school vouchers, Silicon Valley, Silicon Valley startup, South China Sea, Steve Jobs, The Market for Lemons, the rule of 72, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, transaction costs, transcontinental railway, trickle-down economics, urban sprawl, Washington Consensus, Yogi Berra, young professional, zero-sum game

There is a crucial distinction, however, between using the political process to build a safety net for those harmed by creative destruction and using the political process to stop that creative destruction in the first place. Think about the telegraph and the Pony Express. It would have been one thing to help displaced Pony Express workers by retraining them as telegraph operators; it would have been quite another to help them by banning the telegraph. Sometimes the political process does the equivalent of the latter for reasons related to the mohair problem. The economic benefits of competition are huge but spread over a large group; the costs tend to be smaller but highly concentrated. As a result, the beneficiaries of creative destruction hardly notice; the losers chain themselves to their congressman’s office door seeking protection, as any of us might if our livelihood or community were at risk.

Suppose one of our newly educated farmers designs a plow that produces even better yields, putting the first plow salesman out of business—creative destruction. True, this technological breakthrough eliminates one job in the short run. In the long run, though, the town is still better off. Remember, all the farmers are now richer (as measured by higher corn yields), enabling them to hire the unemployed agronomist to do something else, such as develop new hybrid seeds (which will make the town richer yet). Technology displaces workers in the short run but does not lead to mass unemployment in the long run. Rather, we become richer, which creates demand for new jobs elsewhere in the economy. Of course, educated workers fare much better than uneducated workers in this process. They are more versatile in a fast-changing economy, making them more likely to be left standing after a bout of creative destruction. Human capital is about much more than earning more money.

Fisheries managed with transferable quotas were half as likely to collapse as fisheries that use traditional methods.14 Two other points regarding incentives are worth noting. First, a market economy inspires hard work and progress not just because it rewards winners, but because it crushes losers. The 1990s were a great time to be involved in the Internet. They were bad years to be in the electric typewriter business. Implicit in Adam Smith’s invisible hand is the idea of “creative destruction,” a term coined by the Austrian economist Joseph Schumpeter. Markets do not suffer fools gladly. Take Wal-Mart, a remarkably efficient retailer that often leaves carnage in its wake. Americans flock to Wal-Mart because the store offers an amazing range of products cheaper than they can be purchased anywhere else. This is a good thing. Being able to buy goods cheaper is essentially the same thing as having more income.


pages: 418 words: 128,965

The Master Switch: The Rise and Fall of Information Empires by Tim Wu

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accounting loophole / creative accounting, Alfred Russel Wallace, Apple II, barriers to entry, British Empire, Burning Man, Cass Sunstein, Clayton Christensen, commoditize, corporate raider, creative destruction, don't be evil, Douglas Engelbart, Douglas Engelbart, Howard Rheingold, Hush-A-Phone, informal economy, intermodal, Internet Archive, invention of movable type, invention of the telephone, invisible hand, Jane Jacobs, John Markoff, Joseph Schumpeter, Menlo Park, open economy, packet switching, PageRank, profit motive, road to serfdom, Robert Bork, Robert Metcalfe, Ronald Coase, sexual politics, shareholder value, Silicon Valley, Skype, Steve Jobs, Steve Wozniak, Telecommunications Act of 1996, The Chicago School, The Death and Life of Great American Cities, the market place, The Wisdom of Crowds, too big to fail, Upton Sinclair, urban planning, zero-sum game

“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.”* Schumpeter’s cycle of industrial life and death is an inspiration for this book. His thesis is that in the natural course of things, the new only rarely supplements the old; it usually destroys it. The old, however, doesn’t, as it were, simply give up but rather tries to forestall death or co-opt its usurper—à la Kronos—with important implications.

Owning a patent on the lightbulb, or a cure for baldness, means that only you (or your licensee) can profit from its sale. The attendant gains are meant to encourage investment in invention. But in the hands of an outside inventor, a patent serves a different function: as sort of corporate shield that can prevent a large industrial power from killing you off or seizing control of your company and the industry. In that oblique sense, a strong patent can sow the seeds of creative destruction. The Bell patent is an example, perhaps the definitive example, of such a seeding patent. Had it not existed, there would never have been a telephone industry independent of the telegraph. Yet it was hardly a foregone conclusion that Bell’s patent would be its salvation. The validity of the license was somewhat in question: Elisha Gray, remember, had filed a similar patent, arguing, not without foundation, that Alexander Bell had stolen from his design the features that made the telephone actually work.

Vail was acutely aware of how important the telephone network would be to the nation, and there is no evidence that he ever put AT&T’s profitability ahead of its obligation to serve. He presents us therefore with a challenging figure: an unabashed monopolist, but a benign one, who lived up to his own ideals of enlightened despotism. The fault in this arrangement therefore lay not so much with Theodore Vail as with the men who would succeed him. * There is a difference between creative destruction and merely destructive destruction. * Technically, Congress declared telephony and the telegraph a common carrier in the Mann Elkins Act of 1910. But more important was Vail’s embrace of the role. † The alternative phrase for a common carrier is a “public calling,” and the latter may capture more of the original meaning. * Opponents of regulation in the twentieth century pushed the idea that only true monopolies ought to be considered public callings or common carriers.


pages: 337 words: 103,273

The Great Disruption: Why the Climate Crisis Will Bring on the End of Shopping and the Birth of a New World by Paul Gilding

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airport security, Albert Einstein, Bob Geldof, BRICs, carbon footprint, clean water, cleantech, Climategate, commoditize, corporate social responsibility, creative destruction, decarbonisation, energy security, Exxon Valdez, failed state, fear of failure, income inequality, Intergovernmental Panel on Climate Change (IPCC), Joseph Schumpeter, market fundamentalism, mass immigration, Naomi Klein, new economy, nuclear winter, oil shock, peak oil, Ponzi scheme, purchasing power parity, Ronald Reagan, shareholder value, The Spirit Level, The Wealth of Nations by Adam Smith, union organizing, University of East Anglia

Schumpeter’s creative destruction means that many of our current companies simply won’t make it, though many will. It also means that a good proportion of the world’s top one hundred companies in twenty years’ time are names you haven’t heard of yet but exist today and are champing at the bit for the race to start and the opportunity to knock over some of the old players. This is exactly what markets are good at. What the final shape of all this will be, with what technologies, what companies, and which countries end up winners and losers, is full of uncertainty, but the outcome is not. When we act, we will eliminate net CO2e emissions from the economy in an amazingly fast transformation and then move on to the rest of sustainability. Slow, but not stupid. CHAPTER 12 Creative Destruction on Steroids—Out with the Old, In with the New Whenever I give a presentation to a business audience about how dramatic the change is going to be, there are always some who respond, “Yes, I can see why it should be like that, but I can’t see how it’s going to happen, so I just don’t think it’s going to.”

An Economic and Social Hurricane 2. The Scream—We Are Their Children’s Children 3. A Very Big Problem 4. Beyond the Limits—The Great Disruption 5. Addicted to Growth 6. Global Foreshock—The Year That Growth Stopped 7. The Road Ahead—Our Planetary Sat Nav 8. Are We Finished? 9. When the Dam of Denial Breaks 10. The One-Degree War 11. How an Austrian Economist Could Save the World 12. Creative Destruction on Steroids—Out with the Old, In with the New 13. Shifting Sands—From Middle Eastern Oil to Chinese Sun 14. The Elephant in the Room—Growth Doesn’t Work 15. The Happiness Economy 16. Yes, There Is Life After Shopping 17. No, the Poor Will Not Always Be with Us 18. Ineffective Inequality 19. The Future Is Here, It’s Just Not Widely Distributed Yet 20. Guess Who’s in Charge? Acknowledgments Notes Further Reading A Note on the Author Imprint To the prescient pioneers of sustainability of the 1960s and 1970s who spent their lives alerting us to what was coming: Rachel Carson, Donella and Dennis Meadows, Jorgen Randers, Paul Ehrlich, E.

I do so partly because many readers will be working in business and will be wondering what it means for them. I also do so because I have believed for many years that we are going to need business and markets fully mobilized if we are to achieve the historic task ahead of us. This is where my favorite economist comes in. Both as an activist and as an entrepreneur, I have always been particularly fond of the Austrian economist Joseph Schumpeter and his theories of creative destruction. He pointed out that markets are basically “a process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” When I first read these words, I realized they could be describing an ecosystem like a rain forest. It is, after all, a stable overall system, but within it there is a process of constant and dynamic change as old things die or are destroyed and new life is created.


pages: 387 words: 110,820

Cheap: The High Cost of Discount Culture by Ellen Ruppel Shell

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barriers to entry, Berlin Wall, big-box store, cognitive dissonance, computer age, creative destruction, Daniel Kahneman / Amos Tversky, delayed gratification, deskilling, Donald Trump, Edward Glaeser, fear of failure, Ford paid five dollars a day, Frederick Winslow Taylor, George Akerlof, global supply chain, global village, greed is good, Howard Zinn, income inequality, interchangeable parts, inventory management, invisible hand, James Watt: steam engine, Joseph Schumpeter, Just-in-time delivery, knowledge economy, loss aversion, market design, means of production, mental accounting, Pearl River Delta, Ponzi scheme, price anchoring, price discrimination, race to the bottom, Richard Thaler, Ronald Reagan, side project, Steve Jobs, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, traveling salesman, ultimatum game, Victor Gruen, washing machines reduced drudgery, working poor, yield management, zero-sum game

Schumpeter, the Harvard economist who in 1943 published the iconic Capitalism, Socialism, and Democracy. The seventh chapter of that work, entitled “The Process of Creative Destruction,” is for many academics a sacred text. “The process of creative destruction,” Schumpeter writes, “is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.” Creative destruction is an elegantly simple idea describing the industrial mutation of old structures into new ones. The department store evolves from and “creatively destructs” the country store; the auto industry evolves from and replaces the horse and buggy business, automation makes many factory and farm jobs obsolete but creates new jobs in information technology, engineering, healthcare, and biotech. Creative destruction is a critical and necessary driver of progress. In the stampede toward ever greater efficiencies we have come to expect that institutions will get torn down, factories closed, stores shuttered, workers made redundant, and lives detoured.

In the stampede toward ever greater efficiencies we have come to expect that institutions will get torn down, factories closed, stores shuttered, workers made redundant, and lives detoured. And that is as it should be: Nostalgia aside, we know deep down that the good old days were not always so good. Few of us would want our own children operating a dangerous machine in a hot, dirty factory or spending blistering summers under the sun behind a plow. But in the Age of Cheap we have lost our balance: Creative destruction is as destructive as ever. It’s the creative part that is in doubt. “One of the great insights of twentieth-century economics is that you need excessive profits to create innovation,” Harvard trade economist Robert Lawrence told me. “When prices are kept too low, innovation is nearly impossible.” Underlying this is what economists call “perfect competition,” a state characterized by a multitude of buyers and sellers, many products that are essentially interchangeable, and few if any barriers to entry in a given market.

“When a good or service is produced more cheaply abroad, it makes more sense to import it than to make or provide it domestically. This can be difficult for workers who are displaced and need to find jobs in new growing industries. But the economy overall benefits.” Mankiw’s comments echoed those made by former Federal Reserve Chairman Alan Greenspan, by which he reassured workers hurt by outsourcing by saying they “can be confident that new jobs will displace old ones as they always have.” This brand of “creative destruction,” Mankiw, Greenspan, and others have argued, will allow Americans to focus on what we do best: invention and entrepreneurship. On the surface this seems to make sense. The United States is an innovative powerhouse, a place where ideas are born, raised, and coaxed into profitable ventures. Indian and Chinese workers indeed do good work, and they do it cheaply. But what held true for the trade of wine and cloth in the eighteenth century does not necessarily hold true in the post-Internet age.


pages: 385 words: 101,761

Creative Intelligence: Harnessing the Power to Create, Connect, and Inspire by Bruce Nussbaum

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3D printing, Airbnb, Albert Einstein, Berlin Wall, Black Swan, Chuck Templeton: OpenTable, clean water, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, Danny Hillis, declining real wages, demographic dividend, Elon Musk, en.wikipedia.org, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, follow your passion, game design, housing crisis, Hyman Minsky, industrial robot, invisible hand, James Dyson, Jane Jacobs, Jeff Bezos, jimmy wales, John Gruber, John Markoff, Joseph Schumpeter, Kickstarter, lone genius, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, new economy, Paul Graham, Peter Thiel, QR code, race to the bottom, reshoring, Richard Florida, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, six sigma, Skype, Steve Ballmer, Steve Jobs, Steve Wozniak, supply-chain management, Tesla Model S, The Chicago School, The Design of Experiments, the High Line, The Myth of the Rational Market, thinkpad, Tim Cook: Apple, too big to fail, tulip mania, We are the 99%, Y Combinator, young professional, Zipcar

If Americans shifted just half of their combined $30 trillion of investments in multinational conglomerates to local businesses, argues Cortese, “we’d be living in a far different world.” CREATIVE DESTRUCTION AND CREATIVE EDUCATION In Capitalism, Socialism and Democracy, Joseph Schumpeter wrote, “The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers, goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.” Schumpeter, the father of “creative destruction,” saw a version of capitalism in which entrepreneurs were the central, disruptive energy sustaining economic growth. The process of creative destruction undermined established monopolies and toppled existing big businesses that made profits from older regulatory, organizational, technological, and ideological regimes. We see Schumpeter’s creative destruction thriving in Silicon Valley and among start-ups in general.

See also Knowledge mining kinds of knowledge and, 56–57 in knowledge mining, 44 Ziba Design’s work with Lenovo as, 52–56 Immigrants, embodiment and, 49–50 Impossibilities, what-if framing and, 109–10 Improv comedy troupe, 142–43 Incubators, start-up, 203, 244 India, 68–70, 73–76 Indie Capitalism, 223–50 aspects and potentials of, 247–50 creative destruction, creative education, and, 245–47 economics of creativity and, 37–38, 240–45 financial capitalism vs., 227–37 Hewlett-Packard’s failure to innovate and, 223–27 rise of, 237–40 Individual creativity, 20–24, 27–28 Industrial Technology Research Institute, 61–62 IN: Inside Innovation magazine, 11–12, 122 Inkjet printers, 190–97 Innovation. See also Creative Intelligence (CQ) author’s writing and research on (see also Research, creativity) creative destruction and, 242 disruptive, 28–29, 37, 122 evolving models and methodologies of, 27–33 failure of, in Hewlett-Packard, 223–27 financial capitalism and failure of, 234–37 measurement of, 11–14 rising value for, 263–66 Innovation & Design online channel, 11–12, 96 Innovation Awards, 89–90, 105 Innovation gyms, 122, 123–24, 144 Instability.

People belong to a large and growing number of real and digital communities and play a vast number of roles: consumers, investors, designers, cocreators, makers, thinkers, and collaborators. Significant economic value is generated as a result of the engagements people have within these social networks. Market transactions continue to play an important role, but the social network is paramount in the model. 6. Creative destruction is key to innovation-led economic growth. An economy based on creativity accelerates the rise and fall of companies. The number and kind of start-ups increase dramatically as they become the dominant actors in the economy. In this model, older, bigger companies fail faster if they cannot change their cultures and innovate. IF WE USE THESE POLICIES as building blocks for creating a new economics of creativity model, what policies might flow from it?


pages: 537 words: 200,923

City: Urbanism and Its End by Douglas W. Rae

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agricultural Revolution, barriers to entry, business climate, City Beautiful movement, complexity theory, creative destruction, desegregation, edge city, ghettoisation, Gunnar Myrdal, income per capita, informal economy, interchangeable parts, invisible hand, James Watt: steam engine, Jane Jacobs, joint-stock company, Joseph Schumpeter, manufacturing employment, New Economic Geography, new economy, New Urbanism, Plutocrats, plutocrats, Saturday Night Live, the built environment, The Death and Life of Great American Cities, the market place, urban planning, urban renewal, War on Poverty, white flight, Works Progress Administration

I apologize to my colleagues in the Daniels administration both for the numerous deficiencies in my performance on the field of battle in 1990–91 and for the timing of my analysis of the city’s problems nearly a decade after they left office in 1994. With that, I will not further delay the reader. xix C H A P T E R 1 CREATIVE DESTRUCTION AND THE AGE OF URBANISM Industrial mutation . . . incessantly revolutionizes the economic structure from within, incessantly destroying the old, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.— JOSEPH SCHUMPETER, 1946 All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new formed ones become antiquated before they can ossify.

Rents on apartments near the old plant fall, yet vacancy rates still rise little by little from year to year. Seen a day or a year at a time, and a neighborhood at a time, the changes seem increasingly normal—as unworthy of discussion as, say, the sharpening cold of morning while the calendar pages for October and November fall away. Only as changes shingle up—one over another and another—does the cumulative effect of creative destruction emerge for all to know.6 Classic Phases of Creative Destruction At any given moment, there will be zones where creation rises and other places where the lengthening shadows of destruction fall. In one such moment, cities of a given type may create themselves and grow larger, only to be eroded with the passage of time. None of this follows a tidy plan; all of it unfolds with the complex interaction of capital, technology, and the gifts of nature or intellect available to each place.

The sum of such casual, public contact at a local level—most of it fortuitous, most of it associated with errands, all of it metered by the person concerned and not thrust upon him by anyone—is a feeling for the public identity of people, a web of public respect and trust, and a resource in time of personal or neighborhood need. The absence of this trust is a disaster to a city street. Its cultivation cannot be institutionalized. Jane Jacobs, 1961 CONTENTS Preface, ix 1 Creative Destruction and the Age of Urbanism, 1 PART ONE / URBANISM 2 Industrial Convergence on a New England Town, 35 3 Fabric of Enterprise, 73 4 Living Local, 113 5 Civic Density, 141 6 A Sidewalk Republic, 183 PART TWO / END OF URBANISM 7 Business and Civic Erosion, 1917–1950, 215 C O N T E N T S 8 Race, Place, and the Emergence of Spatial Hierarchy, 254 9 Inventing Dick Lee, 287 10 Extraordinary Politics: Dick Lee, Urban Renewal, and the End of Urbanism, 312 11 The End of Urbanism, 361 12 A City After Urbanism, 393 Notes, 433 Bibliography, 477 Acknowledgments, 499 Index, 503 viii PREFACE City: Urbanism and Its End pursues the course of urban history across the boundaries that separate political science from sociology, geography, economics, and history itself.


pages: 183 words: 17,571

Broken Markets: A User's Guide to the Post-Finance Economy by Kevin Mellyn

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banking crisis, banks create money, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, call centre, Carmen Reinhart, central bank independence, centre right, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, crony capitalism, currency manipulation / currency intervention, disintermediation, eurozone crisis, fiat currency, financial innovation, financial repression, floating exchange rates, Fractional reserve banking, global reserve currency, global supply chain, Home mortgage interest deduction, index fund, information asymmetry, joint-stock company, Joseph Schumpeter, labor-force participation, labour market flexibility, light touch regulation, liquidity trap, London Interbank Offered Rate, lump of labour, market bubble, market clearing, Martin Wolf, means of production, mobile money, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Ponzi scheme, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, rising living standards, Ronald Coase, seigniorage, shareholder value, Silicon Valley, statistical model, Steve Jobs, The Great Moderation, the payments system, Tobin tax, too big to fail, transaction costs, underbanked, Works Progress Administration, yield curve, Yogi Berra, zero-sum game

w 163 I Index A C Anglo-Saxon capitalism, 84 Card Act, 68, 70 Anglo-Saxon-type banking systems, 156 CHIPS.See Clearing House Interbank Payment System Asset securitization, 66 Association of Community Organizers for Reform Now (ACORN), 65 Austerity definition, 98 Euro, real unification, 99 Germany, 99–101 B BankAmericard, 29 Bankcard association/card scheme, 29 Bank-centric system, 110 Bank for International Settlements (BIS), 108 Basel III process, 50–51 Basel process, 27–28 Basel standards, 61 Bipartisan government policy, 72 Boom optimistic entrepreneurs, 77 Bretton Woods system, 26, 111 Bureaucracies, 21 Civilization, 64 Clearing House Interbank Payment System (CHIPS), 106, 107 Committee of Payment and Settlement Systems (CPSS), 108 Community Reinvestment Act (CRA), 65–66 Consumer banking BankAmericard, 29 bankcard association/card scheme, 29 branch-based customer relationship, 29 credit card industry, 30 Depression-era Glass-Steagall Act, 33 “diseconomies of scale”, 35 FDIC, 34 four-party model, 29 institutional investors, 34 “market-centric” financial system, 33 merchant/customer relationship, 29 Pac-Man banking, 34 risky business, 31–33 RTC, 31 SEC, 33 S&L industry, 28, 30 1 166 Index Consumer banking (continued) statistical analysis, 30 US “flow-of-funds” data, 28 usury laws, 30 Consumer Finance Protection Bureau (CFPB), 68 Continuous Linked Settlement (CLS), 108 Creative destruction, 85 Credit-driven economy, 76–77 Crony capitalism, 85 Cross-Pacific economy, 97 D Debtor Nation, 64 Dirigisme, 83 Dollar-centric financial system, 112 Durbin Amendment, 70 E ECB.See European Central Bank Economic consequences, financial regulation, 55 bank P & Ls and balance sheets bureaucratic regulation, 59 capital allocation, 57 capitalism, 57 clearinghouse/transaction switch, 58 contradictory rules, 59 creative destruction, 63 free-market capitalism, 57 full-blown panic leading, 57 lender-of-last-resort function, 58 payments system, 58–59 private-sector banks, 58 consumer protection vs. access, 67–68 financial access restriction brick-and-mortar branches, 66 civilization, 64 clearinghouse, 63 CRA, 65–66 credit judgments, 65 economic enfranchisement, 64 government paternalism, 65 joint-stock banks, 63 loan securitization, 66 mass-market retail banking, 66 national and multilateral development agencies, 65 non-credit worthy segments, 66 ownership society, 66 paychecks, 64 premium/reward cards, 66 individual banker accountability, 55 interest reduction, 56 predatory lending, 56 product differentiation, 68–69 public utility, 55, 56 regulatory, capital, and litigation costs, 56 regulatory compliance and fraud losses, 56 savers and investors, 71–73 shell game asset-securitization process, 61 commercial and industrial loans, 62 credible assessment, 62 Dodd-Frank Act, 63 Federal Reserve Bank, 63 free-market creative destruction, 63 globalization, 62–63 Great Depression, 61 Great Moderation, 61 least-regulated jurisdictions, 61 regulatory arbitrage, 61 relationship banking, 62 retail banking revolution, 63 return-on-equity business, 62 rules-based regulation, 61 securitization and market-based funding, 63 supervision vs. rule making, 59–60 unbanking, 70–71 utility-style banking, 56 European Central Bank (ECB), 6, 99, 102–103 F Federal Deposit Insurance Corporation (FDIC), 34 Index Federal Reserve, 101 Finance consumers, 117 American Revolutionary War song, 118 bondholders and money market funds, 138 Bureau of Labor Statistics, 126 business-to-business commerce, 119 consumerism, 118 credit score, 120–121 debt free, 138–139 “dot-com” bubble, 1264 employment and consumer credit, 121–122 Gallup polling organization, 127 Great Society, 126 house prices, 133 “infrastructure”, 119 innovation and education, America advantage, 129 American living standards, 129 global success, 128 high-stakes examinations, 130 industrial policy, 128 student loans, 131 mass-market pottery, 119 money saving, 136–137 New Class, new elite educated caste, 132–133 non-tradable private sector, 127 one’s station in life, 118 overseas trade, 119 pent-up demand, 119 private-sector employment, 125 property taxes, 127 “self-liquidating”, definition, 119 shelter asset bubbles and distorts markets, 133 electoral process, 134 Japanese economy, 135–136 retirement plans and financial advisors, 134 Travellers Club, 133 wealth effect, 133 short-term insurance scheme, unemployment assistance, 127 stock market, 137–138 structural unemployment American economy, 123–125 labor force participation rate, 123 labor markets, Europe, 122 solidarity, 123 three-tiered system, 122 subsidy-based industries, 125 super-safe government debt, 125 technological creativity and economic progress, 117 unionized public-service employees, 125 US job growth, 126 “welfare to work” requirements, 126 You, Inc., 139 Finance-driven economy, 1, 72 anti-capitalism, 2 capitalism, 1 chronic debt crisis, 22 corporate America, 20 current movie artificial bank earnings, 7 asset prices, 6 banking implosions, 6 borrowers and investors connection, 10 borrowing demand, 7 catastrophic financial bubble, 10 civilization, 10 corporatism, 9 democratic crony capitalism, 9 Dodd-Frank act, 8 economic growth and social stability, 10 financial repression, 9 Glass-Steagall Act, 8 human ingenuity, 10 interbank funding markets, 6 low interest rates and easy money, 6 market collapse, 10 money market, 6 overexuberence, 6 overinvestment and speculation, 6 pre-crisis conditions, 8 printing money, 7 private capital, 7 167 168 Index Finance-driven economy (continued) profitability, 7 quantitative easing, 8 recovery, 8 regulation, 8 regulatory capital rules, 8 resources and tools, 9 shell-shocked enterprises and households, 8 end of employment, 21–22 financial leverage magic and poison CEO class, 14–15 consumer debt, 15–16 disconnection problem, 11–12 market bargain, 10 real economy, 10 wealth financialization, 13–14 working capital, 11 global financial crisis, 2 Great Moderation, 16–18 Great Panic, 18–19 household sector agony, 19–20 investor class, 22 Marx, Karl asset bubble, 5 cash nexus, 4 dot-com bubble, 5 economic revolution, 3 First World War, 4 free markets, 3 French Revolution, 3 globalization, 3 Great Depression, 5 liberalism, 3 normalcy, 4 overproduction and speculation, 3 Wall Street, 4, 5 revolutionary socialism, 2 sovereign debt, 8, 22 Finance reconstruction, 142 bank bashing, 146 “bankers”, 142 business model, challenges, 145 Citigroup, 145 cyclical businesses, 143 government management, 142 legitimacy bonus culture, 148–150 privileged opportunity, longestablished bank, 146 short-term share-price manipulation, 148 state and legal systems, 147 stock price, 147 mark-to-market price, 144 “producers”, 143 profession, definition, 163 prudence, 145, 161–163 root-and-branch transformation, 145 talent pool, 144 “the race for talent”, 143 trust cash management, 160 Financial Market Meltdown, 159 FSA, 159 hackneyed term, 159 information asymmetry, 159 non-bank financial service provider, 161 oversold/up-sold products, 159 utility Anglo-Saxon-type banking systems, 156 big data tools, 158 bills-of-exchange market, 150 branch and payment services, 157 clearinghouse creation, 158 core banking, 154 economic value transmission, 150 exchange of claims, 151 fee-income growth, 155 fiat money system, 151 financial intermediation, 150 financial transactions, 157 flexible contractor/subcontractor relationship, 158 information technology, 156 “liquidity premium”, 152 multidivisional/M-form organization, 153 non-interest income, 155 old-media companies, 157 Index overhead value analysis, 154 “privileged opportunity”, 152 quill pen–era practice, 158 sheer utility value, 155 silos, product business, 153 transaction accounts, 152 venture capital industry, 142 “War for Talent”, 143 Financial crises, 23 affordable housing, 24 banking “transmission” mechanism, 43 Basel III process, 50–51 basel process, 27–28 consumer banking(see Consumer banking) Dodd-Frank, 49–50 domestic banking system, 38 European Union, 51–53 FDIC, 40 finance-driven economy’s leverage machine, 43 Financial Market Meltdown, 25 GDP, 38 Government Policy and Central Banks, market meltdown(see Regulation process) government policy failure, 45 “government-sponsored” public companies, 24 Great Depression, 44 GSEs, 24 legal missteps, 47–48 New Deal, 43 panic-stricken markets, 40 political missteps, 45–47 Ponzi scheme, 42 postwar financial order, 25–27 printing money, 38 private profits and socialized losses, 40 private-sector demand, 43 public-sector demand, 42 quantitative approach, 25 TARP, 39 too-big-to-fail institutions, 41 Triple A bonds, 41 US Federal Reserve System, 38 Financial liberalization, 89 Financial Market Meltdown, 25, 61, 89, 109, 159 Financial repression, 9, 78, 111 Financial Services Authority (FSA), 60, 159 Food and Drug Administration (FDA), 69 Fordism, 68 Free-market capitalism, 89 Free markets, 3 French Revolution, 3 Front-end trading systems, 107 FSA.See Financial Services Authority G GDP, 11 “Giro” payments systems, 151 Global imbalance, 96 Globalization, 3 Global whirlwinds, 93 Asia, finance movement cultural differences, 110–111 Financial Market Meltdown, 109 Interest Equalization Tax, 109 language, law, and business culture, 109 primacy, 109 austerity(see Austerity) British Empire, 30 Chimerica, 97 China and United States cross-Pacific economy, 97 foreign interference and aggression, 98 headline growth rates, 97 repression revolution and series, 97–98 Second World War, 98 Smoot-Hawley Tariff, 98 surpluse trade, 97 sustainable development, 98 Chinese ascendancy, 113 clearing and settlement bottleneck, 106–107 Dynastic China, 112 169 Download from Wow!

The markets and the largest investment-banking operations increasingly came to believe that the authorities would step in to prevent any reckoning for financial bets gone wrong. In this sense, the Great Moderation was at least as much a product of governments as it was of markets, something that pains the heart of free-market fundamentalists. The problem is that in a free market, everyone is free to fail. Indeed, something that Joseph Schumpeter called “creative destruction” is essential to economic progress.The Great Moderation was largely a one-way bet for market participants. Financial crises of one sort or another, which affected companies ranging from Japanese and Swedish banks to Long Term Capital, an American hedge fund, continued to occur. In fact, they became more frequent. However, the US Federal Reserve and Treasury were always quick to flood the market with money and slash interest rates in order to limit the damage to the financial 17 18 Chapter 1 |  The Rise and Fall of the Finance-Driven Economy economy.

eBook <www.wowebook.com> Distortion of Bank P & Ls and Balance Sheets Banking is often viewed by the uninformed as the very model and engine of capitalism, which is why critics of capitalism choose to occupy Wall Street and the City of London. Actually, banking has always been in many ways a creature of government and politics. Capitalism demands what the great Austrian economist Josef Schumpeter called “creative destruction.” When markets decide which firms deserve money and which don’t, the latter will fail; and along with the failure of firms, whole communities and thousands of workers may suffer real hardship. However, by trial and error, markets will tend to give capital to new, innovative companies, such as Apple, and take it away from companies with no future, such as GM. People want iPads and don’t want Chevy Volts.


pages: 464 words: 116,945

Seventeen Contradictions and the End of Capitalism by David Harvey

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accounting loophole / creative accounting, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business climate, California gold rush, call centre, central bank independence, clean water, cloud computing, collapse of Lehman Brothers, colonial rule, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, deskilling, drone strike, end world poverty, falling living standards, fiat currency, first square of the chessboard, first square of the chessboard / second half of the chessboard, Food sovereignty, Frank Gehry, future of work, global reserve currency, Guggenheim Bilbao, Gunnar Myrdal, income inequality, informal economy, invention of the steam engine, invisible hand, Isaac Newton, Jane Jacobs, Jarndyce and Jarndyce, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Just-in-time delivery, knowledge worker, low skilled workers, Mahatma Gandhi, market clearing, Martin Wolf, means of production, microcredit, new economy, New Urbanism, Occupy movement, peak oil, phenotype, Plutocrats, plutocrats, Ponzi scheme, quantitative easing, rent-seeking, reserve currency, road to serfdom, Robert Gordon, Ronald Reagan, short selling, Silicon Valley, special economic zone, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, transaction costs, Tyler Cowen: Great Stagnation, wages for housework, Wall-E, women in the workforce, working poor, working-age population

But notice something important here: resort to fossil fuels relieved one contradiction but now, centuries later, it anchors another contradiction between fossil fuel use and climate change. Contradictions have the nasty habit of not being resolved but merely moved around. Mark this principle well, for we will come back to it many times in what follows. The contradictions of capital have often spawned innovations, many of which have improved the qualities of daily life. Contradictions when they erupt into a crisis of capital generate moments of ‘creative destruction’. Rarely is it the case that what is created and what is destroyed is predetermined and rarely is it the case that everything that is created is bad and everything that was good was destroyed. And rarely are the contradictions totally resolved. Crises are moments of transformation in which capital typically reinvents itself and morphs into something else. And the ‘something else’ may be better or worse for the people even as it stabilises the reproduction of capital.

The long and painful history of deindustrialisation has left whole cities, like Detroit, bereft of activity and therefore sinks of lost value even as other cities, like Shenzhen or Dhaka, become hubs of activity that demand massive investments in fixed capital coupled with rental extractions and property market booms if they are to succeed. The history of capital is rife with stories of localised booms and crashes in which the contradiction between fixed and circulating capital, between fixity and motion, is strongly implicated. This is the world where capital as a force of creative destruction becomes most visible in the physical landscape we inhabit. The balance between creativity and destruction is often hard to discern, but the costs imposed on whole populations through deindustrialisation, gyrations in property values and land rents, disinvestment and speculative building all emanate from the underlying and perpetual tension between fixity and motion which periodically and in specific geographical locations heightens to the point of an absolute contradiction and, hence, produces a serious crisis.

It sets up a train of technological accommodations and of new problems, and in so doing it creates new opportunity niches that call forth fresh combinations which in turn introduce further technologies – and further problems … The economy therefore exists always in a perpetual openness of change – in perpetual novelty. It exists perpetually in a process of self-creation. It is always unsatisfied … The economy is perpetually constructing itself.6 New technological configurations displace the old and in so doing initiate phases of what the economist Joseph Schumpeter famously dubbed ‘gales of creative destruction’.7 Whole ways of life and modes of being and thinking have to drastically alter to embrace the new at the expense of the old. The recent history of deindustrialisation and its association with dramatic technological reconfigurations is an obvious case in point. Technological change is neither costless nor painless and the cost and the pain are not evenly shared. The question always to be asked is: who gains from the creation and who bears the brunt of the destruction.


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The Patient Will See You Now: The Future of Medicine Is in Your Hands by Eric Topol

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23andMe, 3D printing, Affordable Care Act / Obamacare, Anne Wojcicki, Atul Gawande, augmented reality, bioinformatics, call centre, Clayton Christensen, clean water, cloud computing, commoditize, computer vision, conceptual framework, connected car, correlation does not imply causation, creative destruction, crowdsourcing, dark matter, data acquisition, disintermediation, don't be evil, Edward Snowden, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Firefox, global village, Google Glasses, Google X / Alphabet X, Ignaz Semmelweis: hand washing, information asymmetry, interchangeable parts, Internet of things, Isaac Newton, job automation, Joseph Schumpeter, Julian Assange, Kevin Kelly, license plate recognition, lifelogging, Lyft, Mark Zuckerberg, Marshall McLuhan, meta analysis, meta-analysis, microbiome, Nate Silver, natural language processing, Network effects, Nicholas Carr, obamacare, pattern recognition, personalized medicine, phenotype, placebo effect, RAND corporation, randomized controlled trial, Second Machine Age, self-driving car, Silicon Valley, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, Snapchat, social graph, speech recognition, stealth mode startup, Steve Jobs, the scientific method, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, Turing test, Uber for X, Watson beat the top human players on Jeopardy!, X Prize

—MITT ROMNEY, FORMER GOVERNOR OF MASSACHUSETTS “Dr. Eric Topol is a pioneer of the medicine of the future and the future is now! Read this book and empower yourself for total well-being.” —DEEPAK CHOPRA “I have experienced Dr. Topol’s healing touch as my personal physician after a 99% heart blockage, in his capacity as cardiology advisor to Men’s Health magazine’s 12 million readers, and as the visionary author of The Creative Destruction of Medicine. With The Patient Will See You Now, he’s extending his healing powers where they’ll do the most good: to the patients themselves. Book an appointment to read it now, and you’ll save yourself a lot of copays later.” —PETER MOORE, EDITOR OF Men’s Health MAGAZINE “Eric Topol’s book focuses us on the most important development in health care today: putting the patient at the center of everything.

Topol writes about the future more effectively than any physician or scientist that I know. If you want to know about what medicine looks like today, you should read this book. But if you want to know what medicine will look like tomorrow, then you must absolutely read this book.” —SIDDHARTA MUHKERJEE, M.D., AUTHOR OF The Emperor of All Maladies: A Biography of Cancer The Patient Will See You Now ALSO BY ERIC TOPOL The Creative Destruction of Medicine Copyright © 2015 by Eric Topol Published by Basic Books, A Member of the Perseus Books Group All rights reserved. Printed in the United States of America. No part of this book may be reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews. For information, address Basic Books, 250 West 57th Street, New York, NY 10107.

But when that occurs, the CEO is ready to plug in and offer guidance and all her experience, knowledge, and wisdom to deal with a problem. Beyond that, the CEO is a kind and compassionate manager, exceptionally good at both communication and multitasking. The CEO is really into IT, too, realizing that both her performance and the company’s are greatly enhanced when everyone can make full use of computer resources. How We Get There In the The Creative Destruction of Medicine,29 I delved into how medicine would become digitized, how we had a new capability of digitizing human beings. But that is a far cry from medicine becoming democratized. As Wael Ghonim wrote in Revolution 2.0, “the power of the people is greater than the people in power.”30 While his book was about the Egypt part of the Arab Spring, enabled by smartphones and social media, the assertion now clearly pertains to medicine, too.


pages: 483 words: 134,377

The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor by William Easterly

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air freight, Andrei Shleifer, battle of ideas, Bretton Woods, British Empire, business process, business process outsourcing, Carmen Reinhart, clean water, colonial rule, correlation does not imply causation, creative destruction, Daniel Kahneman / Amos Tversky, Deng Xiaoping, desegregation, discovery of the americas, Edward Glaeser, en.wikipedia.org, European colonialism, Francisco Pizarro, fundamental attribution error, germ theory of disease, greed is good, Gunnar Myrdal, income per capita, invisible hand, James Watt: steam engine, Jane Jacobs, John Snow's cholera map, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, M-Pesa, microcredit, Monroe Doctrine, oil shock, place-making, Ponzi scheme, risk/return, road to serfdom, Silicon Valley, Steve Jobs, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, Thomas L Friedman, urban planning, urban renewal, Washington Consensus, World Values Survey, young professional

Not even shooting and jailing the opposition, manipulating aid to starve the opposition, seizing the lands of villagers and relocating them against their will, and perpetrating violence against villagers who protested has been enough to shake the technocratic faith that autocrats can be trusted to be benevolent implementers of technical solutions. THE COST OF OPPRESSION Oppression has broad consequences that hold back development. It promotes a lack of trust that inhibits trade and facilitates more oppression. It entrenches a hereditary political and economic elite that blocks the creative destruction necessary for development. Oppressive rulers under-invest in public goods for the majority. This last point will bear on the question raised by the contemporary Ethiopia story on whether autocrats are usually good for reducing child mortality. Of course, the abuses of the Meles regime constitute a very small body of evidence, just as its good performance on child mortality over a few years did in the previous chapter.

Nobody has ever reproached my parents for being traitors to West Virginia, nor has anyone asked them to repay West Virginia for their schooling costs. GHOST COUNTRIES The hostility toward migration as poverty relief in development continues even when migration does benefit those left behind. A big reason for West Virginia’s out-migration was the long-term decline of its coal industry. Among other things, the replacement of trains by automobiles shifted energy demand from coal to petroleum—West Virginia was a victim of creative destruction. Employment in West Virginia coal declined even faster than production did, as mines were mechanized. Other industries suffered badly in West Virginia as its leading industry tanked. Let’s leave behind now the focus only on movement of brains and consider population migration of both skilled and unskilled workers. The huge out-migration in West Virginia suggests that both skilled and unskilled workers were leaving; let’s now lump them together using economists’ jargon as “labor.”

Watt’s spending twelve years improving an invention and a factory owner’s financing him only happened because Watt had gotten a patent on his steam engine. Conventional wisdom is that patents are the main or only way the West solved the inadequate incentives for invention problem. But there is also an even more bottom-up solution that was first sketched out by Joseph Schumpeter early in the twentieth century in his famous theory of “creative destruction.” Schumpeter postulated that an innovator has a jump on everyone else on commercializing his or her own idea. The innovator can develop new products that use his ideas, keeping the idea itself secret from other would-be users. What this means is that he has a monopoly on a product, the new product that resulted from his idea, and as with all monopolies he can realize high profits. The monopoly profits are what give the innovator a generous return for the new idea.


pages: 265 words: 74,941

The Great Reset: How the Post-Crash Economy Will Change the Way We Live and Work by Richard Florida

banking crisis, big-box store, blue-collar work, car-free, carbon footprint, collapse of Lehman Brothers, congestion charging, creative destruction, deskilling, edge city, Edward Glaeser, falling living standards, financial innovation, Ford paid five dollars a day, high net worth, Home mortgage interest deduction, housing crisis, if you build it, they will come, income inequality, indoor plumbing, interchangeable parts, invention of the telephone, Jane Jacobs, Joseph Schumpeter, knowledge economy, labour mobility, low skilled workers, manufacturing employment, McMansion, Menlo Park, Nate Silver, New Economic Geography, new economy, New Urbanism, oil shock, Own Your Own Home, pattern recognition, peak oil, Ponzi scheme, post-industrial society, postindustrial economy, reserve currency, Richard Florida, Robert Shiller, Robert Shiller, secular stagnation, Silicon Valley, Silicon Valley startup, sovereign wealth fund, the built environment, The Wealth of Nations by Adam Smith, Thomas L Friedman, total factor productivity, urban decay, urban planning, urban renewal, white flight, young professional, Zipcar

Despite the massive deprivation and human suffering they caused, these crises played a fundamental role in propelling the economy forward. They were critical moments when existing economic and social arrangements were remade, enabling new periods of economic growth. Born in the same year that Marx died, the great theorist of innovation and entrepreneurship, Joseph Schumpeter, used the phrase “creative destruction” to describe how economic crises sweep away old firms and outmoded economic systems and practices, clearing the way for entrepreneurs to introduce new technologies and even entirely new industries and setting into motion a new era of growth. John Maynard Keynes saw in these crises the need for government spending to essentially protect capitalism from itself. With the private sector flat on its back, government spending was the only way to keep capitalism going and get the economy back on its feet.

Locks, mechanical reapers, typewriters, sewing machines, and eventually bicycles and engines,” notes the economic historian Joel Mokyr.5 Adding to this were major strides forward in continuous-flow technology, initially pioneered in the huge meat-processing factories of Chicago, where it was initially used to speed up the disassembly of livestock, which paved the way for modern mass production à la Henry Ford. These innovations, and many others that were developed during the First Reset, actually helped shape Schumpeter’s theory of creative destruction. Innovation does not slow down during crises, but because the economy is depressed, they tend to accumulate and bunch up. They then come bursting forward as the economy recovers.6 “Well, one reason why upturns follow downturns is that downturns tend to overshoot,” explains the Nobel Prize–winning economist Edmund Phelps regarding the way that crises spur invention and lead to the formation of new businesses.

The Great Depression set the stage for the Second Great Reset. Just as Hansen and others were advancing this theory and capturing the attention of policy makers and the public, his Harvard colleague Joseph Schumpeter was developing his own, more accurate assessment of the role of innovation in overcoming economic crises. Schumpeter, notes Field, had a much “better fix on what was going on. He developed his homage to the power of creative destruction against the backdrop of what has turned out to be the most technologically dynamic epoch of the twentieth century.”4 Field’s contention about the innovativeness of the Second Reset is based on detailed and meticulous research. Delving deeply into the statistical record, he tracks trends in innovation and in total factor productivity over the entire twentieth century, and examines in detail the rise of specific new technologies.


pages: 355 words: 92,571

Capitalism: Money, Morals and Markets by John Plender

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activist fund / activist shareholder / activist investor, Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, bonus culture, Bretton Woods, business climate, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, Fractional reserve banking, full employment, God and Mammon, Gordon Gekko, greed is good, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, labour market flexibility, liberal capitalism, light touch regulation, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, mass immigration, means of production, Menlo Park, money market fund, moral hazard, moveable type in China, Myron Scholes, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Paul Samuelson, Plutocrats, plutocrats, price stability, principal–agent problem, profit motive, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, Veblen good, We are the 99%, Wolfgang Streeck, zero-sum game

A further consequence of this series of industrialisations is that global inequality has lessened. As Karl Marx rightly perceived, industrial capitalism has always been inherently unstable, which is the first and most palpable defect of the system. The cycle of profit, speculation, irrational exuberance, stock market panic and recession has been an endemic feature of capitalism since the industrial revolution began. Creative destruction, the process identified by the Austrian-American economist Joseph Schumpeter as the essential dynamic of capitalism, has long been troublesome for those thrown out of work as a result of increasing competition and technological innovation. It also subverts the sense of community. And today, not only is the business cycle made worse by ill-judged monetary policies and manic bankers – there have been more than 100 major banking crises worldwide in the past three decades – but globalisation and economic interdependence have caused basic manufacturing industries to evacuate wholesale from the developed to the developing world, at a high cost in lost jobs.

That said, the book undoubtedly satisfies the market test, since it remains one of the publishing world’s outstanding bestsellers.25 If there is now a more widespread acceptance that the money motive is not invariably reprehensible, there are caveats. For some, like Keynes, the motive could still be highly distasteful. In forecasting how the world might look to his generation’s grandchildren, he wrote that the love of money would ultimately be recognised as ‘a somewhat disgusting morbidity’. For others, such as Joseph Schumpeter, the economist best known for identifying creative destruction as the motor of capitalism, there remained a question as to how far the profit-maximising business person could be regarded as an admirable role model. He argued that something was lost in the transition from a society governed by aristocrats, whose values were essentially military, to an industrial age; and, unlike Thomas Carlyle, he saw the businessman as woefully unheroic: With the utmost ease and grace the lords and knights metamorphosed themselves into courtiers, administrators, diplomats, politicians and into military officers of a type that had nothing whatever to do with that of the medieval knight.

And that is why resilience in an entrepreneur is more important than brilliance – grit trumps almost every other trait.’29 Nowadays there is what I would call grudging assent to the proposition that entrepreneurship has a vital role in generating economic growth, an idea that was first given its proper due by the Austrian school of economists in the twentieth century. Joseph Schumpeter, in particular, lauded the role of entrepreneurs in the capitalist process of creative destruction, whereby inefficient businesses are wiped out in the downturn of the economic cycle, and new, more competitive businesses emerge. The Austrians were bested in argument by Keynes in the 1930s on the question of whether to rely on laissez-faire, or on the monetary and fiscal activism that Keynes preferred, as a remedy for unemployment in the Great Depression. They were consequently out of fashion for decades afterwards.


pages: 590 words: 153,208

Wealth and Poverty: A New Edition for the Twenty-First Century by George Gilder

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affirmative action, Albert Einstein, Bernie Madoff, British Empire, capital controls, cleantech, cloud computing, collateralized debt obligation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, deindustrialization, diversified portfolio, Donald Trump, equal pay for equal work, floating exchange rates, full employment, George Gilder, Gunnar Myrdal, Home mortgage interest deduction, Howard Zinn, income inequality, invisible hand, Jane Jacobs, Jeff Bezos, job automation, job-hopping, Joseph Schumpeter, knowledge economy, labor-force participation, margin call, Mark Zuckerberg, means of production, medical malpractice, minimum wage unemployment, money market fund, money: store of value / unit of account / medium of exchange, Mont Pelerin Society, moral hazard, mortgage debt, non-fiction novel, North Sea oil, paradox of thrift, Paul Samuelson, Plutocrats, plutocrats, Ponzi scheme, post-industrial society, price stability, Ralph Nader, rent control, Robert Gordon, Ronald Reagan, Silicon Valley, Simon Kuznets, skunkworks, Steve Jobs, The Wealth of Nations by Adam Smith, Thomas L Friedman, upwardly mobile, urban renewal, volatility arbitrage, War on Poverty, women in the workforce, working poor, working-age population, yield curve, zero-sum game

By 1910 the open hearth process, with its radically different capital plant, had usurped Bessemer and had taken over some two-thirds of the steel market in the United States. As Schumpeter so memorably wrote, “Creative destruction is the essential fact about capitalism... it is by nature a form or method of economic change, and not only never is, but never can be stationary.... The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumer goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.”3 In the struggles of creative destruction neither large nor small companies have a decisive advantage. In general large companies are most valuable in making incremental (though cumulatively very large) productivity improvements and in extending their markets into the world economy, where political and financial clout are often more important than innovation.

Although any particular small firm may be less creative than a large corporation, the millions of small businesses together are the prime source of creative destruction—the chief initiators of valuable change. The very virtues of size—the economies of scale they offer—are the corollary of their vices: their huge and settled investments in particular capital and management practices. Without expressing any hostility toward the large corporations, one can maintain that the struggle between past and future is in part a struggle between David and Goliath, and this struggle will never end. Although Schumpeter himself came to underestimate the changeless implications of the imperative of change—and many contemporary economists astonishingly imagine that we are now entering a stationary or stagnant technological age—creative destruction is always the essence of growth. From this fact arises the central question about any system of political economy, any platform of a political party, any inspiring scheme of leadership: will it allow the future to prevail?

The more comprehensive the regulatory systems, the more surely they will be dominated by mediocrities, and the more surely mediocre will be the growth of the U.S. economy. Excessive regulation to save us from risks will create the greatest danger of all: a stagnant society in a changing world. The choice is not between comfortable equilibrium and reckless progress. It is between random deterioration by time and change and creative destruction by human genius. Our current regulatory apparatus is in danger of becoming an enemy of creative destruction. Thus the EPA has relentlessly obstructed the use of new biological insecticides—pheromones, pesticidal bacteria, and other organic pest controllers of the sort celebrated by Rachel Carson as potential replacements for DDT. This stance led to continued use of chemicals such as parathion, which is far more poisonous and destructive than DDT, although most of the new biological substances pose no environmental threat at all.


pages: 772 words: 203,182

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right by George R. Tyler

8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, bank run, banking crisis, Basel III, Black Swan, blood diamonds, blue-collar work, Bolshevik threat, bonus culture, British Empire, business process, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate personhood, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, crowdsourcing, currency manipulation / currency intervention, David Brooks, David Graeber, David Ricardo: comparative advantage, declining real wages, deindustrialization, Diane Coyle, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Gordon Gekko, hiring and firing, income inequality, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, labour market flexibility, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, pension reform, performance metric, pirate software, Plutocrats, plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sand Hill Road, shareholder value, Silicon Valley, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game

That era provided the evidence that Smith utilized in arguing that the business community readily colludes against consumers, employees, and the public interest, resulting in higher prices, less innovation, and a reduced variety of goods. That sentiment also informed the works of political scientist Joseph Schumpeter. He fathered the concept of “creative destruction,” which describes the capitalist process: new, innovative competitors—Apple or Google, for example—arise to challenge established giants such as Microsoft or IBM. The level of such enterprise destruction runs about 10 percent annually in the United States; between 1989 and 1997 an average of 611,000 US firms disappeared each year, out of about 5.7 million.62 Antitrust policy is designed explicitly to promote and nurture this creative destruction process by limiting the ability of aging dinosaur firms to metamorphose into conglomerates that restrict competition; without it, capitalism stagnates as dinosaurs stagger on, dominating weaker innovators.

Their success is marked by female labor force participation rates and wages in northern Europe that are the highest in the world. “Flexicurity” to Ensure Northern Europe Labor Market Flexibility The family capitalism countries recognize the vital role played by flexible labor markets in enhancing productivity growth. They are keenly aware that the Schumpeterian creative destruction process means job churning is an inevitable byproduct of highly beneficial entrepreneurial activity and of economies integrated with international trade. And they have taken to heart economist Eichengreen’s admonition. “Trying to prevent this creative destruction from happening is a recipe for less economic growth and less productivity.”6 As economists at the OECD have explained, there is awareness now in countries such as the Netherlands that “strict employment protections reduce labor market fluidity and prolong unemployment.”7 That appreciation has inculcated a culture of labor market experimentation and continual reform in recent decades in northern Europe with names like “flexicurity.”

The consequence becomes what Mario Monti, sometime Prime Minister of Italy and former President of Milan’s Bocconi University, an antitrust expert, derisively terms, “destruction conservation.”63 Families are harmed by less innovation and also lower living standards, because cartels impose price penalties of 20–25 percent or even higher.64 The Reagan era deregulation of antitrust enforcement derailed Schumpeter’s creative destruction process, with investigations and prosecutions rolled back. For example, there are almost 8,000 banks in America, yet the largest 20 came during this period to control 90 percent of the market, and the top three control 44 percent.65 In the 1980s, the ten biggest banks held fewer than 30 percent of total deposits, but held 54 percent of them in 2012. This anticompetitive outcome was described editorially by the Financial Times in 2009: “Weak competition is obvious to customers: financial companies demand high fees that are often calculated according to illogical tariffs.


pages: 209 words: 80,086

The Global Auction: The Broken Promises of Education, Jobs, and Incomes by Phillip Brown, Hugh Lauder, David Ashton

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active measures, affirmative action, barriers to entry, Branko Milanovic, BRICs, business process, business process outsourcing, call centre, collective bargaining, corporate governance, creative destruction, credit crunch, David Ricardo: comparative advantage, deindustrialization, deskilling, Frederick Winslow Taylor, full employment, future of work, glass ceiling, global supply chain, immigration reform, income inequality, industrial cluster, industrial robot, intangible asset, job automation, Joseph Schumpeter, knowledge economy, knowledge worker, labour market flexibility, low skilled workers, manufacturing employment, market bubble, market design, neoliberal agenda, new economy, Paul Samuelson, pensions crisis, post-industrial society, profit maximization, purchasing power parity, QWERTY keyboard, race to the bottom, Richard Florida, Ronald Reagan, shareholder value, Silicon Valley, sovereign wealth fund, stem cell, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, transaction costs, trickle-down economics, winner-take-all economy, working poor, zero-sum game

John Maynard Keynes’s classic work on The General Theory of Employment, Interest and Money, published in 1936, shaped economic thinking at the time by rejecting the neoliberal view that capitalist economies were self-correcting and required little government intervention. Hence, economies which had fallen into recession would automatically bounce back to a period of boom and full employment. Keynes rejected this idea and argued that governments could intervene effectively in market economies to solve the problem of recession, or what one of his contemporaries called the “gales of creative destruction.”3 Thus, when demand for goods slackened and workers were threatened with unemployment, governments could act to keep the wheels of industry turning. Keynes also endorsed the idea of a welfare state to protect people from the chronic insecurities that characterize the boom-and-bust nature of capitalist development. By the 1980s, neoliberal ideas had regained popularity. Under Ronald Reagan in America and Margaret Thatcher in Britain, there was a return to preaching the virtues of free trade, self-interest, and the power of the market to deliver prosperity and justice.

This book explains why much of this money, effort, and enterprise will be wasted, as the neoliberal opportunity bargain fails to deliver on the promise of education, jobs, and rewards. Schooled in the belief that “learning equals earning,” many Americans have unrealistic expectations of a world that does not owe them a living. It has left them ill-prepared to meet the challenges posed by the new era of knowledge capitalism because they are caught in a gale of creative destruction that makes it difficult to find individual solutions to changing economic realities. The demand for managerial and professional jobs in the United States is not only far less than commonly assumed, but the quality of working life and rewards associated with those jobs will not live up to expectations. The idea that learning equals earning fails to acknowledge that most of those with a university degree in America have not witnessed an increase in income since the early 1970s.

Consequently, many of the things we only thought could be done in the West can now be done anywhere in the world not only cheaper but sometimes better. But the move to low-cost brainwork is not the end of the story. Third, although much of the focus has been on the development of new products and services that highlight the demand for creative people exploiting clever ideas, few seemed to notice that the forces of creative destruction are followed by the destruction of the creative. The productive application of new ideas depends on standardization giving employers greater control over the workplace. Improvements in productivity for much of the twentieth century rested on the principles of scientific management outlined by Fredrick Winslow Taylor. To date, the productivity of new technologies in offices and professional services has been disappointing in much the same way that it took decades to realize the potential of factory production.


pages: 481 words: 120,693

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

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activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, stem cell, Steve Jobs, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game

Consider, by way of example, how Warren Buffett, the most hallowed figure in America’s pantheon of officially virtuous billionaires, described his investing philosophy in his 2008 letter to shareholders. “A truly great business must have an enduring ‘moat’ that protects excellent returns on invested capital,” Buffett explained. “Though capitalism’s ‘creative destruction’ is highly beneficial for society, it precludes investment certainty. A moat that must be continuously rebuilt will eventually be no moat at all.” Like the Venetians who put themselves in the Book of Gold, Buffett understands that the creative destruction of an open economy is good for the country as a whole; but smart capitalists like him prefer to be defended by uncrossable moats. Buffett goes on to explain that his preferred moats are being a low-cost producer or possessing a well-known worldwide brand. But favorable government regulation can create a powerful moat, too.

In egalitarian America, and even in aristocratic Europe, the industrial revolution eventually lifted all boats, but it also widened the social divide. One reason that process was traumatic was that it was pretty dreadful to be a loser—from their personal perspective, the Luddites, skilled weavers who wrecked the machines that made their trade unnecessary, had a point. But, as in all meritocratic 1 percent societies, the creative destruction of the industrial revolution was also traumatic for the many who made a good-faith effort to join the party but failed. Indeed, it was the pathos of these would-be winners that inspired Mark Twain to write the novel that gave the era its name. As Twain and coauthor Charles Dudley Warner explained in a preface to the London edition of their novel, The Gilded Age: “In America nearly every man has his dream, his pet scheme, whereby he is to advance himself socially or pecuniarily.

Rather than be worried by such developments, we should be both encouraged and hopeful. Vast swaths of mankind are having their chance to enjoy some of the fruits of wealth creation. This is the big story. Mr. O’Neill’s empathy for the prospering people of China and India isn’t the only reason to be optimistic about the twin gilded ages. Another is that the experience of the past two centuries has taught us that, with time, the creative destruction of capitalism inevitably brings an overall improvement in everyone’s standard of living. That was what John Baranowski, the general manager of accounting and operations at Greyhound Lines, the bus company based in Dallas, Texas, argued in reply to an essay by W. Brian Arthur, a professor at the Santa Fe Institute, about the computer revolution and the rise of a second economy in which most of the work is done by machines talking to other machines, with little intervention by humans.


pages: 497 words: 150,205

European Spring: Why Our Economies and Politics Are in a Mess - and How to Put Them Right by Philippe Legrain

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3D printing, Airbnb, Asian financial crisis, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, cleantech, collaborative consumption, collapse of Lehman Brothers, collective bargaining, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, debt deflation, Diane Coyle, Downton Abbey, Edward Glaeser, Elon Musk, en.wikipedia.org, energy transition, eurozone crisis, fear of failure, financial deregulation, first-past-the-post, forward guidance, full employment, Gini coefficient, global supply chain, Growth in a Time of Debt, hiring and firing, hydraulic fracturing, Hyman Minsky, Hyperloop, immigration reform, income inequality, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), Irish property bubble, James Dyson, Jane Jacobs, job satisfaction, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, liquidity trap, margin call, Martin Wolf, mittelstand, moral hazard, mortgage debt, mortgage tax deduction, North Sea oil, Northern Rock, offshore financial centre, oil shale / tar sands, oil shock, open economy, peer-to-peer rental, price stability, private sector deleveraging, pushing on a string, quantitative easing, Richard Florida, rising living standards, risk-adjusted returns, Robert Gordon, savings glut, school vouchers, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart grid, smart meter, software patent, sovereign wealth fund, Steve Jobs, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, working-age population, Zipcar

In a complex, ever-changing economy, policymakers need to do more than stand back and let markets rip – but the belief that they know best is a delusion. Throw in insights from political economy, namely how policymakers get caught up with the crowd or captured by it, and the dangers of micromanagement become clear. The task for policymakers is particularly tricky because while the inherent instability of capitalism is a source of progress – the “gales of creative destruction” produced by innovators and entrepreneurs, as Joseph Schumpeter put it – it can also be extremely damaging: when the financial system runs away with itself and then crashes. Economies need to try to capture the benefits of entrepreneurs’ efforts – or the animal spirits of investors, as Keynes put it – while limiting the financial sector’s excesses. Governments need to encourage the dynamism of technological and business progress, while stepping in to rekindle its spirits in a slump.

As Keynes pointed out: “If the animal spirits are dimmed and the spontaneous optimism falters, leaving us to depend on nothing but a mathematical expectation, enterprise will fade and die.”541 While Keynes and Schumpeter are often viewed as polar opposites, there is merit in synthesising their insights. Keynes is right that governments need to step in to support demand in a slump, while Schumpeter is correct that we need to enable economies to adjust so that the process of creative destruction can resume. “In the long term, it is absolutely necessary for insolvent banks, firms, and households to go bankrupt and emerge anew; keeping them alive indefinitely only prolongs the problem,” economist Nouriel Roubini rightly observes. What does that mean for economic policy? It should be bold and modest. Bold in trying to unleash and channel waves of innovation and enterprise. Modest in realising that policymakers’ ability to shape the future is limited.

More fundamentally, the tax system ought to distinguish between gains from hard work and investment and unearned gains that derive from the efforts of others. As Chapter 12 will explain, a good way to encourage greater dynamism and decency would be to slash taxes on labour and replace them with a tax on land values. Policy changes Capitalism is inherently unstable. Often this is a good thing. Economic growth rarely proceeds in a straight line; rather it involves waves of creative destruction: entrepreneurial innovation that ditches the old for the new, as Chapter 11 will discuss. Trying to curb this inherent dynamism tends to lead to stagnation. So policymakers ought to unleash it, while helping people to adapt and providing them with the security they need to embrace change. Unfortunately, the financial system has an inherent tendency to amplify this instability and indeed create its own through the “destructive creation” of bubbles that end in busts.


pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

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3D printing, balance sheet recession, banking crisis, basic income, Bernie Sanders, Bretton Woods, business climate, Carmen Reinhart, central bank independence, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, endogenous growth, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, forward guidance, full employment, G4S, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, low skilled workers, Martin Wolf, mass incarceration, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Steve Jobs, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, trickle-down economics, universal basic income, very high income

It has been the primary source of improvements in productivity, and consequent rises in living standards, for the past 200 years.46 Thus a theory of how capitalist economies work must include at its centre the dynamics of innovation, understanding both the specific nature of the investments needed and the turbulent, non-equilibrium outcomes that result. But this requires a much more dynamic and accurate understanding of how innovation occurs than is provided by the orthodox economic theories of imperfect competition. Drawing on Schumpeter’s original analysis of the processes of ‘creative destruction’,47 modern evolutionary economics has done much to explain how firms operate with bounded rationality in circumstances of uncertainty, where markets tend towards disequilibrium and change is path-dependent. Growth results from the co-evolution of technologies, firms and industry structures and the social and public institutions which support them, connected by complex feedback processes.48 Promoting innovation therefore requires attention to be paid to each of these elements.

R&D: A Troubled Enterprise’, Metropolitan Policy Program, Brookings Institute, May 2015. 13 Arora et al., ‘Killing the Golden Goose?’. 14 W. Lazonick and M. O’Sullivan, ‘Maximizing Shareholder Value: A New Ideology for Corporate Governance’, Economy and Society, vol. 29, no. 10, 2000, pp. 13–35. 15 Ibid. 16 W. Lazonick, ‘Profits without Prosperity’, Harvard Business Review, vol. 92, no. 9, 2014, pp. 46–55. 17 M. Mazzucato, ‘Financing innovation: creative destruction vs. destructive creation’, in special issue of Industrial and Corporate Change, M. Mazzucato, ed., vol. 22, no. 4, 851–67, See repurchases/R&D in Figure 1, p. 857. 18 J. Kay, ‘The Kay review of UK Equity Markets and Long-term Decision Making’, Final Report (July 2012). 19 P. A. Hall and D. Soskice, Varieties of Capitalism and Institutional Complementarities (pp. 43–76), New York, Springer US, 2001. 20 Lazonick and O’Sullivan, ‘Maximizing Shareholder Value’. 21 The share of basic research funded by the private sector has fallen, causing the public sector to focus more on basic research, and in the process cut its applied research budget (Arora et al., ‘Killing the Golden Goose?’).

Jackson, Prosperity without Growth: Economics for a Finite Planet, London, Sterling, VA, Earthscan, 2001; H. Daly, Beyond Growth: The Economics of Sustainable Development, Sussex, UK, Beacon Press, 1996 Edward Elgar Publishing Limited. Cheltenham, UK. Northampton, MA, USA; H. Daly, ‘Georgescu-Roegen versus Solow/Stiglitz’, Ecological Economics, vol. 22, no. 3, 1997, pp. 261–66. 17 P. Aghion and P. W. Howitt, ‘A model of growth through creative destruction’, Econometrica, vol. 60, no. 2, 1992. pp. 323–51; G. Grossman and E. Helpman, Innovation and Growth in the Global Economy, London, MIT Press, 1991, p. 77; P. Romer, ‘Endogenous technological change’, Journal of Political Economy, vol. 98, no. 5, 1990, pp. S71–S102; R. M. Solow, ‘Technical change and the aggregate production function’, Review of Economics and Statistics, vol. 39, no. 3, 1957, pp. 312–20R; R.


pages: 233 words: 75,712

In Defense of Global Capitalism by Johan Norberg

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Asian financial crisis, capital controls, clean water, correlation does not imply causation, creative destruction, Deng Xiaoping, Edward Glaeser, Gini coefficient, half of the world's population has never made a phone call, Hernando de Soto, illegal immigration, income inequality, informal economy, Joseph Schumpeter, Kenneth Rogoff, land reform, Lao Tzu, liberal capitalism, manufacturing employment, market fundamentalism, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, open economy, profit motive, race to the bottom, rising living standards, school vouchers, Silicon Valley, Simon Kuznets, structural adjustment programs, The Wealth of Nations by Adam Smith, Tobin tax, trade liberalization, trade route, transaction costs, trickle-down economics, union organizing, zero-sum game

If you and I and everyone else can think of things that we would like two people to do, we have a permanent manpower deficit, with 6 billion people wanting at least 12 billion employees. This is why we will never have too much manpower, no matter how prosperous we become or how efficient our production gets. Efficiency does, of course, have a flip side. Economist Joseph Schumpeter famously described a dynamic market as a process of ‘‘creative destruction,’’ because it is concerned with ‘‘destroying’’ old solutions and industries, but with a creative end in view, namely the transfer of manpower and capital to more productive occupations. This gives us a higher standard of living, but as the word ‘‘destruction’’ suggests, not everyone benefits from every market transformation in the short term. It is, of course, painful for those who have invested in the old solutions and for those who are laid off in less efficient industries.

But that risk still cannot be compared with the stress in ages past of perhaps not being able to earn one’s daily bread or of drought or flood completely obliterating one’s livelihood. It cannot be compared with the anxiety of the present-day Ethiopian farmer, whose life may depend on the coming of rain and on the health of his livestock. The most foolish possible way to counter the problems that such economic adjustments entail is to try to prevent the adjustments. Without ‘‘creative destruction,’’ we would all be stuck with a lower standard of living. The whole point of trade and development is to direct resources to the point where they can be used most efficiently. A Chinese proverb has it, ‘‘When the wind of change begins to blow, some people build windbreaks while others build windmills.’’ The idea that we should halt change now is as misguided as the idea that we should have obstructed agricultural advances two centuries ago to protect the 80 percent of the population employed on the land at that time.

Moore and Simon, p. 218f. 4. Jonah Goldberg, ‘‘The Specter of McDonald’s: An Object of Bottomless Hatred,’’National Review, June 5, 2000. 5. Thomas Hylland Eriksen, Kulturterrorismen: en uppgo¨relse med tanken om kulturell renhet (Nora, Sweden: Nya Doxa, 1999), p. 46. 6. For numerous examples of ‘‘indigenous’’ cultural products made possible by cultural contact and trade, see Tyler Cowen, Creative Destruction: How Globalization Is Changing the World’s Cultures (Princeton, N.J.: Princeton University Press, 2002). 7. Mario Vargas Llosa, ‘‘Can Culture Be Exempt from Free Trade Agreement?’’ Daily Yomiuri, April 25, 1994. 8. Giddens, p. 66. 9. Berg and Karlsson, p. 51. 10. Berg and Karlsson, pp. 162–171. 306 Index Page references followed by an f or n denote references to figures and footnotes respectively.


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Originals: How Non-Conformists Move the World by Adam Grant

Albert Einstein, Apple's 1984 Super Bowl advert, availability heuristic, barriers to entry, business process, business process outsourcing, Cass Sunstein, clean water, cognitive dissonance, creative destruction, cuban missile crisis, Daniel Kahneman / Amos Tversky, Dean Kamen, double helix, Elon Musk, fear of failure, Firefox, George Santayana, Ignaz Semmelweis: hand washing, Jeff Bezos, job satisfaction, job-hopping, Joseph Schumpeter, Kickstarter, Lean Startup, Louis Pasteur, Mahatma Gandhi, Mark Zuckerberg, meta analysis, meta-analysis, minimum viable product, Network effects, pattern recognition, Paul Graham, Peter Thiel, Ralph Waldo Emerson, random walk, risk tolerance, Rosa Parks, Saturday Night Live, Silicon Valley, Skype, Steve Jobs, Steve Wozniak, Steven Pinker, The Wisdom of Crowds, women in the workforce

Thank you for buying an authorized edition of this book and for complying with copyright laws by not reproducing, scanning, or distributing any part of it in any form without permission. You are supporting writers and allowing Penguin to continue to publish books for every reader. ISBN 978-0-698-40577-6 Version_1 For Allison Contents Also by Adam Grant Title Page Copyright Dedication Foreword by Sheryl Sandberg 1 Creative Destruction The Risky Business of Going Against the Grain 2 Blind Inventors and One-Eyed Investors The Art and Science of Recognizing Original Ideas 3 Out on a Limb Speaking Truth to Power 4 Fools Rush In Timing, Strategic Procrastination, and the First-Mover Disadvantage 5 Goldilocks and the Trojan Horse Creating and Maintaining Coalitions 6 Rebel with a Cause How Siblings, Parents, and Mentors Nurture Originality 7 Rethinking Groupthink The Myths of Strong Cultures, Cults, and Devil’s Advocates 8 Rocking the Boat and Keeping It Steady Managing Anxiety, Apathy, Ambivalence, and Anger Actions for Impact Acknowledgments References Index Foreword BY SHERYL SANDBERG Chief operating officer of Facebook and founder of LeanIn.Org Adam Grant is the perfect person to write Originals because he is one.

He gives practical guidance on how to manage anxiety, channel anger, find the strength in our weaknesses, overcome obstacles, and give hope to others. — Originals is one of the most important and captivating books I have ever read, full of surprising and powerful ideas. It will not only change the way you see the world; it might just change the way you live your life. And it could very well inspire you to change your world. 1 Creative Destruction The Risky Business of Going Against the Grain “The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” George Bernard Shaw On a cool fall evening in 2008, four students set out to revolutionize an industry. Buried in loans, they had lost and broken eyeglasses and were outraged at how much it cost to replace them.

We can only imagine how many Wozniaks, Michelangelos, and Kings never pursued, publicized, or promoted their original ideas because they were not dragged or catapulted into the spotlight. Although we may not all aspire to start our own companies, create a masterpiece, transform Western thought, or lead a civil rights movement, we do have ideas for improving our workplaces, schools, and communities. Sadly, many of us hesitate to take action to promote those ideas. As economist Joseph Schumpeter famously observed, originality is an act of creative destruction. Advocating for new systems often requires demolishing the old way of doing things, and we hold back for fear of rocking the boat. Among nearly a thousand scientists at the Food and Drug Administration, more than 40 percent were afraid that they would face retaliation if they spoke up publicly about safety concerns. Of more than forty thousand employees at a technology company, half felt it was not safe to voice dissenting opinions at work.


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With Liberty and Dividends for All: How to Save Our Middle Class When Jobs Don't Pay Enough by Peter Barnes

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Alfred Russel Wallace, banks create money, basic income, Buckminster Fuller, collective bargaining, computerized trading, creative destruction, David Ricardo: comparative advantage, declining real wages, deindustrialization, diversified portfolio, en.wikipedia.org, Fractional reserve banking, full employment, hydraulic fracturing, income inequality, Jaron Lanier, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, land reform, Mark Zuckerberg, Network effects, oil shale / tar sands, Paul Samuelson, profit maximization, quantitative easing, rent-seeking, Ronald Coase, Ronald Reagan, Silicon Valley, sovereign wealth fund, the map is not the territory, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, Tyler Cowen: Great Stagnation, Upton Sinclair, Vilfredo Pareto, wealth creators, winner-take-all economy

That said, the current political environment makes such scaling all but impossible. It therefore behooves us to take a longer view. As Charles Darwin and Alfred Russel Wallace noted in the nineteenth century, living systems evolve through a process of variation and selection. Many nonliving systems, including economies, evolve in a similar way. Capitalism in particular has been characterized as a system of “creative destruction.”1 One aspect of evolution that remained unclear for decades after Darwin and Wallace was whether the vary-and-select process proceeds gradually or in sudden bursts. In theory, it could work either way, but in 1972, paleontologists Niles Eldredge and Stephen Jay Gould published a landmark paper that argued, based on fossil records, that “the history of evolution is not one of stately unfolding, but a story of homeostatic equilibria, disturbed only rarely by rapid and episodic events of spe-ciation.”2 They called this pattern punctuated equilibrium, and it seems to apply not only to biological systems but to others as well.

., 24, 39 C California, climate dividends in, 117–118 California Air Resources Board (CARB), 117–118 California Public Utilities Commission (CPUC), 117–118 Canada, 53–54, 114 Cantwell, Maria, 110, 115 Cantwell-Collins Act, 142 Cap-and-dividend system, 105–107 legislation on, 109–110 property income and, 116–117 Cap-and-giveaway system, 105–107 Cap-and-trade system. See also Carbon capping in California, 117–118 Clean Air Act creating, 99 climate change and, 99–100 labor unions and, 131–132 offsets in, 104–105 Capital gains, 47 Capitalism creative destruction and, 120 everyone-gets-a-share capitalism, 3–4, 42, 126 types of income and, 27–28 winner-take-all capitalism, 3, 33–34 Carbon capping, 97–118 European carbon trading system, 99, 104–105 Carbon dioxide carbon capping, 97–118 carbon taxing, 113–116 environmental movement and, 135–136 pollution permits, 93 Carbon Limits and Energy for America’s Renewal (CLEAR) Act, 142 Carbon taxing, 113–116 CheatNeutral.com, 104 China, 25–26, 105 Citizen’s income, 79–80 Civil War, debt-free money distribution and, 91–92 Clean Air Act, 99 Climate change, 99–100 Clinton, William J., 99, 114 Coal-burning power plants, 99 Coase, Ronald, 98–99 Collective bargaining, 19 Collins, Chuck, 33 Collins, Susan, 110 Commercial banks.

See also Dividends; Rent adjacent possible and, 121 audit of, 62 benefits, entitlement to, 62 components of, 60–61 defined, 11 at economy-wide level, 140–141 externalities and, 64 guidelines for creating, 89–92 management of, 62 mental ideas and, 122–127 one person, one share, 123–124 political environment and, 120 potential dividends and, 139–146 pre-distribution and, 125–127 quantity of assets needed for, 93–95 shared wealth dividends, 124–125 specific assets and, 141–146 user fees for, 85–86 Copyrights, rent from, 144 Cowen, Tyler, 135 Creative destruction, 120 Credo, 45 Crisis preparing for, 121–127 to-do lists and preparing for, 127–131 Currency trading, 92 D Dales, John, 98 Darwin, Charles, 120 Debt fractional reserve banking and, 90 leverage, 47 Debt-free money distribution, 90–91 Lincoln, Abraham and, 91 Defined-benefits pensions, 123 Deindustrialization, 17 Dell Computers, 25–26 Democratic Congressional Campaign Committee, 109 Democrats and direct spending, 22 The Depression and the Townsend Plan, 133–134 Deregulation, 21 Derivatives, potential revenue from transaction fees, 143 Deunionization, 18–19 Distribution of wealth, 14 Dividends, 9–10.


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The Digital Doctor: Hope, Hype, and Harm at the Dawn of Medicine’s Computer Age by Robert Wachter

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activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, AI winter, Airbnb, Atul Gawande, Captain Sullenberger Hudson, Checklist Manifesto, Chuck Templeton: OpenTable, Clayton Christensen, collapse of Lehman Brothers, computer age, creative destruction, crowdsourcing, deskilling, en.wikipedia.org, Erik Brynjolfsson, everywhere but in the productivity statistics, Firefox, Frank Levy and Richard Murnane: The New Division of Labor, Google Glasses, Ignaz Semmelweis: hand washing, Internet of things, job satisfaction, Joseph Schumpeter, knowledge worker, lifelogging, medical malpractice, medical residency, Menlo Park, minimum viable product, natural language processing, Network effects, Nicholas Carr, obamacare, pattern recognition, peer-to-peer, personalized medicine, pets.com, Productivity paradox, Ralph Nader, RAND corporation, Second Machine Age, self-driving car, Silicon Valley, Silicon Valley startup, six sigma, Skype, Snapchat, software as a service, Steve Jobs, Steven Levy, the payments system, The Wisdom of Crowds, Thomas Bayes, Toyota Production System, Uber for X, US Airways Flight 1549, Watson beat the top human players on Jeopardy!, Yogi Berra

And that will turn on how closely healthcare hews to the normal laws of thermodynamics of the capitalist economy. The business model of “creative destruction” was first described by Austrian economist Joseph Schumpeter in 1942. It holds that a key driver of corporate innovation is the knowledge that the companies that produce the most value will win, and the rest will be destroyed. The theory—a fundamental component of Christensen’s notion of disruptive innovation—is, in essence, economic Darwinism. Were such forces fully unleashed in healthcare, they would clearly drive not only the adoption of technology, but a headlong effort to develop and implement all the changes in work flow, staffing, and culture that are associated with getting the best results from these expensive digital tools. In his 2012 book, The Creative Destruction of Medicine, Eric Topol of the Scripps Clinic argued that healthcare is on the cusp of being “Schumpetered,” with information technology playing a crucial role.

Drucker, “The Coming of the New Organization,” Harvard Business Review, January 1988. 250 “Organizational factors that unlock the value of IT” E. Brynjolfsson and L. M. Hitt, “Beyond the Productivity Paradox: Computers Are the Catalyst for Bigger Changes,” Communications of the ACM 41:49–55 (1998). 250 The business model of “creative destruction” J. Schumpeter, Capitalism, Socialism, and Democracy (New York: Harper & Row, 1942). 250 In his 2012 book … Eric Topol E. Topol, The Creative Destruction of Medicine: How the Digital Revolution Will Create Better Health Care (New York: Basic Books, 2012). 252 In my own division of 60 hospitalists http://hospitalmedicine.ucsf.edu/home/index.html. 253 Today at UCSF, many specialty questions are answered R. Vesely, “Expanding Access to Specialty Care,” University of California, July 30, 2014, available at http://www.university ofcalifornia.edu/news/expanding-access-specialty-care.

., 9–10, 11–12, 17 Bush, Jonathan, 89, 226–233 Carr, Nicholas, 275 case-mix adjustment, 40 Cedars-Sinai Medical Center, 67–68 CellScope, 240–241, 242 Cerner, 8, 86, 187, 222, 231 Chan, Benjamin, 139–141, 149–153, 155–157 Chang, Paul, 53, 62 the chart, 44–45 The Checklist Manifesto (Gawande), 121–122 Christensen, Clay, 12, 61, 217, 229 clinical research, 263–264 clinical trials, 33 clinicopathologic correlation, 31 Clinton, Hillary, 11 Clinton, William “Bill”, 9, 189 Code Blue, 2–4 Codman, Ernest, 36 cognitive computing, 146 cognitive load, 150–151 complementary innovations, 245 computer systems, replacing the physician’s brain, 93–104 computerized decision support for clinicians, 248, 251, 260 computerized provider order entry (CPOE), 130 “Connecting for Health” initiative, 10, 17 cookbook medicine, 120 Cramer, Jim, 233 creative destruction, 250–251 The Creative Destruction of Medicine (Topol), 250 CT scans, 50–51 quality of images, 52–53 stacking, 53 data. See big data data entry, 74 See also scribes data janitors, 117 data wrangling, 117 “death panel” canard, 15 deBronkart, Dave, 198 Delbanco, Tom, 172–178 DeSalvo, Karen, 115–116, 216–217 deskilling, 275 Dhaliwal, Gurpreet, 99, 110, 112 diagnosis, 94–104 See also Isabel DICOM, 51 differential diagnoses, 97 disruptive innovation, 61, 217 distractions, 83–84 doctor visits, 263 doctor-patient relationships, 29–30, 173–174 and technology, 27–28 Doctors and Their Patients (Shorter), 30 doctor’s notes, 30–34, 268 the faceless note, 78–80 See also medical records Donabedian, Avedis, 23 dosage errors, 127–130 See also Pablo Garcia medical error case dosage limits, 133–134 Dougherty, Michelle, 82 Doximity, 238 Doyle, Arthur Conan, 97 Dr.


pages: 397 words: 112,034

What's Next?: Unconventional Wisdom on the Future of the World Economy by David Hale, Lyric Hughes Hale

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affirmative action, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Bretton Woods, capital controls, Cass Sunstein, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, debt deflation, declining real wages, deindustrialization, diversification, energy security, Erik Brynjolfsson, Fall of the Berlin Wall, financial innovation, floating exchange rates, full employment, Gini coefficient, global reserve currency, global village, high net worth, Home mortgage interest deduction, housing crisis, index fund, inflation targeting, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Just-in-time delivery, Kenneth Rogoff, labour market flexibility, labour mobility, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Network effects, new economy, Nicholas Carr, oil shale / tar sands, oil shock, open economy, passive investing, payday loans, peak oil, Ponzi scheme, post-oil, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, sovereign wealth fund, special drawing rights, technology bubble, The Great Moderation, Thomas Kuhn: the structure of scientific revolutions, Tobin tax, too big to fail, total factor productivity, trade liberalization, Washington Consensus, Westphalian system, women in the workforce, yield curve

In the early 1990s, the Scandinavians went through the same sort of structural crisis as Japan, but they have come out the other side in much better shape.1 Growth requires creative destruction. But if the destruction is too destructive, it will be politically intolerable. The Scandinavian use of a well-designed, pro-growth social safety net has made those countries politically safe for creative destruction. Rather than suffering a trade-off between its social safety net and growth, the Scandinavians enjoy a synergy: good growth finances the social safety net, while the safety net makes workers tolerate the creative destruction that generates good growth. Some reformers in Japan want the creative destruction without a proper social safety net. Others want to preserve Japan’s traditional, antigrowth social safety net and avoid creative destruction. That is why Japan has so far failed to come up with the needed solution.


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Every Nation for Itself: Winners and Losers in a G-Zero World by Ian Bremmer

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airport security, banking crisis, barriers to entry, Berlin Wall, blood diamonds, Bretton Woods, BRICs, capital controls, clean water, creative destruction, Deng Xiaoping, Doha Development Round, energy security, European colonialism, failed state, global rebalancing, global supply chain, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Julian Assange, labour mobility, Martin Wolf, mass immigration, Mikhail Gorbachev, mutually assured destruction, Nixon shock, nuclear winter, Parag Khanna, purchasing power parity, reserve currency, Ronald Reagan, smart grid, South China Sea, sovereign wealth fund, special economic zone, Stuxnet, trade route, uranium enrichment, Washington Consensus, WikiLeaks, Yom Kippur War

But while Western mining companies and diamond-trading firms face an avalanche of bad press at home if they’re caught cheating on these rules, that’s not the case in many emerging-market states, where government and industry often exercise much greater direct influence over local media and where the demands of development often encourage governments to make and enforce their own rules.23 *** Finally, investors and companies can become G-Zero winners by recognizing these likely winners and losers—and placing their bets accordingly. Every stock picker looks great in a bull market, and that proved true in a world in which globalization lifted so many boats. The G-Zero will force investors to do a lot more homework. Those who do that work have much to gain. LOSERS The G-Zero is a process of creative destruction, as natural as it is inevitable. Institutions that no longer reflect the world they were created to promote and protect must give way to new ones. Those that struggle against this process of death and renewal are wasting time and resources that could be better spent on anticipating and shaping the post-G-Zero world. If leading established and emerging powers can’t agree on a fair way to address global warming, boost global trade, manage food and public health crises, or govern cyberspace, they’re unlikely to agree on how to divide decision-making power within new international institutions or on what to do with the old ones.

The architects of U.S. foreign policy will have to do more with less in a G-Zero world, America will have fewer opportunities to get what it wants from other countries, and it’s entirely likely that Americans will struggle to accept their diminished international role. That does not mean that the United States is destined to be a G-Zero loser. Resilience in the new era will depend on adaptability and the power to profit from the processes of creative destruction. This is a crucial American advantage. Throughout its history, the United States has valued innovation more than security, technological change more than traditional ways of doing things, and hope for the future more than veneration of the past. In a world of constant change, these qualities are likely to serve the country well. We will take a closer look at America’s G-Zero future in the final chapter.

China will also have to create sustainable balance in its economy, by shifting its reliance for growth from its current heavy dependence on exports toward greater consumption at home—but without “decoupling” from Western consumers to a degree that would isolate China from the world’s other largest economies. Further, over time many of the country’s largest state-owned enterprises will outlive their usefulness. As with other dying institutions, those who profit from them will fight to keep them alive, and state officials will be tempted to artificially extend their life spans. Creative destruction can be either a powerful source of prosperity or a frightening source of turmoil, but only by letting these enterprises die a natural death and enabling more dynamic companies to take their place can China continue to extend its economic gains. That is the lesson of adapters and dinosaurs, and it ultimately applies to China just as surely as to America and Europe. While China will extend its military power in years to come, particularly in East and South Asia, a G2 depends for the foreseeable future on Beijing’s willingness to rely on American military might to provide most global public goods outside of Asia.


pages: 279 words: 76,796

The Unbanking of America: How the New Middle Class Survives by Lisa Servon

Affordable Care Act / Obamacare, Airbnb, basic income, Build a better mousetrap, Cass Sunstein, choice architecture, creative destruction, Credit Default Swap, employer provided health coverage, financial exclusion, financial independence, financial innovation, gender pay gap, George Akerlof, gig economy, income inequality, informal economy, Jane Jacobs, Joseph Schumpeter, late fees, Lyft, M-Pesa, medical bankruptcy, microcredit, Occupy movement, payday loans, peer-to-peer lending, precariat, Ralph Nader, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, sharing economy, too big to fail, transaction costs, unbanked and underbanked, underbanked, universal basic income, Unsafe at Any Speed, We are the 99%, white flight, working poor, Zipcar

This moment is notable for its rarity—this business sector “hasn’t changed materially in hundreds of years,” according to Brett King, an expert in retail banking. Creative destruction, a term coined by the Austrian economist Joseph Schumpeter, denotes the process by which capitalism destroys old economic orders and reinvents them through innovation. Here’s an example of this process at work: innovations in refrigeration and transportation technologies enabled the creation of supermarkets, which ultimately put many smaller food shops out of business. More recently, Amazon, in its use of the Internet, its innovative approaches to shipping, and the creation of the Kindle reader, profoundly changed book selling. Technology always plays a big role in times of creative destruction, and the present moment is no different. Never before has so much information about each and every one of us been more available to more people.

These informal practices are not: Sudhanshu Handa and Claremont Kirton, “The Economics of Rotating Savings and Credit Associations: Evidence from the Jamaican ‘Partner,’” Journal of Development Economics, vol. 60, no. 1 (1999): 173–94; Sowmya Varadharajan, “Explaining Participation in Rotating Savings and Credit Associations (ROSCAs): Evidence from Indonesia” (Ithaca, NY: Cornell University, 2004). 141 almost less than one in ten: PricewaterhouseCoopers, “The Sharing Economy,” Consumer Intelligence Series, pwc.com/CISsharing, April 2015. the sharing economy: Havas Worldwide, “The New Consumer and the Sharing Economy,” Prosumer Report (New York: Havas, 2014). 8. INSIDE THE INNOVATORS 143 This moment is notable: Brett King, Breaking Banks: The Innovators, Rogues, and Strategists Rebooting Banking (Singapore: John Wiley & Sons, 2014), p. xv. Creative destruction, a term: Joseph Alois Schumpeter, The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle (London: Transaction Publishers, 1934). 144 Dave Birch, a director at: King, Breaking Banks, p. 42. Mobile phones have already: “The Future of Money,” 60 Minutes, CBS News, November 22, 2015. http://www.cbsnews.com/news/future-of-money-kenya-m-pesa-60-minutes/ 146 Smartphone use grew: Personal correspondence with Mike Mondelli, April 8, 2016. 163 interest rate of 36 percent: There’s a broader movement supporting the 36 percent rate.

See also RiteCheck as alternative to banks, xii, 3, 6–7, 16–19, 30–31 business model of, 6–7, 22, 37 expansion of, xiii–xiv fees of, 7, 15, 18, 19, 21–22 financial health and, 171 history of, 12–14, 84–86 millennials and, 117–19 personal relationships and, 19–23 profits of, 6–7 regulation of, 13 research approach to, 183–84 services provided by, 21–22 transparency of, 19 Check Center, 77–79, 83–86, 91–92, 181–83, 216n100 ChexSystem, xv–xvi, 32 children care costs, xiv, 53–54, 60, 168, 206n60 as credit card targets, xiv–xv, 71–72 Citigroup, 37, 44, 72 civil rights, 41–44 Clarity Services, 49–50, 75, 184, 213–15n88 Clinton, Bill, 4 Clinton, Hillary, 40 Coleman, Joe, 6–8, 13–14, 22, 83, 183–84 commercial banking, 26–27 Commission on Civil Rights, 42 community development, 158 Community Development Financial Institutions Fund, 172 Community Reinvestment Act (CRA, 1977), 8, 43 compliance departments, 41, 147, 199n41 consulting firms, 29 consumer advocates, 81–82, 101–2, 224n163 consumer awareness, 93, 173–74 consumer behavior, 89–91, 145–46, 161 Consumer Financial Protection Bureau (CFPB) comparison shopping by, 174, 226n174 complaints filed with, 98–100 creation of, 39–40 deception fines by, 72 on overdraft services, 17, 194n17 payday lender opposition of, 89, 91 regulation and, 39–40, 147, 198–99n40, 215–16n91 well-being scale, 166 Continental Illinois, 36 cost of living, 59–60, 82, 88, 107 Countrywide Financial Corporation, 42 Cox, Chris, 39 CRA. See Community Reinvestment Act creative destruction, 143 Credit Card Accountability, Responsibility, and Disclosure Act (CARD, 2009), 72, 74–75, 157 credit cards charge cards vs., 208n67 credit limits for, 72–75, 211n73 credit reduction from, 73 credit scores and, 67–68 financial crisis (2008) and, 73–75, 212n75 history of, 67 income shortfalls and, 63–64 increase in use of, 70 innovations in, 155–57 interest rates of, 71–72, 210n70, 211n71 late fees of, 68, 72 merchant fees of, 32–33 payday loans vs., 87–88 regulation of, 72, 74–75, 157 retail, 209n68 subprime, 70–72, 75, 152, 157 Credit Karma, 115 credit monitoring services, 72 credit scores alternatives to, 131, 138, 141–42 character lending vs., 67–68 determining, 74–75, 150, 212n75 income and, 48–50 innovative models for, 145, 149–52 lack of, 68, 150 medical debt and, 59 payday loans and, 87–88, 93 rebuilding, 115 ROSCAs and, 161 credit unions, 82, 172 creditworthiness, 67–68, 73, 113 criminal prosecution, 95, 98, 99 CRL.


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Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society by Will Hutton

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Andrei Shleifer, asset-backed security, bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, capital controls, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, choice architecture, cloud computing, collective bargaining, conceptual framework, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, debt deflation, decarbonisation, Deng Xiaoping, discovery of DNA, discovery of the americas, discrete time, diversification, double helix, Edward Glaeser, financial deregulation, financial innovation, financial intermediation, first-past-the-post, floating exchange rates, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, Hyman Minsky, I think there is a world market for maybe five computers, income inequality, inflation targeting, interest rate swap, invisible hand, Isaac Newton, James Dyson, James Watt: steam engine, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, liberal capitalism, light touch regulation, Long Term Capital Management, Louis Pasteur, low-wage service sector, mandelbrot fractal, margin call, market fundamentalism, Martin Wolf, mass immigration, means of production, Mikhail Gorbachev, millennium bug, money market fund, moral hazard, moral panic, mortgage debt, Myron Scholes, Neil Kinnock, new economy, Northern Rock, offshore financial centre, open economy, Plutocrats, plutocrats, price discrimination, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, railway mania, random walk, rent-seeking, reserve currency, Richard Thaler, Right to Buy, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, Rory Sutherland, Satyajit Das, shareholder value, short selling, Silicon Valley, Skype, South Sea Bubble, Steve Jobs, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, unpaid internship, value at risk, Vilfredo Pareto, Washington Consensus, wealth creators, working poor, zero-sum game, éminence grise

Innovation may create new wealth, but it challenges old and redundant sources of wealth – a process that Schumpeter famously called ‘creative destruction’. Existing elites – the incumbents whose power, privilege and cash result from the prevailing technology – stand to lose a lot, possibly everything, from creative destruction. So they will resist change to the last. Schumpeter did not make Baumol’s distinction between productive and unproductive enterprise. To his mind, all innovations were productive, whether they entailed opening up a new market, developing a new product or discovering a new process or form of corporate organisation. For Schumpeter, creative destruction had an inherent bias to productive entrepreneurship. Nor did he believe that entrepreneurship could be organised in large companies: it was essentially an individualistic activity and would become ever harder as technology and capitalism became more complex.

But he was right to stress that successful innovation requires that existing elites and power-holders are at least unable to obstruct new sources of wealth generation, and at best actively welcome it. Put another way, if those who have manoeuvred themselves into owning economic rent are sufficiently powerful to obstruct new technologies and innovation that threaten their position, they will surely do so and thus wreck the growth process. The capacity to unleash creative destruction therefore relies on society’s capacity to allow due desert to triumph over undue desert. The open society as the handmaiden for innovation This is why an increasing number of economic historians are interested in the relationship between the Industrial Revolution and the European Enlightenment, after which the pace of GPT introduction accelerated. As we have seen, Enlightenment thinkers challenged classical and medieval thought about desert: Kant, Rousseau and Smith all agreed that human beings were of equal worth and should not be condemned by birth or circumstance into poverty.

Despite initial success, both systems ultimately buckled, having been out-fought, out-produced, out-thought and out-legitimised by open-access capitalist societies. In Russia the communist revolution smothered any chance of progress towards an open-access society and bureaucratised the economy around the Communist Party’s priorities. The reward system that underpins productive entrepreneurship – due desert for discretionary effort – was simply abolished. The chaotic process of ‘creative destruction’ (discussed in more detail in Chapter 10), through which capitalism destroys outmoded production processes to replace them with new ones, ceased. Instead, all effort was devoted to mobilising production around existing technologies to alleviate poverty, to match the capitalist powers and to win the war against Hitler. Innovative ideas were screened to ensure that they would not challenge the party’s ongoing control of the economy and the state.


pages: 607 words: 133,452

Against Intellectual Monopoly by Michele Boldrin, David K. Levine

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accounting loophole / creative accounting, agricultural Revolution, barriers to entry, cognitive bias, creative destruction, David Ricardo: comparative advantage, Dean Kamen, Donald Trump, double entry bookkeeping, en.wikipedia.org, endogenous growth, Ernest Rutherford, experimental economics, financial innovation, informal economy, interchangeable parts, invention of radio, invention of the printing press, invisible hand, James Watt: steam engine, Jean Tirole, John Harrison: Longitude, Joseph Schumpeter, Kenneth Arrow, linear programming, market bubble, market design, mutually assured destruction, Nash equilibrium, new economy, open economy, peer-to-peer, pirate software, placebo effect, price discrimination, profit maximization, rent-seeking, Richard Stallman, Silicon Valley, Skype, slashdot, software patent, the market place, total factor productivity, trade liberalization, transaction costs, Y2K

Being its “discoverers,” we will christen it “IP-inefficiency” and illustrate its working by means of a few significant examples. The theory of why IP-efficiency comes about is rather simple: like every profit maximizing entrepreneur, monopolists are willing and able to do anything legally and technically feasible to retain their monopoly profits. Later in the book, we talk about the Schumpeterian model of dynamic efficiency via creative destruction. This model dreams of a continuous flow of innovation due to new entrants overtaking incumbents and becoming monopolists until new innovators quickly take their place. In this theory, new entrants work like mad to innovate, drawn by the enormous monopoly profits they will make. Our simple observation is that, by the same token, monopolists will also work like mad to retain their enormous monopoly profits.

The authors call the cross-licensing between innovators and incumbents aimed at maintaining monopoly pricing for the cooper-ators “cooperative commercialization strategy,” and conclude the following: “While a cooperative commercialization strategy forestalls the costs of competition in the product market and avoids duplicative investments in sunk assets, imperfections in the “market for ideas” may lead innovators to instead pursue a competitive strategy in the product market. . . . [F]irms who control intellectual property or are associated with venture capital financing are more likely to pursue a cooperative strategy” (p. 30). Notice what this says: IP facilitates collusive behavior and the persistence of monopoly. Competition and “creative destruction” come along only when IP rights are weak or nonexistent. To which we say, “Exactly, Sherlock.” 14. Online at http://www.freepatentsonline.com/20050160457.html (accessed February 24, 2008). 15. The Federal Circuit Court Opinion in this case can be found at http://www.ll. georgetown.edu/federal/judicial/fed/opinions/00opinions/00-1464.html (accessed February 24, 2008). 16. For the views of the Justice Department on the relation between antitrust and intellectual property see Klein (1997).

Schumpeterian Good Monopoly Although originally not a mainstream view in economics, the Schumpeterian view is now close to becoming orthodoxy in most circles.30 Schumpeter celebrates monopoly as the ultimate accomplishment of capitalism. He argues that, in a world in which intellectual property holders are monopolists, competition is a dynamic process that is implemented via the method of creative destruction. This idea remains widespread today; for example, Aghion and Howitt in 1992 developed a formal model based on Schumpeterian ideas. The critical principle is that competition is not in the market P1: KNP head margin: 1/2 gutter margin: 7/8 CUUS245-07 cuus245 978 0 521 87928 6 May 21, 2008 16:55 170 Against Intellectual Monopoly but for the market; while competition may be good at a given point in time, as it induces static efficiency, monopoly is good in the long run, these theorists argue, because it brings about dynamic efficiency, that is, innovation.


pages: 261 words: 10,785

The Lights in the Tunnel by Martin Ford

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Albert Einstein, Bill Joy: nanobots, Black-Scholes formula, call centre, cloud computing, collateralized debt obligation, commoditize, creative destruction, credit crunch, double helix, en.wikipedia.org, factory automation, full employment, income inequality, index card, industrial robot, inventory management, invisible hand, Isaac Newton, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, knowledge worker, low skilled workers, mass immigration, moral hazard, pattern recognition, prediction markets, Productivity paradox, Ray Kurzweil, Search for Extraterrestrial Intelligence, Silicon Valley, Stephen Hawking, strong AI, superintelligent machines, technological singularity, Thomas L Friedman, Turing test, Vernor Vinge, War on Poverty

We would notice that some of the panels on the walls gradually grow dimmer and attract fewer lights. In some cases, they may reverse their decline and become strong again. But in many other cases, they weaken and growdark. Even as this happens, however, elsewhere on the tunnel walls, we see that new panels are appearing and growing stronger. A few seem to grow rapidly in size before our eyes. This is the process of creative destruction. In the mass market, the collective purchasing decisions of the lights determine which businesses succeed and thrive, and which ones ultimately decline and fail. This is a natural and cyclical process. When an inefficient business fails, its capital, resources and employees will eventually be transferred to a new, stronger business. As a panel on the tunnel wall goes dark, the lights that represent that company’s workers will also grow dim.

While the color rotation among the lights captures our interest for a time, the most striking realization is that nothing else has changed in the tunnel. As we watch, we see that the lights continue to softly impact the panels on the walls of the tunnel as consumers purchase products and services. The businesses in the tunnel make no distinctions based on the color of the lights. Over time, the process of creative destruction continues just as it always has. Inefficient businesses fail and newones rise up to take their place. Among the multitude of lights in the tunnel, we can see that there are still a significant minority which shine with intense white light. The wealthiest people in the tunnel may be subject to somewhat higher tax rates, but the businesses and assets they own are retaining their value as the mass market continues to thrive.

Some of those industries are relatively labor intensive, so they have to hire more workers to meet this demand—and so overall employment remains stable or increases. This is the reason Copyrighted Material – Paperback/Kindle available @ Amazon Appendix / Final Thoughts / 211 that, historically, technology has not led to sustained, widespread unemployment. My argument is that accelerating automation technology will ultimately invade many of the industries that have traditionally been labor intensive. Additionally, the process of creative destruction will destroy old industries and create new ones, and very few of these new industries are likely to be labor intensive. As a result, the overall economy will become less labor intensive and ultimately reach a “tipping point.” Beyond this point, the economy will no longer be able to absorb the workers who lose jobs due to automation: businesses will instead invest primarily in more machines.

The Corporation: The Pathological Pursuit of Profit and Power by Joel Bakan

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Berlin Wall, Cass Sunstein, corporate governance, corporate personhood, corporate social responsibility, creative destruction, energy security, Exxon Valdez, IBM and the Holocaust, joint-stock company, laissez-faire capitalism, market fundamentalism, Naomi Klein, new economy, race to the bottom, Ralph Nader, Ronald Reagan, shareholder value, South Sea Bubble, The Wealth of Nations by Adam Smith, Triangle Shirtwaist Factory, urban sprawl

"I'm sucking Satan's pecker" is how Chris Hooper, a highly successful television ad director and voice-over artist, describes his work for the likes of McDonald's, Coca-Cola, and other major corpo- Page 126 construct their own little world and negotiate it amongst themselves."" What children really need, says Kline, are toys that encourage "creative destruction," the process of imagining, creating, destroying, and re-creating something, and that "give them a sense of mastery [and] help them explore the physical laws of the world." Corporations are unlikely to make such toys, however, when the profits from synergistic Page 127 marketing are so high. The toy companies are "clearly selling more toys" now, says Kline. "Toy sales boomed after the initial launch of those tie-in programs." Even LEGO, the quintessential "creative destruction" toy company, adopted the tie-in strategy, driven to it by bottom-line concerns (and despite Kline's protests when he worked as a consultant for the company), and began to and working and playing with other people.""

., 35-39, 41, 46,57 see also regulatory laws corporate mascots, 26 corporations: amorality of, 53-59, 69, 79, 88-89, 110,134 backlash against, 25-27, 140-43 benevolent, 18-19, 151 church replaced by, 134 definition of, 3 democracy corrupted by, 101-2 devastation as opportunity for, 111, 124-25 dominance of, 5, 21-27, 134, 139-40,153,159 elimination of, 159-60 English banning of, 6-8, 9 exploitation by, 74, 112, 118, 122, 123, 138, 139, 140, 148, 149, 163 as "Frankenstein monsters," 19, 149 as government creations, 153-58, 164 grant theory of, 16 historical development of, 5-21, 153,156 as institutions, 1-3, 28, 50, 56-57, 59,64 as instruments of destruction, 71-73,110 natural entity theory of, 16, 154-55 Nazis assisted by, 87-89 no accountability of, 152 nonprofit, 166 philanthropy of, 30, 31, 45, 47-49 political systems as viewed by, 88-89 profits and, 31, 34, 36, 41, 45, 48, 49, 50,51,52,53,55,57,58,62,69, 88-89 profits and, 31, 34, 36, 41, 45, 48, 49, 50,51,52,53,55,57,58,62,69, 73,82,88-89,101,103,105, 113,117,122,126-27,138,154, 165 psychopathy of, 28, 56-59, 60, 69, 79, 85, 110, 122, 134, 158, 161 public good and, 156, 158 public-purpose, 160-61 "rising tide lifts all boats" principle of, 142-43 and self-interest as human nature, 116-17,134-35,138 self-interest of, 1-2, 28, 37-39, 44-50,58-59,60,61,80,101-2, 105,109-10,117-18,134,142, 149, 156, 160, 161, 167 cost-benefit analysis, 62-65, 79-80, 149-50,152 in oil industry, 82-83 costs: externalized, 61, 62-65, 71-73, 149-50 of social responsibility, 45, 47-48, 49 'creative destruction" toys, 126-27 Croix de Feu, 91 Back Matter Page 1 70 2 NOTES 6. Carswell, The South Sea Bubble, 210. 7. Especially in high-technology companies, where stock options are widely used to compensate employees, failure to account for them unduly inflates reported earnings, sometimes by hundreds of millions of dollars. Yet, despite criticism of the practice by investor groups, accounting bodies, and the likes of Alan Greenspan and Warren Buffett, the federal government seems reluctant to stop it.


pages: 166 words: 49,639

Start It Up: Why Running Your Own Business Is Easier Than You Think by Luke Johnson

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Albert Einstein, barriers to entry, Bernie Madoff, collapse of Lehman Brothers, corporate governance, corporate social responsibility, creative destruction, credit crunch, Grace Hopper, happiness index / gross national happiness, high net worth, James Dyson, Jarndyce and Jarndyce, Jarndyce and Jarndyce, mass immigration, mittelstand, Network effects, North Sea oil, Northern Rock, patent troll, Plutocrats, plutocrats, Ponzi scheme, profit motive, Ralph Waldo Emerson, Silicon Valley, software patent, stealth mode startup, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, traveling salesman, tulip mania, Vilfredo Pareto, wealth creators

To the recent graduate Part 2 PEOPLE Age and the founder Time, energy and ideas Poor children of the rich and successful Joys and perils of a partnership Networking Cliques and clubs – the ties that bind Mentoring The founder’s passion Bottom-up management An end to pygmy bosses and grey leaders Coping with talent Trouble within Private-life drama The necessary evil of HR Part 3 POINTS OF STYLE Bring back the Renaissance men There always will be blood Fatherhood and the entrepreneur Some day my prince will come (home early) The delights of the portfolio career The mythical entrepreneur Ritualism in business Made not born The brogue element Part 4 THE CAPITAL PURSUIT Tales of the Money Riverbank Moonlighting: the best launch for a start-up Summoning an angel Venture capitalists: on another wavelength Banks Secondary sources of money A word about dumb money Part 5 FORMULAS The trouble with trying to spot a winner Five questions I ask myself before investing Business plans A list of don’ts A spell in service By the staff, for the staff Independents will always have their day Franchises – the worst of all worlds Part 6 THE CYCLE Turnaround and creative destruction The cycle as told by restaurants Managing in a downturn Faustian pact of a guarantee A sense of dread ails the opinion-makers The consumer’s new mantra is value X & Y in a downturn Dishonest dealings Watch out for an epidemic of petty fraud Time to go on the offensive Hard times reveal the true opportunists Losing your reputation Getting fired Part 7 THE ENTREPRENEUR AT LARGE Inventors are heroes Women inventors Innovation and reality All part of a good education The reputation of business What’s so terrible about making money?

Be highly suspicious if you are offered a relatively obscure, second-hand franchise for sale. The vendor has probably discovered that the system doesn’t work, and you are likely to have the same difficulties if you proceed. Better to start with a clean sheet, and either put your own name above the door or buy someone else’s good name outright. PART 6 The Cycle Turnaround and creative destruction All businesses and industries are cyclical, and that boom and bust comes to virtually every company. It is human nature to become exuberant at the top and depressed at the bottom – such a roller coaster is the essence of life. I would go so far as to say in general I prefer the company of those who have highs and lows, rather than someone whose mood is flat and unchanging. Those dull spirits remind me of entropy, and all life is engaged in a perpetual battle to resist that.

This is an irresistible sequence of events. Mere mortals cannot resist the tide of history. Markets and exchanges are merely mechanisms that reflect the temperament of man. Witnessing and participating in such upheaval can be traumatic. Take the collapse of Lehman Brothers and the forced sell-offs of Merrill Lynch and HBoS. For the staff, their families, and other stakeholders, this classic example of Schumpeter’s ‘creative destruction’ is hardly something to be celebrated. Here is a sudden and jolting reallocation of resources. Overnight, venerable institutions are destroyed, and new ones spring up, phoenix-like, to fill the gap. But this process of renewal is at the heart of capitalism. Inefficient and misguided organizations disappear and ultimately more productive ones arise. Nothing is permanent and all organizations must reinvent themselves periodically – or die.


pages: 336 words: 90,749

How to Fix Copyright by William Patry

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A Declaration of the Independence of Cyberspace, barriers to entry, big-box store, borderless world, business intelligence, citizen journalism, cloud computing, commoditize, creative destruction, crowdsourcing, death of newspapers, en.wikipedia.org, facts on the ground, Frederick Winslow Taylor, George Akerlof, Gordon Gekko, haute cuisine, informal economy, invisible hand, Joseph Schumpeter, Kickstarter, knowledge economy, lone genius, means of production, moral panic, new economy, road to serfdom, Ronald Coase, Ronald Reagan, semantic web, shareholder value, Silicon Valley, The Chicago School, The Wealth of Nations by Adam Smith, trade route, transaction costs, trickle-down economics, web application, winner-take-all economy, zero-sum game

In addition, Taylor’s methods of using stop watches and other forms of quantification led to laborers producing more in less time for less pay. Some opulence. See Tyler Cowen, Creative Destruction: How Globalization is Changing the World’s Cultures 14–16 (Princeton University Press, 2002), for a discussion of the different ways the term diversity is used. http://famouspoetsandpoems.com/poets/walt_whitman/quotes. “If I had gone directly to the people, read my poems, faced the crowds, got into immediate touch with Tom, Dick, and Harry instead of waiting to be interpreted, I’d have had my audience at once,” quoted in David Reynolds, Walt Whitman’s America: A Cultural Biography 339 (1995,Vintage Books). Tyler Cowen, Creative Destruction: How Globalization Is Changing the World’s Cultures 3 (Princeton University Press, 2002). Professor Cowen’s book is devoted to refuting de Tocqueville’s and similar theories.

It is not at all coincidental that vested rights holder interests favor closed lists while innovative companies favor fair use or other flexible, functional equivalents. As Dr. Francis Gurry, the Director General of the World Intellectual Property Organization cautioned, “Copyright should be about promoting cultural dynamism, not preserving or promoting vested business interests.”26 Innovation Requires a Dynamic Legal System Innovation is by its nature dynamic. Innovation’s power lies in what economist Joseph Schumpeter termed “creative destruction”: the introduction of innovative products and business models that displace old ones.27 If an innovative product or service does not provide competition to existing products or services, it is not innovative. Competition is inextricably linked to innovation. Laws are not. The Internet and information technologies are key drivers of the twenty-first-century economy and cultural development, but such development is possible only if copyright laws do not inhibit their growth.

Professor Cowen’s book is devoted to refuting de Tocqueville’s and similar theories. See also his In Praise of Commercial Culture (2000, Harvard University Press). Tyler Cowen, Creative Destruction: How Globalization Is Changing the World’s Culture 103 (2002, Princeton University). Id. at 129. Peter Manuel, Cassette Culture: Popular Music and Technology in North India 64 (1993, University of Chicago Press). See http://en.wikipedia.org/wiki/Jab_We_Met. Media Piracy in Emerging Economies, India Chapter. See Larry Rohter, Gilberto Gil and the politics of music. International Herald Tribune, March 12, 2007. NOTES TO PAGES 256–262 317 27. See Ian Hargeaves, Digital Opportunity: A Review of Intellectual Property and Growth, Chapter 8, paragraph 8.40 (May 2011). 28. Media Piracy in Emerging Economies, at 1. 29. Media Piracy in Emerging Economies at iii. 30.


pages: 318 words: 92,257

Floating City: A Rogue Sociologist Lost and Found in New York's Underground Economy by Sudhir Venkatesh

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creative destruction, East Village, illegal immigration, side project, Silicon Valley, the scientific method, urban renewal, working poor

When I was a kid in college, the idea of entropy struck me hard: all that is solid melts into air, creative destruction, and so on. A factory is always one innovation away from becoming obsolete. Everything is always in the process of falling apart. The bourgeois succeeded because they didn’t cling to tradition. Instinctively, despite all their protestations to the contrary, they embraced entropy. Entropy rang true to me because I was going through so many personal changes. It rang true in New York’s underground too. Everyone was constantly on the precipice of change. You had to learn how to get out, change your focus, accept losses, fail quickly, and move on. Success required self-awareness. This was the theory. But in practice, I hated to see Analise going through this particular episode of creative destruction. Shine too. They both were failing, but their ambition and nerve wouldn’t let them quit.

Though their personal income levels and the socioeconomic status of their neighborhoods might not be shifting greatly, they were not the passive subjects so many sociologists used to fuel their paternalistic claim as all-knowing fathers for societal orphans. In fact, they were quite dynamic in both thought and action, and they also scrambled to keep up with a world that was transforming blindingly fast, even if the benefits of all that creative destruction did not accrue to them quite as rapidly as to wealthier strivers. As my tone may hint, this is a pet peeve. For the last decade, I’ve been fighting the stereotypes of the poor that began to pervade American society after the publication of the infamous Moynihan Report in 1965, which argued that the history of slavery and generations of single-parent matriarchal families had created a “tangle of pathology” that made it difficult for many inner-city blacks to enter the social mainstream.

That was another surprise. Street-savvy entrepreneurs like Shine never admit vulnerability. They can’t risk a chink in the armor. He knew he could trust me, but still—dealing in bars outside Harlem had clearly put him outside his comfort zone. A small shift in the cocaine market and all that was solid in Shine’s life was melting into air. Marx would have been fascinated, Milton Friedman amused. The creative destruction of capitalism—change or die—was sending this resourceful and determined man into bars where he didn’t know the manager, to hotels filled with security he’d never met, to white customers he didn’t trust. And “die” wasn’t a metaphor. The frustration I’d seen on his face at the bar that day spoke volumes. In sociological terms, Shine was coming to the painful realization that he was missing some aspect of cultural capital, that he wasn’t quite in line with the tribal codes of this new world.


pages: 113 words: 37,885

Why Wall Street Matters by William D. Cohan

Apple II, asset-backed security, bank run, Bernie Sanders, bonus culture, break the buck, buttonwood tree, corporate governance, corporate raider, creative destruction, Credit Default Swap, Donald Trump, Exxon Valdez, financial innovation, financial repression, Fractional reserve banking, Gordon Gekko, greed is good, income inequality, Joseph Schumpeter, London Interbank Offered Rate, margin call, money market fund, moral hazard, Potemkin village, quantitative easing, secular stagnation, Snapchat, South Sea Bubble, Steve Jobs, Steve Wozniak, too big to fail, WikiLeaks

He imagines that the Fed governors are sitting around their big oval table in Washington, scratching their heads, wondering why there’s less job creation than there should be, why there are fewer small businesses being started, why there is a decrease in entrepreneurial behavior, why the economy’s growth remains so sluggish. “The answer is because without creative destruction you don’t have new business formation, and they have decided creative destruction is not what they like,” he said. “They don’t like anything that has the word ‘destruction.’ So they stopped the destruction, and therefore there was no creative creation that followed it.” He can’t do anything to influence Tarullo or the Fed, of course, so he is doing the only thing he can do given his view that Tarullo’s strategy will end badly, very badly: He has made a big bet against the American economy so that he and his investors can benefit if he’s right.


pages: 717 words: 150,288

Cities Under Siege: The New Military Urbanism by Stephen Graham

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airport security, anti-communist, autonomous vehicles, Berlin Wall, call centre, carbon footprint, clean water, congestion charging, creative destruction, credit crunch, DARPA: Urban Challenge, defense in depth, deindustrialization, digital map, edge city, energy security, European colonialism, failed state, Food sovereignty, Gini coefficient, global supply chain, Google Earth, illegal immigration, income inequality, knowledge economy, late capitalism, loose coupling, market fundamentalism, mass incarceration, McMansion, megacity, moral panic, mutually assured destruction, Naomi Klein, New Urbanism, offshore financial centre, one-state solution, pattern recognition, peak oil, planetary scale, private military company, Project for a New American Century, RAND corporation, RFID, Richard Florida, Scramble for Africa, Silicon Valley, smart transportation, surplus humans, The Bell Curve by Richard Herrnstein and Charles Murray, urban decay, urban planning, urban renewal, urban sprawl, Washington Consensus, white flight, white picket fence

Many of these, in turn, have stimulated not only vast migrations but also the construction of city-scale refugee camps to accommodate the displaced populations, who already numbered some fifty million by 2002.72 The permiation of organized, political violence within and through cities and systems of cities is complicated by the fact that much ‘planned’ urban change, even in times of relative peace, itself involves warlike levels of violence, destabilization, rupture, forced expulsion and place annihilation.73 Particularly within the dizzying peaks and troughs of capitalist and neoliberal urbanism or the implementation of programmes for large-scale urban ‘renewal’, ‘regeneration’ or ‘renaissance’, state-led planning often amounts to the legitimized clearance of vast tracts of cities in the name of the removal of decay, of modernization, improvement, or ordering, of economic competition, or of facilitating technological change and capital accumulation and speculation.74 While tracts of booming cities are often erased through state-engineered speculation, the many cities that are shrinking because of de-industrialization, global industrial relocation, and demographic emptying are also vulnerable to clean-sweep planning. ‘The economically, politically and socially driven processes of creative-destruction through abandonment and redevelopment’, suggests David Harvey, ‘are often every bit as destructive as arbitrary acts of war. Much of contemporary Baltimore, with its 40,000 abandoned houses, looks like a war zone to rival Sarajevo.’75 WAR UNBOUND In such a context, and given the increasingly extreme social inequalities, it is no surprise that Western military theorists and researchers are now particularly preoccupied with how the geographies of cities, especially the cities of the global South, are beginning to influence both the geopolitics and the technoscience of post–Cold War political violence.

This is especially so as both the War on Terror and radical Islamism tend to demonize the messy cosmopolitanism of cities, construing them as intrinsically amoral, sinful and unnatural places. It is no wonder that both barbarisms murderously target cities and their inhabitants. Or that both the neocon/ Christian and the Islamist fundamentalism share what Zillah Eisenstein terms a ‘masculinist-militarist’ mentality, in which violence is the path to the creative destruction of cities, nations or civilizations.19 The Manichaean mirrors of the two polarized fundamentalisms inevitably produce a duplication and reduplication of violence.20 What results is a convergence between state terror and non-state terror. The ‘ultimate catastrophe’ of the War on Terror, as Joseba Zulaika points out, ‘is that such a categorically ill-defined, perpetually deferred, simple-minded Good-versus-Evil war echoes and re-creates the very absolutist mentality and exceptionalist tactics of the insurgent terrorists.’

Militarization also involve the normalization of military paradigms of thought, action and policy; efforts at the aggressive disciplining of bodies, places and identities deemed not to befit masculinized (and interconnected) notions of nation, citizenship or body; and the deployment of a wide range of propaganda which romanticizes or sanitizes violence as a means of righteous revenge or the achievement of some God-given purpose. Above all, militarization and war organizes the ‘creative destruction’ of inherited geographies, political economies, technologies and cultures. So, what exactly is new about the ‘new military urbanism’? How is it different from the intense militarization experienced by the cities of, say, the Cold War or total war? I shall point to seven related trends which, I argue, introduce palpably new dimensions to the contemporary militarization of urban life. RURAL SOLDIERS, URBAN WAR First, new relationships are emerging between nations, soldiers and citizens, which have major implications for the contemporary urbanization of warfare.


pages: 479 words: 113,510

Fed Up: An Insider's Take on Why the Federal Reserve Is Bad for America by Danielle Dimartino Booth

Affordable Care Act / Obamacare, asset-backed security, bank run, barriers to entry, Basel III, Bernie Sanders, break the buck, Bretton Woods, central bank independence, collateralized debt obligation, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, financial deregulation, financial innovation, fixed income, Flash crash, forward guidance, full employment, George Akerlof, greed is good, high net worth, housing crisis, income inequality, index fund, inflation targeting, interest rate swap, invisible hand, John Meriwether, Joseph Schumpeter, liquidity trap, London Whale, Long Term Capital Management, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, moral hazard, Myron Scholes, natural language processing, negative equity, new economy, Northern Rock, obamacare, price stability, pushing on a string, quantitative easing, regulatory arbitrage, Robert Shiller, Robert Shiller, Ronald Reagan, selection bias, short selling, side project, Silicon Valley, The Great Moderation, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, yield curve

When Rosenblum arrived in the mid-1980s, the Dallas Fed’s reputation probably would have been ranked eleventh out of twelve regional banks, or the “Sleepy Fed,” in the view of economist Michael Cox, who spent over thirty years at the bank. (He’s now a professor at Southern Methodist University.) Under the leadership of Rosenblum, the Dallas bank improved dramatically and became known as the Free-Market Fed. Rosenblum encouraged Cox and his new hires to think outside the box. As a champion of “creative destruction,” a seemingly paradoxical concept developed by renowned economist Joseph Schumpeter, Cox published frequently and about issues the public cared about, an anomaly in the Fed system. But the field of economics was undergoing a sea change, literally. The “saltwater” economists (East and West coasts, Harvard, Keynes, pro-government regulation and intervention) were challenging the “freshwater” economists (Midwest, University of Chicago, Friedman, free-market philosophy).

The Treasury first issues the debt and the Federal Reserve buys that same debt, which increases the money supply. Effectively, it gives Congress an open checkbook and allows policymakers to put off making hard choices that budgetary constraints would otherwise force. The idea always made Fisher’s blood boil. And with good reason. Unconstrained politicians? Need I say more? His fellow hawk Lacker fretted that the Fed’s interventions would interfere with the creative destruction needed to clear out deadwood, uncompetitive industry players who would gain access to the bond market and, by doing so, keep the lights on. Did someone mention zombie banks in Japan? “People make choices on their way to making adjustments,” Lacker said. “Would these leveraged borrowers like there to be a greater demand for their liabilities? Yes. This all looks as though demand is low.

Rates that mattered for the recovery of the economy—those paid by businesses and households through mortgages, auto loans, credit cards—had risen rather than fallen. The banks with the most toxic balance sheets restricted their lending activity to shore up their own margins. “Japan paid dearly for propping up its troubled banks in the 1990s,” wrote Fisher and Rosenblum. “We need to develop supervision and resolution mechanisms that make it possible for even the biggest boys to fail—in an orderly way, of course. We want creative destruction to work its wonders in the financial sector, just as it does elsewhere in the economy, so we never again have a system held hostage to poor risk management.” The conflict on the FOMC was being played out in public. In October 2009 alone, FOMC members fanned out and gave thirty speeches. Governor Warsh, who had experience on Wall Street, argued that the Fed shouldn’t delay a rate hike.


pages: 395 words: 116,675

The Evolution of Everything: How New Ideas Emerge by Matt Ridley

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affirmative action, Affordable Care Act / Obamacare, Albert Einstein, Alfred Russel Wallace, altcoin, anthropic principle, anti-communist, bank run, banking crisis, barriers to entry, bitcoin, blockchain, British Empire, Broken windows theory, Columbian Exchange, computer age, Corn Laws, cosmological constant, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, cryptocurrency, David Ricardo: comparative advantage, demographic transition, Deng Xiaoping, discovery of DNA, Donald Davies, double helix, Downton Abbey, Edward Glaeser, Edward Lorenz: Chaos theory, Edward Snowden, endogenous growth, epigenetics, ethereum blockchain, facts on the ground, falling living standards, Ferguson, Missouri, financial deregulation, financial innovation, Frederick Winslow Taylor, Geoffrey West, Santa Fe Institute, George Gilder, George Santayana, Gunnar Myrdal, Henri Poincaré, hydraulic fracturing, imperial preference, income per capita, indoor plumbing, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jane Jacobs, Jeff Bezos, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, Khan Academy, knowledge economy, land reform, Lao Tzu, long peace, Lyft, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, means of production, meta analysis, meta-analysis, mobile money, money: store of value / unit of account / medium of exchange, Mont Pelerin Society, moral hazard, Necker cube, obamacare, out of africa, packet switching, peer-to-peer, phenotype, Pierre-Simon Laplace, price mechanism, profit motive, RAND corporation, random walk, Ray Kurzweil, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, rising living standards, road to serfdom, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, sharing economy, smart contracts, South Sea Bubble, Steve Jobs, Steven Pinker, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, women in the workforce

Most of the so-called robber barons got rich by cutting the price of goods, not raising them. Innovation was the key consequence of free enterprise, dwarfing gains from trade, efficiencies of specialisation and improvements by practice. In a famous phrase introduced in his book Capitalism, Socialism and Democracy in 1942, Schumpeter saw ‘creative destruction’ as the key to economic progress, and the ‘essential fact about capitalism’. For new firms and technologies to emerge, old ones had to die. There is a ‘perennial gale of creative destruction’. Or, as Nassim Taleb puts it, for the economy to be antifragile (strengthened by running risks), individual firms must be fragile. The restaurant business is robust and successful precisely because individual restaurants are vulnerable and short-lived. Taleb wishes that society honoured ruined entrepreneurs as richly as it honours fallen soldiers.

Jefferson, the gent, had imbibed the philosophy of the Enlightenment and worshipped at the shrine of Lucretius. But in the end he wanted an agrarian, protected, hierarchical, stable Virginian society. He hated the way people lived ‘piled upon one another in large cities’, and he suggested that America ‘let our workshops remain in Europe’. It was Hamilton, the immigrant, living in chaotic Manhattan, who embraced the future – the creative destruction that commerce and abundant capital would bring, the dissolving of social strata, the upending of power (although he did argue for a small tariff to protect infant industries). In Britain, the founders of the anti-slavery society were free traders. Read, for example, the writings of Harriet Martineau, who shot to fame in the 1830s because of her series of short fictional books called Illustrations of Political Economy.

Remember how technology evolves, whether we want it to or not. Re-evolving politics Take politics. Even today the internet revolution is undermining Leviathan at every turn. The internet turns everybody into a journalist and a politician; puts the customer in ultimate charge; and lowers the cost for ordinary people to do extraordinary things, whether in charity, business or politics. Big companies are tumbling before its creative-destructive onslaught; big state bureaucracies cannot long resist. As the maverick MP Douglas Carswell puts it, ‘Everything that the internet touches it transforms. The barriers to entry come crashing down. Established operators face competition from nimble upstarts. So, too, in politics.’ Carswell argues that i-democracy is rapidly and inexorably transforming the old ways of doing politics, replacing party-controlled, bureaucracy-enabled traditions with radical emergent possibilities, from open primaries to instant plebiscites, from participatory budgeting in local government to online recall.


pages: 297 words: 77,362

The Nature of Technology by W. Brian Arthur

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Andrew Wiles, business process, cognitive dissonance, computer age, creative destruction, double helix, endogenous growth, Geoffrey West, Santa Fe Institute, haute cuisine, James Watt: steam engine, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, knowledge economy, locking in a profit, Mars Rover, means of production, Myron Scholes, railway mania, Silicon Valley, Simon Singh, sorting algorithm, speech recognition, technological singularity, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions

And as these inferior elements become replaced, their dependent opportunity niches also collapse (steps 2 and 4) and with them the technologies that had occupied these. The arrival of the automobile in the early 1900s caused the replacement of horse transportation. The death of horse transportation eliminated the needs for blacksmithing and carriage making. The collapse of blacksmithing in turn eliminated the need for anvil making. Collapses caused further collapses in a backward succession. This is not quite the same as Schumpeter’s “gales of creative destruction,” where novel technologies wipe out particular businesses and industries broadly across the economy. Rather, it is a chain of domino-like collapses—avalanches of destruction, if you prefer to call them that. The creative side to this is, as Schumpeter pointed out, that new technologies and industries take the place of those that collapse. We can add to this that new technologies can as easily set up new opportunity niches to be occupied by further new technologies, which set up further niches, to be occupied by yet further technologies.

They examine how development paths are influenced by the knowledge base available to a technology and the science that surrounds it, by incentives that firms face, by how the search process for improvements differs within different bodies of technology, by the patent system and legal environment that surround the technology, by learning effects, and by the structure of the industry the technology fits into. 132 the new technology… specialize: In biology language, we would say the technology radiates. 132 This is where… selection: For Darwinian approaches see Stanley Metcalfe, Evolutionary Economics and Creative Destruction, Routledge, London, 1998; Saviotti and Metcalfe; also Joel Mokyr, “Punctuated Equilibria and Technological Progress,” American Economic Assoc. Papers and Proceedings 80, 2, 350–54, May 1990; Basalla. 133 Such obstacles are exasperating: See Robert Ayres, “Barriers and Breakthroughs: an ‘Expanding Frontiers’ Model of the Technology-Industry Life Cycle,” Technovation 7, 87–115, 1988. 133 a bottleneck that… of: Constant talks of “log-jams and forced inventions” (p. 245), and of “anomaly-induced” technical change (pp. 5, 244). 134 Structural Deepening: For an earlier discussion of this, see Arthur, “On the Evolution of Complexity,” in Complexity, G.

So when I say that technologies are constructed from ones that previously exist, I mean this as shorthand for saying they are constructed from ones that previously exist or ones that can be constructed at one or two removes from those that previously exist. 171 In the beginning,… harnessed: See Ian McNeil, “Basic Tools, Devices, and Mechanisms,” in An Encyclopedia of the History of Technology, McNeil, ed., Routledge, London, 1990. 172 “The more there… curve: Ogburn, p. 104. 180 “gales of creative destruction”: Schumpeter, 1942, pp. 82–85. 181 An Experiment in Evolution: Arthur and Polak. 184 There is a parallel observation in biology: Richard Lenski, et al., “The evolutionary origin of complex features,” Nature, 423, 139–143, 2003. 185 This yielded avalanches: Polak and I found that these “sand-pile” avalanches of collapse followed a power law, which suggests, technically speaking, that our system of technologies exists at self-organized criticality. 187 More familiarly, larger… combinations: another important source of this is gene and genome duplication.


pages: 309 words: 78,361

Plenitude: The New Economics of True Wealth by Juliet B. Schor

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Asian financial crisis, big-box store, business climate, carbon footprint, cleantech, Community Supported Agriculture, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, decarbonisation, dematerialisation, demographic transition, deskilling, Edward Glaeser, en.wikipedia.org, Gini coefficient, global village, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Joseph Schumpeter, Kenneth Arrow, knowledge economy, life extension, McMansion, new economy, peak oil, pink-collar, post-industrial society, prediction markets, purchasing power parity, ride hailing / ride sharing, Robert Shiller, Robert Shiller, sharing economy, Simon Kuznets, single-payer health, smart grid, The Chicago School, Thomas L Friedman, Thomas Malthus, too big to fail, transaction costs, Zipcar

Even when growth picks up again, there will be large sectors in permanent decline—automobiles, industrial farming, and perhaps even fossil fuels will be smaller and less profitable industries, if they’re profitable at all. With a downturn this severe, there will be a protracted and difficult process of weeding out low-performing industries, companies, and products, or what the Austrian economist Joseph Schumpeter called creative destruction. It will take time to re-create the classic conditions for prosperity, such as confidence, financial regulation, monetary stability, consumer demand, and a steady policy hand. Due to the complexity of the global economy, the challenges are far greater than we’ve ever faced. As we move forward, the fatal flaw of the current growth regime—climate change and other ecological limits—will rear its ugly head.

Politics and Society 32 (December): 439-73. Business Alliance for Local Living Economies (BALLE). The Business Alliance for Local Living Economies: 20,000 entrepreneurs building the new economy. Available from http://www.livingeconomies.org (accessed September 7, 2009). Caballero, Ricardo J., and Adam B. Jaffe. 1993. How high are the giants’ shoulders: An empirical assessment of knowledge spillovers and creative destruction in a model of economic growth. NBER Macroeconomics Annual 8: 15-74. Cavanagh, John, and Jerry Mander. 2004. Alternatives to economic globalization: A better world is possible. San Francisco: Berrett-Koehler. Caviglia-Harris, Jill L., Dustin Chambers, and James R. Kahn. 2009. Taking the “U” out of Kuznets: A comprehensive analysis of the EKC and environmental degradation. Ecological Economics 68 (4): 1149-59.

.: BEA environmental studies and climate change and consumption, consumerism carbon and product scores and clothing and, see clothing end of life (EOL) and environmental impact of expansion of fashion and material flows and population and storage and disposal issues in symbolic value and well-being and Container Store cooperatives copyrights coral reefs Costa Rica cost-benefit analysis cotton Craigslist Creative Commons creative destruction credit credit unions currency Daily, Gretchen Daly, Herman dams Dasgupta, Partha debt deforestation de Graaf, John Denmark, ecological footprint in Depression, Great desertification DICE (Dynamic Integrated Climate-Economy) digital fabricators discount rate-5n diseases droughts Dudley Street Neighborhood Initiative durable goods: department store index for prices of weight of dynamic efficiency Earth Institute Earth Restoration Corps Easterlin, Richard eBay ecocide eco-efficiency ecological commons ecological footprint hours worked and ecological modernization ecological optimism economy: aggregate growth and business-as-usual form of, see business-as-usual (BAU) economy climate change and community and energy efficiency and extra-market diversification and financialization and flexible production and human behavior and information exchange and Keynes and materials use and extraction and need for alternative form of physical capital and rebound effect and scale of production and efficiency of self-provisioning and service sector of shifting the conversation on time wealth and “too big to fail” dilemma and U.S., historical profitability of value as measure in world, growth of see also environmental economics ecovillages education efficiency Egypt Ehrlich, Paul electric industry electric vehicles electronics, consumer imports of material flow and multifunctionality and storage and disposal of see also specific products Elpel, Renee Elpel, Tom Empire of Fashion (Lipovetsky) employee-owned companies employment, see labor; unemployment end of life (EOL) energy: housing and price of rebound effect from efficient use of systems dynamics and taxes and use of see also specific energy sources energy economics environment ecological footprint in, see ecological footprint ecological optimism and economic activity and feedback loops and full-cost pricing and integrated assessment models and mainstream economics and planetary boundaries and restoration of UN assessment of (2005) water footprint and see also climate change environmental economics cost-benefit analysis and customization and household production and production possibilities curve and reciprocity and resale and reuse and sharing and trade-off view of -4n working less and see also economy Environmental Kuznets Curve (EKC) -3n Europe: cohousing in ecological footprint in health care in historical carbon emissions of materials consumption in passive solar building in population decline in product life extension policies in European Society for Ecological Economics EV1 electric car extensive growth extinctions extra-market diversification ExxonMobil fabrication laboratories (fab labs) cost of Factor e Farm Farm, The (Tenn.)


pages: 249 words: 66,383

House of Debt: How They (And You) Caused the Great Recession, and How We Can Prevent It From Happening Again by Atif Mian, Amir Sufi

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Andrei Shleifer, asset-backed security, balance sheet recession, bank run, banking crisis, Ben Bernanke: helicopter money, break the buck, Carmen Reinhart, collapse of Lehman Brothers, creative destruction, debt deflation, Edward Glaeser, en.wikipedia.org, financial innovation, full employment, high net worth, Home mortgage interest deduction, housing crisis, Joseph Schumpeter, Kenneth Rogoff, liquidity trap, Long Term Capital Management, market bubble, Martin Wolf, money market fund, moral hazard, mortgage debt, negative equity, paradox of thrift, quantitative easing, Robert Shiller, Robert Shiller, school choice, shareholder value, the payments system, the scientific method, tulip mania, young professional, zero-sum game

When a city or country has a collapse in spending, a flexible economy should be able to adjust by lowering wages and making exporting industries more competitive. Another adjustment mechanism should have been migration. Perhaps it was time for workers to pack up and move to other parts of the country with a stronger job market. Economists going back to Joseph Schumpeter have argued that this “creative destruction” process is natural and even healthy. When the economy needs to reallocate its production to new activities, workers move in order to take advantage of new opportunities. But unfortunately, the U.S. economy during the Great Recession didn’t work that way, and unemployment persisted. John Maynard Keynes had it exactly when he wrote: “It may well be that the classical theory represents the way in which we should like our economy to behave.

States,” B.E. Journal of Macroeconomics 12, no. 2 (2012). 16. Nakamura and Steinsson, “Fiscal Stimulus in a Monetary Union.” 17. Frank Fabozzi and Franco Modigliani, Mortgage and Mortgage-Backed Securities Markets (Boston: Harvard Business School Press, 1992). 18. Miles, “Housing, Leverage, and Stability in the Wider Economy.” 19. See Gregor Matvos and Zhiguo He, “Debt and Creative Destruction: Why Could Subsidizing Corporate Debt Be Optimal?” (working paper, University of Chicago Booth School of Business, March 2013). 20. See Pierre-Olivier Gourinchas and Olivier Jeanne, “Global Safe Assets” (Bank for International Settlements working paper 399, December 2012). As they note, “Privately produced stores of value cannot provide sufficient insurance against global shocks. Only public safe assets may, if appropriately supported by monetary policy.” 21.

See also Federal Reserve Central Valley, CA: net-worth destruction in, 25–26; population growth in, 68; spending declines in, 38; unemployment in, 66–68 Chapter 13 bankruptcy, 146–48, 202n37, 203n44 Chomsisengphet, Souphala, 139 Cobb-Douglas preferences, 195n3 collapse in housing prices, 12–13, 17–30, 44–45, 132–33, 170; borrowers’ junior claims and, 18; debt and spending during, 39–44, 194n5; foreclosures and, 26–29, 39, 50–52, 170, 202n21; forgiveness practices and, 135–51, 205n19; government programs on, 135–42; lenders’ senior claims and, 18–19, 23–25, 50; leverage multipliers of, 22–23, 192n2; renegotiation of mortgages and, 137–42, 145–47, 202n37, 203n44; shared-responsibility mortgages and, 176; Troubled Asset Relief Program (TARP) and, 136; underwater mortgages and, 26, 51–52, 60, 150 Commercial Paper Funding Facility (CPFF), 125 consumer spending, 5–7, 31–45; borrowing constraints on, 89–90, 197n18; declines in, 6–7, 31–35, 128, 130; geographic distribution of, 35–38, 45; government stimulus of, 21; home equity loans and, 88, 159; household debt and, 3–7, 131–34; housing-wealth effect on, 38–42, 88–89; inflation and, 153, 160–62; in the levered-losses framework, 50–51, 71, 194n5; lowered prices and, 53, 55; marginal propensity to consume levels and, 38–45, 140–42, 176, 178, 194n5, 202nn20–21; multiplier effects of, 179; precautionary savings and, 194n5; on residential investment, 32–35; of savers vs. borrowers, 55, 140–42; shared-responsibility mortgages and, 176–79; unemployment and, 62, 178–79 Corker, Bob, 60–62 Coval, Josh, 98, 101 cram-down practices, 146–48 crash. See collapse in housing prices; Great Recession Crawford, William H., 144 creative destruction, 67 credit, 5, 143; in bank bailout arguments, 126–27; borrowing constraints on, 89–90, 197n18; myopic consumers of, 90–91, 197n18; tight availability of, 11, 31–35, 59. See also debt; lending boom; mortgage credit expansion creditors. See mortgage lenders; savers credit-rating agencies, 103–4 currency in circulation, 154–57 Daley, Suzanne, 119–21 Davidson, Adam, 131–32, 200n21 Davis, Steven, 70 debt, 12–13, 17–30, 39–45, 166; animal spirits view of, 80–81, 196n8; as anti-insurance, 29–30; bubbles and, 110–16, 149, 169–70; equity-like financing of, 168–70, 180–87, 206n13; forgiveness programs for, 60, 135–51, 205n19; government subsidy of, 181–82; in the levered-losses framework, 50–52, 70–71, 134, 170; marginal propensity to consume levels and, 39–44, 194n5; in neglected risks frameworks, 114–15; optimists’ use of, 111–13; risk-sharing principle of, 168–87; risks of home ownership and, 2, 12–13, 17–30, 39, 168–69; spending declines and, 38–41; for student loans, 167–69, 182–83, 206n9; wealth inequality and, 18–21, 23–25, 71.

The Techno-Human Condition by Braden R. Allenby, Daniel R. Sarewitz

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airport security, augmented reality, carbon footprint, clean water, cognitive dissonance, conceptual framework, creative destruction, Credit Default Swap, decarbonisation, facts on the ground, friendly fire, industrial cluster, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jane Jacobs, land tenure, life extension, Long Term Capital Management, market fundamentalism, mutually assured destruction, nuclear winter, Peter Singer: altruism, planetary scale, prediction markets, Ralph Waldo Emerson, Ray Kurzweil, Silicon Valley, smart grid, source of truth, stem cell, Stewart Brand, technoutopianism, the built environment, The Wealth of Nations by Adam Smith, transcontinental railway, Whole Earth Catalog

To talk about transhumanism without understanding the systemic transformative effect of technological change at this level is whistling in the dark. (Less metaphorically, it is to grossly overestimate how much we can know and understand about the world we live in, and how it is reconstructing us, when, frankly, most of us don't have a clue about what is going on.) Railroads simultaneously destroyed and made worlds, and they are but one example of the ongoing human project of "creative destruction.,,18 Technological change, as the example of the railroads suggests, is always potent; today, however, we have not just one or two enabling technologies undergoing rapid evolution, but five: nanotechnology, biotechnology, robotics, information and communication technology (leT), and applied cognitive science. Nanotechnology extends human will and design to the atomic level. Biotechnology, in the words of environmental historian J.

Additional useful writings in this fascinating area of cultural studies may be found in Nicolson 1959 and in Abrams 1971. 17. And often, as with war or other catastrophe, at huge human cost. See, for example, Polanyi's (1943) portrayal of the remaking of social fabric in industrialized England, or Dickens' portrayals of industrial London. 18. The reference is to the famous characterization of capitalism as "gales of creative destruction" in Schumpeter 1942. 19. McNeill 2000, pp. 193-194. 20. "Engineering and aging," IEEE Spectrum 41 (2004), no. 9: 10, 31-35. For much more on this controversial possibility, see de Grey 204 Notes to Chapters 4 and 5 2004. Aubrey D. N. J. de Grey is a well-known and controversial advocate of what might be called the "radical human life extension" school. Whether life extension is possible, and if so when it will be available, and how long lives will eventually be, remain highly contentious within the relevant research communities.

.,9 Climate change, 31, 40, 67, 109££,161,164,170, 193ff Cochlear implants, 54££ Cod fishing, 41, 42 Cognition in the Wild, 95, 96 Cognitive science, 8, 80, 179 Complexity Level III, 162££ "wicked," 109££, 168 Computer-brain interfaces (CBI), 35,88,89,146££ Confucian bureaucracy, 132 Congress of Vienna, 75 Conquest, R., 120 Consumption, mass, 40 Control, hierarchy of, 52 Copernicus, N., 101, 173 Counterinsurgency, 139 Counter Rocket Artillery Mortar (CRAM),150 Cowpox, 16 Creative destruction, 80 Credit, 39, 40 Cronon, W, 115 Darwin, c., 7, 172 Defense Advanced Research Projects Agency (DARPA), 152 Democracy, 93-105 Diamond, J., 121 Dickens, c., 97 Dignity,10 Division of labor, 73, 155 Doping, in sports, 4 Dreiser, T., 97 Dumbledore, A., 91, 110 Earth systems, 63££ Einstein, A., 173 Ellul, J., 44, 45 Emerson, R. W, 74 Ender's Game, 155 Enhancing Evolution, 19 Enlightenment, 10, 11,31,61, 64,99,102,104,111,117, 118, 121, 161 Environmentalism, 110 Ethics, 179££ Eugenics, 22 European Union, 132, 133, 139, 183 Facebook,81,148,149 "Factor X," 23 Factory capitalism, 73 Faust, 189 Fides et Ratio, 101 Food and Drug Administration (FDA), 2, 4, 54 Forrester, ]., 92 Fox News, 117 France, 133 Frankenstein myths, 119 Freud, S., 172, 173 From, L., 122 Fukuyama, E, 21, 23 Galileo, 173 Garreau, J., 9 General circulation models (GCMs),111 Index Genetically modified organisms (GMOs), 69, 99, 174 Genetic modifications, 18 Goethe, J.


pages: 484 words: 136,735

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

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bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, bonus culture, Bretton Woods, BRICs, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, Edward Glaeser, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, global rebalancing, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage debt, new economy, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

Focusing on the evolutionary nature of capitalism draws attention to the inevitability of radical change in political institutions, as well as in economic life. This mutability is the key condition for capitalism’s prosperity and long-term survival. Yet politicians, businesspeople, and economists to the right of the ideological spectrum, the people supposedly most dedicated to capitalism’s historic triumph, are mostly blind to the most important reason for its success. They extol the virtues of Joseph Schumpeter’s process of “creative destruction,”3 whereby dying industries are replaced by previously unimagined new technologies and managerial systems, but they wilfully ignore the same process of creative self-destruction that renews the system as a whole. Why should the politico-economic structure of the capitalist system be considered immutable, while its microfoundations are in constant flux? This mystery has never been properly addressed.

History shows that systemic evolutions of the kind described generally occur through discontinuous, not gradual, changes. Andrew Gamble, the Cambridge political scientist, distinguishes between such truly transformative crises of capitalism and mere crises in capitalism, 7 the regular financial cycles that have produced busts and crashes throughout economic history and have helped to reorganize businesses through Schumpeter’s process of “creative destruction.” In a crisis of capitalism, what is reorganized is not just a group of businesses and industries but the capitalist system itself. Such events are rare and, as Gamble says, “intensely political in nature . . . they become the occasion for far-reaching change both within states and between states. They create conditions for the rise of new forms of politics and policy regimes . . . new institutions, new alignments, new policies, and new ideologies.”

The conversion into dollars uses an exchange rate of $1.6 to the pound, and the relationship with wages assumes average annual growth of 1 percent. http://www.bankofengland.co.uk/education/inflation/calculator/. 3 Christopher Reed, “‘The Damn’d South Sea’: Britain’s Greatest Financial Speculation and Its Unhappy Ending,” Harvard Magazine (May-June 1999). 4 George Soros, The New Paradigm for Financial Markets. 5 Mohamed El-Erian, When Markets Collide: Investment Strategies for the Age of Global Economic Change. 6 The Gartman Letter, January 27, 2009. http://www.thegartmanletter.com. Chapter Nine 1 This is one facet of Joseph Schumpeter’s famous process of “creative destruction,” though not the most important one, which is driven by technological innovation, rather than credit. Schumpeter, Capitalism, Socialism and Democracy. 2 The more extreme followers of the Austrian school even demand the repeal of “tyrannical” laws against drunk driving. See Llewellyn Rockwell Jr., “Legalize Drunk Driving,” Mises Daily, Ludwig von Mises Institute, November 3, 2000. Available from http://mises.org/daily/2343. 3 Andrew Mellon, the U.S. treasury secretary from 1921 to 1932, was probably the last true believer in the Austrian view to hold a position of high authority.


pages: 471 words: 124,585

The Ascent of Money: A Financial History of the World by Niall Ferguson

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Admiral Zheng, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collateralized debt obligation, colonial exploitation, commoditize, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, deglobalization, diversification, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Glaeser, Edward Lloyd's coffeehouse, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, German hyperinflation, Hernando de Soto, high net worth, hindsight bias, Home mortgage interest deduction, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, iterative process, John Meriwether, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour mobility, Landlord’s Game, liberal capitalism, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, Naomi Klein, negative equity, Nick Leeson, Northern Rock, Parag Khanna, pension reform, price anchoring, price stability, principal–agent problem, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, quantitative hedge fund, RAND corporation, random walk, rent control, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, structural adjustment programs, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus, Thorstein Veblen, too big to fail, transaction costs, value at risk, Washington Consensus, Yom Kippur War

The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates . . . The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as US Steel illustrate the same process of industrial mutation - if I may use the biological term - that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.23 A key point that emerges from recent research is just how much destruction goes on in a modern economy. Around one in ten US companies disappears each year. Between 1989 and 1997, to be precise, an average of 611,000 businesses a year vanished out of a total of 5.73 million firms. Ten per cent is the average extinction rate, it should be noted; in some sectors of the economy it can rise as high as 20 per cent in a bad year (as in the District of Columbia’s financial sector in 1989, at the height of the Savings and Loans crisis).24 According to the UK Department of Trade and Industry, 30 per cent of tax-registered businesses disappear after three years.25 Even if they survive the first few years of existence and go on to enjoy great success, most firms fail eventually.

Ten per cent is the average extinction rate, it should be noted; in some sectors of the economy it can rise as high as 20 per cent in a bad year (as in the District of Columbia’s financial sector in 1989, at the height of the Savings and Loans crisis).24 According to the UK Department of Trade and Industry, 30 per cent of tax-registered businesses disappear after three years.25 Even if they survive the first few years of existence and go on to enjoy great success, most firms fail eventually. Of the world’s 100 largest companies in 1912, 29 were bankrupt by 1995, 48 had disappeared, and only 19 were still in the top 100.26 Given that a good deal of what banks and stock markets do is to provide finance to companies, we should not be surprised to find a similar pattern of creative destruction in the financial world. We have already noted the high attrition rate among hedge funds. (The only reason that more banks do not fail, as we shall see, is that they are explicitly and implicitly protected from collapse by governments.) What are the common features shared by the financial world and a true evolutionary system? Six spring to mind:• ‘Genes’, in the sense that certain business practices perform the same role as genes in biology, allowing information to be stored in the ‘organizational memory’ and passed on from individual to individual or from firm to firm when a new firm is created

In the evolutionary process, animals eat one another, but that is not the driving force behind evolutionary mutation and the emergence of new species and sub-species. The point is that economies of scale and scope are not always the driving force in financial history. More often, the real drivers are the process of speciation - whereby entirely new types of firm are created - and the equally recurrent process of creative destruction, whereby weaker firms die out. Take the case of retail and commercial banking, where there remains considerable biodiversity. Although giants like Citigroup and Bank of America exist, North America and some European markets still have relatively fragmented retail banking sectors. The cooperative banking sector has seen the most change in recent years, with high levels of consolidation (especially following the Savings and Loans crisis of the 1980s), and most institutions moving to shareholder ownership.

Crisis and Leviathan: Critical Episodes in the Growth of American Government by Robert Higgs, Arthur A. Ekirch, Jr.

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Alistair Cooke, clean water, collective bargaining, creative destruction, credit crunch, declining real wages, endowment effect, fiat currency, fixed income, full employment, hiring and firing, income per capita, Joseph Schumpeter, laissez-faire capitalism, manufacturing employment, means of production, minimum wage unemployment, Plutocrats, plutocrats, post-industrial society, price discrimination, profit motive, rent control, rent-seeking, Richard Thaler, road to serfdom, Ronald Reagan, Simon Kuznets, strikebreaker, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, transcontinental railway, union organizing, Upton Sinclair, War on Poverty, Works Progress Administration

American governments in the twentieth century, impelled by a more "progressive" ideology, readily accepted-indeed eagerly sought-expanded powers. The crisis of the 1890s, the last major battle in which the forces of classical liberalism won a clear victory, serves as an illuminating backdrop against which the crises of the twentieth century stand out in bold relief. CREATIVE DESTRUCTION IDEOLOGICALLY SUSTAINED, 1865-1893 When Joseph Schumpeter coined the expression "creative destruction" to describe the dynamics of "relatively unfettered capitalism," he might have had in mind the United States in the late nineteenth century. Certainly the nation's economic development had never been so rapid, nor so erratic and disruptive. The American who studies the statistics of his country's social and economic change, wrote the industrialist Andrew Carnegie in the early 1890s, "becomes almost dizzy at discovering the velocity with which she is rushing on."

Ideology and Political Action Ideology in Analysis Ideology and Rhetoric Ideology: Exogenous or Endogenous? Conclusions 35 Contents XVlll 4. Crisis, Bigger Government, and Ideological Change: Toward an Understanding of the Ratchet 57 A Schematic View of the Prohlem Why Stage II? A Cost-Concealment Hypothesis Why Stage IV? A (Partial) Hypothesis on Ideological Change Recapitulation: Why the Ratchet? The Task A head PART II. History 5. Crisis under the Old Regime, 1893-1896 77 Creative Destruction Ideologically Sustained, 1865-1893 Depression and Social Unrest, 1893-1896 Saving the Gold Standard Maintaining Law and Order in the Lahor Market Striking Down the Income Tax Conclusions 6. The Progressive Era: A Bridge to Modern Times 106 Economic Development and Political Change, 1898-1916 The Ideological Winds Shift End and Beginning: The Railroad Lahor Trouhles, 1916-1917 Conclusions 7.

For an analytical extension and updating of Schumpeter's argument about the role of inflation, see Robert Higgs, "Inflation and the Destruction of the Free Market Economy," Intercollegiate RetView 14 (Spring 1979): 67-76. 8. Seymour E. Harris, ed., Schumpeter, Social Scientist (Cambridge, Mass.: Harvard University Press, 1951); Arnold Heertje, ed., Schumpeter's Vision (New York: Praeger, 1981); john E. Elliott, "Marx and Schumpeter on Capitalism's Creative Destruction: A Comparative Restatement," Quarterly Journal of Economics 95 (August 1980): 45-68; Richard D. Coe and Charles K. Wilber, eds., Capitalism and Democracy: Schumpeter RetVisited (Notre Dame, Ind.: University of Notre Dame Press, 1985). 9. William Fellner, "March into Socialism, or Viable Postwar Stage of Capitalism?" in Schumpeter's Vision, ed. Heertje, p. 52; Schumpeter, Capitalism, Socialism and Democracy, p. 375. 10.


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Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism by Kevin Phillips

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algorithmic trading, asset-backed security, bank run, banking crisis, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, collateralized debt obligation, computer age, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, diversification, Doha Development Round, energy security, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, George Gilder, housing crisis, Hyman Minsky, imperial preference, income inequality, index arbitrage, index fund, interest rate derivative, interest rate swap, Joseph Schumpeter, Kenneth Rogoff, large denomination, Long Term Capital Management, market bubble, Martin Wolf, Menlo Park, mobile money, money market fund, Monroe Doctrine, moral hazard, mortgage debt, Myron Scholes, new economy, oil shale / tar sands, oil shock, old-boy network, peak oil, Plutocrats, plutocrats, Ponzi scheme, profit maximization, Renaissance Technologies, reserve currency, risk tolerance, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, shareholder value, short selling, sovereign wealth fund, The Chicago School, Thomas Malthus, too big to fail, trade route

And by giving transfusions to otherwise insolvent banks, she said, Paulson and Bernanke had prolonged the crisis. “They should not be re-capitalizing firms that should be shut down. . . . Firms that made wrong decisions should fail.”32 Letting bad decision makers fail was how things worked in the old days when “creative destruction” kept capitalism on its toes. Now, of course, too many institutions in the United States were perceived as too big to fail, which made creative destruction unacceptable. And that inacceptability, in turn, denied U.S. capitalism some of its capacity for renewal. Had Paulson and Bernanke been willing to take a blowtorch to the Frankenstein firms and their practices and products back in late 2007 or early 2008, some six or eight might well have had to be broken up, taken over, or forced into bankruptcy or receivership—indeed nine more or less were anyway.

Indeed, foreigners sold U.S. securities heavily in August. Clearly, elements of marketplace globalization are in some retreat, not least in the United States. Over the last fifteen years, I have used the term “financial mercantilism” to describe a collaboration in which Washington and the U.S. financial sector seek to minimize certain unwanted marketplace forces. The purpose is to suppress what economist Joseph Schumpeter called “creative destruction”—for the United States, circa 2008, that would include the failure of a major financial institution or the deflation-cum-downward-revaluation of financial assets. My book Arrogant Capital (1994), following several notable bailouts, used this phraseology: “Financial mercantilism—government-business collaboration calculated to suspend or stymie market forces—has at least partly replaced yesteryear’s vibrant capitalism.”

In the meantime, of course, heads of the giant New York banks enjoyed growing wealth, although of their number only Citigroup’s Sandford Weill appeared on the Forbes 400 list.46 Financiers were now making much the same breakthrough in the wealth sheets that finance had made in the sector comparisons a decade earlier. Part of the reason for sketching some of the realignment of wealth that has flowed from the rise of the financial sector is simply to underscore how yesteryear’s support for the creative destruction of a free and fast-flowing marketplace would logically have evolved into support for an assets “Plunge Protection Team” or a federal assets-maintenance strategy instead. Keep the markets up. Please, gentlemen, especially with all of those crazy people in the Middle East and the dollar coming unglued. Meanwhile, the new economy is breeding more stratification and inheritance than mobility.

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be by Moises Naim

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additive manufacturing, barriers to entry, Berlin Wall, bilateral investment treaty, business process, business process outsourcing, call centre, citizen journalism, Clayton Christensen, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, conceptual framework, corporate governance, creative destruction, crony capitalism, deskilling, disintermediation, don't be evil, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, illegal immigration, immigration reform, income inequality, income per capita, intangible asset, intermodal, invisible hand, job-hopping, Joseph Schumpeter, Julian Assange, Kickstarter, liberation theology, Martin Wolf, mega-rich, megacity, Naomi Klein, Nate Silver, new economy, Northern Rock, Occupy movement, open borders, open economy, Peace of Westphalia, Plutocrats, plutocrats, price mechanism, price stability, private military company, profit maximization, Ronald Coase, Ronald Reagan, Silicon Valley, Skype, Steve Jobs, The Nature of the Firm, Thomas Malthus, too big to fail, trade route, transaction costs, Washington Consensus, WikiLeaks, World Values Survey, zero-sum game

The answer to both questions is yes and no. The trends we are currently observing can be interpreted—or simply dismissed—as the manifestation of what economist Joseph Schumpeter (and before him Karl Marx) dubbed “creative destruction.” In Schumpeter’s words: “The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation . . . that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.”42 The shifts in power that we see all around us—which include and transcend the ascent and demise of business enterprises—are certainly consistent with Schumpeter’s expectations.

As we saw in Chapter 8, in a telling example of the effects on power of the More, Mobility, and Mentality revolutions, venture capital investment models have spread from Silicon Valley to many other nations, energizing latent entrepreneurial skills in onceunlikely hubs of business innovation. And new multinationals have emerged from countries that until recently no world-class company viewed as breeding grounds of potential competitors. We know that shifts in the pecking order of companies are as old as the modern market economy, and that a profound link between innovation and “creative destruction” is at the heart of capitalism’s vitality. Yet, the massive global changes we now see go further. 4 They could not have happened without the decay of power. At the core here is something that is hard not to like: just as the decay of power in politics has undermined authoritarian regimes, in business it has curtailed monopolies and oligopolies while giving consumers more choices, lower prices, and better quality.

., 98, 131, 147 Business, 12, 13, 16, 26, 29, 31, 35, 37, 41, 60, 68, 71, 221, 243 M-structure (M-form) of, 37–38, 46 state-owned, 160, 178, 183 structural revolution in, 162–163 See also Corporations Cairns Group, 155 Cairo, 85, 199 California, 94, 207 Call Centers, 70, 177 Cambodia, 89, 209 234 Cameron, David, 89 Canada, 79, 86, 97, 99, 145, 149 Capital, 32, 38, 39, 47, 101, 160, 167, 171–172, 173, 174, 183, 186, 208, 220 access to, 180–181, 187 venture capital, 180, 220 Capitalism, 35, 39, 40, 41, 45, 47, 49, 71, 132, 158, 168, 174, 211 and creative destruction, 71, 220 models of, 37–38 Caracas, 85 Cardoso, Fernando Henrique, 106 Carey, John M., 94 Caribbean nations, 155 Carlsen, Magnus, 4 Carnation Revolution, 82, 83 Carnegie, Andrew, 42, 206–207 Carnegie Corporation, 206 Carnegie Endowment for International Peace, 67, 130, 238 Cartels, 29, 46, 221, 222, 226 Caryl, Christian, 120 Castañeda, Jorge G., 60 Castells, Manuel, 212, 213 Casualties, 5, 56, 110, 111, 113, 117, 120, 231 Catholic Church, 18, 70, 73, 84, 194, 197, 198, 199 CBS, 212 Cedar Revolution, 103 Cellphones, 5, 56, 62, 63, 66, 71, 102, 111, 178, 206, 214 CEMEX company, 175, 186 Central America, 66, 185 Centralization, 35, 36, 38, 41, 43, 44, 52, 71, 75, 198, 199, 203, 211, 228 decentralization, 77, 96–97, 209, 229 in militaries, 112, 115, 116, 117 CEO turnover, 163–164.

The Future of Technology by Tom Standage

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air freight, barriers to entry, business process, business process outsourcing, call centre, Clayton Christensen, computer vision, connected car, corporate governance, creative destruction, disintermediation, distributed generation, double helix, experimental economics, full employment, hydrogen economy, industrial robot, informal economy, information asymmetry, interchangeable parts, job satisfaction, labour market flexibility, Marc Andreessen, market design, Menlo Park, millennium bug, moral hazard, natural language processing, Network effects, new economy, Nicholas Carr, optical character recognition, railway mania, rent-seeking, RFID, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, six sigma, Skype, smart grid, software as a service, spectrum auction, speech recognition, stem cell, Steve Ballmer, technology bubble, telemarketer, transcontinental railway, Y2K

It may not be for everyone yet, but over the next decade, as the fiddliness of connecting to the internet – whether through the air, the power socket, the old phone jack, the cable-tv dongle, or by satellite – is resolved, that connection will increasingly be the only link needed. Communicating, by voice or any other means, will be free. Will it be simpler? Ask Ms Baumholtz. 106 MAKE IT SIMPLE The blood of incumbents Stand by for a spot of creative destruction n the record, any top executive in the it, consumer-electronics and telecoms industries today will profess that his firm is leading the way towards simplicity. But are those claims justified? In theory, says Ray Lane, a venture capitalist, the company best placed to deliver simplicity should be Microsoft. It controls virtually all of the world’s pcs and laptop computers (albeit smaller shares of mobile phones, handheld and server computers), so if its software became simpler, everything else would too.

And though it may not be an Intel killer, it could prevent that firm from extending its dominance of the desktop into the living room. Consumer-electronics devices, unlike desktop pcs, do not have to be compatible with existing software. In that sense, the Cell does pose a threat to Intel, which regards the “digital home” as a promising area for future growth. Stand by, therefore, for another round of creative destruction in the field of information technology. And no matter what the Cell does to the broader computer-industry landscape, the virtual game-vistas it will conjure up are certain to look fantastic. The material on pages 198–200 first appeared in The Economist in February 2005. 200 7 THE DIGITAL HOME THE FUTURE OF TECHNOLOGY Life in the vault Companies are fighting to turn your home into an entertainment multiplex n june 2004, Intel, the world’s largest chipmaker, launched two new lines of chips, code-named Grantsdale and Alderwood, which it called the “most compelling” changes to the way personal computers (pcs) work in “over a decade”.

Kearney 163, 189 AAAI see American Association of Artificial Intelligence ABB 287, 289 ABI Research 295, 296 Accenture 39, 118–20, 126, 129, 131–2, 134–5, 138, 145–6 ActivCard 69 Activision 186–7 Adobe 39 Advanced Cell Technology 268 Africa 251–2 agricultural biotechnology ix, 238–9, 251–7, 270–1 see also genetic modifications AI see artificial intelligence AIBO 332, 334, 338 AIDS 247, 250 airlines 37–8, 42 AirPort 211 airport approach, security issues 68–9 Airvana 140–1 Alahuhta, Matti 164 Albert 339–40 “always on” IT prospects 94–5, 203 Amazon.com 10, 37, 91 AMD 85, 313 American Association of Artificial Intelligence (AAAI) 337–8 American Express 22, 27, 126 American football 194–7 American Superconductor 288 amino acids 241–8, 253–5 analogues see late adopters Anderson, Roger 287 Anderson, Ross 61, 73–4, 76 Andreessen, Marc 8, 15 animal husbandry 256–7 anti-piracy systems 34–5 anti-virus software 50–1, 60, 67–8 antibodies 249–50, 256–7 AOL 93 Apache 10 Apple 95, 97, 99–101, 165–6, 172, 192, 198, 202–3, 204, 207–8, 211, 219–29 Applera 242–3 application service providers (ASPs) 19–20, 91–2, 109 Applied Molecular Evolution 246, 258 architects, green buildings 299–304 Archos AV 206 Argentina 319 Arima 156 Armand, Michel 281, 283 ARPU see average revenue per user Arthur, Brian 39 artificial intelligence (AI) x, 89, 102, 233, 336–40 artists 83–4 ASCII 96 Asian cultures 93, 142, 176 see also individual countries ASPs see application service providers AstraZeneca 312 AT&T 108, 110 ATMs see automated teller machines atoms, nanotechnology ix–x, 233, 263–4, 306–29 Atos Origin 123, 130, 134, 143 audits 44, 46 automated teller machines (ATMs) 61 autonomic computing 88–92, 335, 339 Avax office building 304 average revenue per user (ARPU), mobile phones 157, 162–3 B B2B see business-to-business computing Baan 30 Babic, Vasa 159 back-up systems 43–4 Bacon, Sir Francis 236, 271 Ballard, Geoffrey 290 Balliet, Marvin 28 Ballmer, Steve 98 Bamford, Peter 164–5, 167 banks 37, 42, 48, 61, 72, 80, 87, 115, 116–18, 121, 126, 146 Bardhan, Ashok 138 barriers to entry, mobile phones 155–6 Battat, Randy 140–1 batteries 233, 277–9, 280–4 Baumholtz, Sara 103, 105–6 Bayesian decision-making 338 BEA 21–2, 87 Bell 108 Bell, Genevieve 93 Bell, Gordon 13 Bell Labs 210 341 THE FUTURE OF TECHNOLOGY Benioff, Marc 19, 22, 84, 92 Benjamin, Dan 295 BenQ 156–7 Berliner, Emile 82 Bernstein, Phillip 300, 304 Berquist, Tom 37 Bhattacharya, Arindam 131 Bhide, Amar 128 Big Brother 179–83 biological weapons 265–6 biometric systems 60, 64–5, 71, 74 biopolymers 259–64 biotechnology ix–x, 233, 236–71 agricultural biotechnology ix, 238–9, 251–7, 270–1 categorisations 238–9, 241 cloning 239, 256, 267–71, 329 clusters 240 concepts ix–x, 233, 236–71, 327 embryonic stem cells 268–9 enzymes 258–64 fuels ix–x, 233, 259–64, 271, 274–9, 314–15 funding problems 237–8 future prospects 236–48, 267–71 genomics 239, 241–8, 262–4, 308 GM ix–x, 233, 236–40, 251–5, 267–71, 318–20 historical background 241 industrial biotechnology 258–64 medical applications ix–x, 145, 233, 236–40, 247, 249–50, 256–7, 267–71 pharmaceutical companies 239–40, 241–50, 312 plastics 238–9, 259–64 problems 236–40 revenue streams 237–8, 241–2 RNA molecules 241–2, 249–50, 265 therapeutic antibodies 249–50, 256–7 virtual tissue 248 warfare 265–6 x-ray crystallography 247–8 BlackBerry e-mail device 152–3, 156, 171 Blade Runner (movie) 269 Bloomberg, Jason 91 Bluetooth wireless links 171–2, 173, 214–15, 218 BMG 222–3, 227, 229 BMW 159, 176 Boeing 69 Bonneville Power Administration (BPA) 287 boom-and-bust cycles, innovations vii–viii, 4–39, 82–3, 107, 134 Bosch 142 Boston Consulting Group 120, 131, 140, 142, 160, 203, 226 Bowie, David 19 Brazil 114, 309, 319 BREEAM standard 300–1 342 Breese, Jack 100, 102 Brenner, Sydney 242, 252–3 Brillian 112–14 Brin, David 179, 183 Brin, Sergey 9 British Airways 126–7 broadband ix, 34–5, 52–3, 93, 96–7, 103, 168–9, 203, 207, 209–13 Broockman, Eric 216 Brooke, Lindsay 297 Brown, Tim 101, 106 Buddhism 19 budgets 7, 9, 14, 28–31, 45–6, 71, 186 bugs, software 20–1, 54–6 built-in obsolescence 8–9, 29 Bull, Michael 220 Bush, George W. 35, 144, 268–9, 274–6 Business Engine 28, 30 business models ix, 10, 19–20, 36–40, 109 business plans 10 business units 28–31 business-process outsourcing (BPO) 118 business-to-business computing (B2B) 90 Byrnes, Chris 44, 46 byte’s-eye view, complexity problems 85–7 C Calderone, Tom 224 call centres 79, 121, 125–9, 136, 144 Cambridge University 61, 73, 76 camcorders 214 camera phones 156, 170–2, 179–83, 203 see also mobile phones Cameron, Bobby 28 Canada 152, 181, 290 cancer cells 249–50, 317, 329 canola 252–3 Canon 108 capitalism 28 Capossela, Chris 79, 94 car industry 5, 38–9, 82–4, 113, 114, 116, 118–19, 120–1, 134, 146, 158–9, 175–6, 284, 290–8 diesel cars 296–7, 314–15 electric cars 284, 290, 291–8 hybrid cars 233, 284, 291–8 mobile phones 158–9, 175–6 particulate filters 296–7 performance issues 291–8 Toyota hybrid cars 291–5, 297 CARB 296 carbon nanotubes 311–12, 322, 325, 328 carbon-dioxide emissions 275, 296, 300 Cargill 253–4, 259–60 Carnegie Mellon 44–5 Carr, David 194 Carr, Nicholas vii–viii, 83 Cato Institute 34 INDEX CBS 36, 225 CDMA2000-1XEV-DO technology 165, 168–9 CDs 207, 212–13, 223–8, 315 celebrity customers, mobile phones 173–4 Celera 241–2, 262 Cell chips 198–200 cell phones 172 see also mobile phones Celltech 243 Centrino 11 Cenzic 54, 68 CFOs see chief financial officers Chand, Rajeev 217–18 Chapter 11 bankruptcies 37 Charles, Prince of Wales 317 Charney, Scott 43, 47, 72–3 Chase, Stuart 136, 139 Chasm Group 12, 36 Check Point Software 52–3, 86 chemistry 239, 310–11 Chi Mei 156–7 chief financial officers (CFOs) 21, 28–31, 73–4 Chile 319 China 38–9, 109, 112–15, 120–1, 130, 136, 140, 142, 145, 154, 156, 160, 171, 269, 276, 301, 309, 319–20 Christensen, Clayton 9, 107–8 Chuang, Alfred 87 CIA 18, 33, 50, 56 Cisco 106, 110, 211 Citibank 30, 121, 126 civil liberties, security issues 74 civilisation processes 84 clamshell design, mobile phones 170–1 Clarke, Richard 43, 75–6 cleaner energy ix–x, 233, 274–6 climate change ix clocks 82 clones, IBM PCs 9 cloning, biotechnology 239, 256, 267–71, 329 Clyde, Rob 67 CMOS chips 313–14 co-branding trends, mobile phones 161 Coburn, Pip 80–1, 89 Cockayne, Bill 66 Code Red virus 45, 49, 50, 54–5 Cognizant 125, 131 Cohen, Ted 228 cold technologies 31, 80 Cole, Andrew 163–5, 167 Comber, Mike 222 commoditisation issues, concepts 6–7, 8–16, 25, 132–5, 159, 203 Compal 156 Company 51 45–6, 54 Compaq 38 competitive advantages viii, 30 complexity problems ASPs 91–2, 109 byte’s-eye view 85–7 concepts viii, 14–16, 78–81, 82–110, 117–22 consumer needs 93–7 costs 79 creative destruction 107–10, 200, 326 desktops 100–2 digital homes 95–7 disappearance 82–4 “featuritis” 83–4 filtering needs 101–2, 339 front-end simplicity needs 84, 88, 99–102 historical background 80–4 infrastructural considerations 85–7, 117–22 IT viii, 14–16, 78–81, 82–110, 117–22 mergers 87 metaphors 100–2 “mom” tests 98 outsourcing 118–22 simplicity needs 78–81, 84, 87, 88–92, 98–110 web services 88–92 wireless technology 95–7, 109–10 “ws splat” 90–1 computer chips 4–12, 32–4, 85–7, 93, 95, 109, 119, 158, 161, 198–200, 202–3, 216, 313–14, 325–7 see also processing power Cell chips 198–200 costs 10, 14 heat generation 11–12 nanotechnology 313–14, 325–7 types 199–200, 202–3, 313–14 UWB chips 216 Computer Security Institute (CSI) 50–2, 62 Comviq 109 Condé Nast Building 301 consumer electronics see also customers; digital homes; gaming; mobile phones Cell chips 198–200 concepts viii–ix, 94–7, 99–102, 119, 147, 198–200, 203, 338–9 hard disks 204–8 control systems see also security... cyber-terrorism threats 75–6 Convergys 121, 126–9 copyright ix, 34 Corn, Joe 82 Cornice 208 Corporate Watch 318 costs viii, 4–7, 10, 14–15, 29–31, 70–4, 79, 186, 275–6, 283, 295–8, 311, 332–6 calculations 30–1 complexity problems 79 computer chips 10, 14 343 THE FUTURE OF TECHNOLOGY downward trends viii, 4–7, 14 energy alternatives 275–6 flat-panel displays 230–1 gaming budgets 186 hybrid cars 295–8 networks 14–15 outsourcing 112–24, 131–5, 140–3 performance links 29–30 robots 332–6 security issues 45–6, 50–1, 62, 70–4 storage costs 14–15 viruses 50–1 VOIP 104–6, 167 cotton 252–5 crashes, innovations vii, 4, 5–8, 39, 107, 134 creative destruction 107–10, 200, 326 credit cards 114, 117–18, 129, 338 Crick, Francis 236, 247, 271 crime fraud 52, 61–3, 181–3 mobile phones 180–3 CRM see customer relationship management crops, GM 251–5, 270–1 Crosbie, Michael 302 Cruise, Tom 64–5 Crystal Palace 299 CSI see Computer Security Institute CSM Worldwide 291–2, 297 CTC 288 cultural issues outsourcing 122, 142 technology 93–4 customer relationship management (CRM) 19, 47 customers see also consumer electronics complexity issues 93–7 cultural issues 93–4, 142 powers 26–7, 28–31, 36–40, 83–4 satisfaction 22, 24, 28–31 simplicity needs 78–81, 84, 87, 88–92, 98–110 vendors 94–7 cutting-edge economics 17 Cypress Semiconductor 32 Czech Republic 114, 120, 319 Czerwinski, Mary 100 D D-VARS 288 DaimlerChrysler 292, 295–6 Danger 152 data centres 17, 21, 84–92, 117–22 data services, mobile phones 164–5, 170–1 databases 17–18, 20–1, 35, 36–7, 56, 69, 101–2 Davidson, Mary Ann 56 Davies, Geoff 53, 72–4 de Felipe, Charles 87 344 de Vries, Pierre 55 Dean, David 160 deCODE 243–4 Dedo, Doug 67 Delacourt, Francis 143 Dell 8, 9, 85, 88, 109, 114–15, 131, 150, 202–3, 230 DeLong, Brad 36 Demos 318 Denman, Ken 212 Denmark 289 deployment period, revolutionary ideas 6 Dertouzos, Michael 78 desktops 100–2 Deutsche Bank 121, 126, 161, 164 diesel cars 296–7, 314–15 Diffie, Whitfield 43, 56 digital cameras 78, 95, 179–83, 203, 204 digital homes ix, 94–7, 147, 200, 202–32 see also flat-panel displays; TV; video...; wireless technology competitors 202–3 concepts 147, 200, 202–32 future prospects 202–3 hard disks 204–8, 219–20 iPod music-players ix, 99–100, 102, 172, 192, 203, 204, 207–8, 219–29 media hubs 202–3 music 204, 207–8, 219–29 PCs 202–3 UWB 96–7, 214–19 Wi-Fi 34–5, 66–7, 93, 95–7, 153, 203, 209–18 digital immigrants 81, 93, 109 digital natives 81, 93 digital video recorders (DVRs) 205–6 direct-sequence ultrawideband (DS-UWB) 215–17 disaster-recovery systems 43–4 Dish Network 205 Disney 168 disruptive innovations, concepts 107–10, 200, 326 Diversa 253–4 DNA 236–41, 243–4, 247, 250, 262, 265, 312, 328 Dobbs, Lou 144 Dobkin, Arkadiy 130, 142 Dolly-the-sheep clone 256, 268 Donaldson, Ken 317 Dorel Industries 140 dotcom boom vii, 19, 37–9, 66, 79–81, 90, 92, 162, 309, 322, 339 double-clicking dangers, viruses 59–60 Dow 259–60, 263 DreamWorks 186 Drexler, Eric 316 DS, Nintendo 191–3 DS-UWB see direct-sequence ultrawideband INDEX Dun & Bradstreet 126 DuPont 259–60 DVD technology 203, 214, 224, 315 DVRs see digital video recorders E E*Trade 37 e-commerce 14, 71, 113 see also internet e-homes see digital homes e-mail viii, 42–57, 59–60, 99, 101, 104–6, 150, 156–7, 180 see also internet historical background 106 eBay 37, 91 economics, cutting-edge economics 17 The Economist x, 7, 66 Edison, Thomas Alva 82–3, 289 eDonkey 229 EDS 19–20, 60, 88, 120, 126, 134 Eigler, Don 310 electric cars 284, 290, 291–8 Electric Power Research Institute (EPRI) 285–9, 290, 295–6 electricity fuel cells 274–9, 280–1, 289–90, 297–8, 301, 315, 325 green buildings 233, 299–304 hybrid cars 233, 284, 291–8 hydrogen 233, 262–4, 271, 274–9, 289–90, 297–8 lithium-ion batteries 233, 280–4 micropower concepts 289 nanotechnology 314–15 power grids 233, 285–90 storage problems 275–6, 289–90 electrification age ix, 5, 19, 23, 39, 82, 83, 84, 134 Electronic Arts 187, 190 electronic-manufacturing services (EMS), mobile phones 155–6, 159–60 electrons 307 Eli Lilly 44 Ellison, Larry 5, 21–2, 38–40 embryonic stem cells 268–9 EMI 222–9 Emotion Engine chips 199–200 Empedocles, Stephen 321 employees future job prospects 136–9, 144–6 office boundaries 80–1, 94 outsourcing viii, 112–46 resistance problems 31 security threats 58–63, 69 VOIP 104–6 EMS see electronic-manufacturing services encryption 53–4, 86–7 energy internet 285–90 energy technology ix–x, 233, 274–304, 314–15 alternative production-methods 275–6, 286, 289 concepts 274–304, 314–15 demand forecasts 277–9 fuel cells 233, 262–4, 271, 274–9, 280–1, 289–90, 297–8, 301, 315, 325 green buildings 233, 299–304 hybrid cars 233, 284, 291–8 hydrogen 233, 262–4, 271, 274–9, 289–90, 297–8 lithium-ion batteries 233, 280–4 nanotechnology 314–15 power grids 233, 285–90 production costs 275–6 renewable energy 275–6, 286, 289, 300 Engelberger, Joe 334 enterprise consumers 94–7 enterprise software 20, 35 Environmental Defence 319 enzymes, biotechnology 258–64 Epicyte 256–7 EPRI see Electric Power Research Institute Eralp, Osman 225 Ericsson 155–6, 158, 171 ETC 317–18 Ethernet 210–11 Europe see also individual countries fuel cells 274 mobile phones 163–9, 174 outsourcing 140–6 EV-DO see CDMA...


pages: 654 words: 120,154

The Firm by Duff McDonald

Asian financial crisis, borderless world, collective bargaining, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, family office, financial independence, Frederick Winslow Taylor, income inequality, invisible hand, Jeff Bezos, Joseph Schumpeter, laissez-faire capitalism, Mahatma Gandhi, new economy, pets.com, Ponzi scheme, Ralph Nader, risk tolerance, risk-adjusted returns, shareholder value, Silicon Valley, Steve Jobs, supply-chain management, The Nature of the Firm, young professional

BusinessWeek went so far as to suggest that McKinsey had deliberately turned a “blind eye to signs of trouble” in order to perpetuate the lucrative relationship.21 It was also perpetuating McKinsey’s self-image as the cutting-edge intellectuals of the corporate suite. McKinsey partner Richard Foster’s 2001 book, Creative Destruction, was nothing short of a big wet kiss to Enron’s way of doing business. It was also a mere repackaging of economist Joseph Schumpeter’s own work on the strengths of capitalism a half century before, but with a crucial twist: It was celebrating the worst instincts of laissez-faire capitalism, not the best. The War for Talent, a 2001 book by McKinsey consultants Ed Michaels, Helen Handfield-Jones, and Beth Axelrod (now head of HR at eBay), might have been an even wetter kiss for Enron than Creative Destruction. The book set off a worldwide craze for a raft of flimsy ideas, many of which were based on simple observation of Skilling’s management style and practices, a large part of which had come out of McKinsey itself.

McKinsey’s 1997 study, “The War for Talent,” had caused a mad rush to add a new (and questionable) dimension to the traditional human resources function: the talent manager. The idea, in its simplest sense: Rapidly promote “talented” employees (whatever that meant), encourage them to think outside the box, and pay them more than they are worth. One Enron employee quoted in McKinsey consultant Richard Foster’s book Creative Destruction made the following absurd remark: “We hire very smart people and we pay them more than they think they are worth.” It was nothing short of theory gone mad in practice. As Gladwell wryly observed in reference to Enron, “It never occurred to them that, if everyone had to think outside the box, maybe it was the box that needed fixing.”47 “What if smart people are overrated?” asked Gladwell.

McKinsey & Company, 30 at Marshall Field, 29–30, 53 McDonald and, 126–31 at McKinsey, 30, 269, 297 McKinsey (James O.) views about, 12, 29–30 in McKinsey New York office, 71 McKinsey revenue and, 96 McKinsey as scapegoat for, 8, 96, 107, 117, 248 in 1990s, 211 as product of McKinsey, 174, 278–79 reengineering and, 211. See also specific corporation Coulter, Jim, 167 Cox, David, 286 Cozinc Rio Tinto, 94 Crainer, Stuart, 110, 173 Cravath, Swaine & Moore, 83 Creative Destruction (Foster), 247, 248, 263 Crédit Lyonnais, 79 Credit Suisse, 245, 253, 257 Credit Suisse First Boston, 279 Cresap, McCormick and Paget, 42, 55, 118 Crocker Bank, 166 Crockett, Horace “Guy,” 31, 37, 38, 39, 56–57, 61, 86, 102 Crutchfield, Edward, 254–55 cubic consulting, 225–27 culture/values, McKinsey: clients and, 275, 331, 333 and cult of servitude, 102 of dissent, 266–67 and Enron-McKinsey relationship, 247 and expansion of McKinsey, 325 impact of Enron collapse on, 251 and individual ethos, 66, 94, 156, 163 internal concerns about Gupta influence on, 237 Katzenbach comments about, 171 and knowledge, 218 and McKinsey in the future, 325, 330, 331 and recruiting and training, 171 risk taking, 209–10 sharing and, 143 and size of McKinsey, 320 team building and, 208 and turnover of employees, 330.


pages: 472 words: 117,093

Machine, Platform, Crowd: Harnessing Our Digital Future by Andrew McAfee, Erik Brynjolfsson

3D printing, additive manufacturing, AI winter, Airbnb, airline deregulation, airport security, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, artificial general intelligence, augmented reality, autonomous vehicles, backtesting, barriers to entry, bitcoin, blockchain, book scanning, British Empire, business process, carbon footprint, Cass Sunstein, centralized clearinghouse, Chris Urmson, cloud computing, cognitive bias, commoditize, complexity theory, computer age, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, Dean Kamen, discovery of DNA, disintermediation, distributed ledger, double helix, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, ethereum blockchain, everywhere but in the productivity statistics, family office, fiat currency, financial innovation, George Akerlof, global supply chain, Hernando de Soto, hive mind, information asymmetry, Internet of things, inventory management, iterative process, Jean Tirole, Jeff Bezos, jimmy wales, John Markoff, joint-stock company, Joseph Schumpeter, Kickstarter, law of one price, Lyft, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, Marc Andreessen, Mark Zuckerberg, meta analysis, meta-analysis, moral hazard, multi-sided market, Myron Scholes, natural language processing, Network effects, new economy, Norbert Wiener, Oculus Rift, PageRank, pattern recognition, peer-to-peer lending, performance metric, Plutocrats, plutocrats, precision agriculture, prediction markets, pre–internet, price stability, principal–agent problem, Ray Kurzweil, Renaissance Technologies, Richard Stallman, ride hailing / ride sharing, risk tolerance, Ronald Coase, Satoshi Nakamoto, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, speech recognition, statistical model, Steve Ballmer, Steve Jobs, Steven Pinker, supply-chain management, TaskRabbit, Ted Nelson, The Market for Lemons, The Nature of the Firm, Thomas L Friedman, too big to fail, transaction costs, transportation-network company, traveling salesman, two-sided market, Uber and Lyft, Uber for X, Watson beat the top human players on Jeopardy!, winner-take-all economy, yield management, zero day

Fuji: The Battle for Global Market Share,” 2000, https://www.pace.edu/emplibrary/tfinnerty.pdf. 131 the Casio QV-10: Sam Byford, “Casio QV-10, the First Consumer LCD Digital Camera, Lauded as ‘Essential’ to Tech History,” Verge, September 14, 2012, http://www.theverge.com/2012/9/14/3330924/first-lcd-digital-camera-casio-qv-10. 131 Its $900 price tag: Richard Baguley, “The Gadget We Miss: The Casio QV-10 Digital Camera,” Medium, August 31, 2013, https://medium.com/people-gadgets/the-gadget-we-miss-the-casio-qv-10-digital-camera-c25ab786ce49#.3cbg1m3wu. 132 print ad revenue had declined by 70%: Mark J. Perry, “Creative Destruction: Newspaper Ad Revenue Continued Its Precipitous Free Fall in 2013, and It’s Probably Not Over Yet,” AEIdeas, April 25, 2014, https://www.aei.org/publication/creative-destruction-newspaper-ad-revenue-continued-its-precipitous-free-fall-in-2013-and-its-probably-not-over-yet. 132 $3.4 billion: Pew Research Center, “State of the News Media 2015,” April 29, 2015, http://www.journalism.org/files/2015/04/FINAL-STATE-OF-THE-NEWS-MEDIA1.pdf. 132 “print dollars were being replaced by digital dimes”: Waldman, “Information Needs of Communities.” 132 13,400 newspaper newsroom jobs: Ibid. 132 Tucson Citizen: Tucson Citizen, accessed January 31, 2017, http://tucsoncitizen.com. 132 Rocky Mountain News: Lynn DeBruin, “Rocky Mountain News to Close, Publish Final Edition Friday,” Rocky Mountain News, February 26, 2009, http://web.archive.org/web/20090228023426/http://www.rockymountainnews.com/news/2009/feb/26/rocky-mountain-news-closes-friday-final-edition. 132 lost more than 90% of their value: Yahoo!

Understanding the implications of these developments for business can make the difference between thriving and merely surviving. Or between surviving and perishing. Technological progress tests firms. Indeed, the average life span of the most valuable US companies, those listed in the S&P 500, has fallen from about sixty years in 1960 to less than twenty years today. A lot of Joseph Schumpeter’s “creative destruction” has taken place in this digital era, and most of this book has focused on how executives can navigate that destruction successfully. But although we field many requests for advice on how a company can thrive in the digital era, some of the most common questions we get take a broader view: What does the machine-platform-crowd transformation mean for society? Will machines leave people unemployed?

Shaw), 267 composition, musical, 117 computational biology, 116–17 computer-aided design, 119–20 computers (generally) and Go, 3–6 origins of programming, 66–67 and standard partnership, 31 concentration, sales/profits, 311–12 confabulation, 45n conference venues, 189 confirmation bias, 57 Confucius, 1 connections, human, 122–24 consciousness, 120 construction sites, drones for mapping, 99 consumer loyalty and, 210–11 consumer surplus, 155–56, 159, 161, 164, 173 content, crowd-created, 8, 234 content platforms, 139 contracts blockchain and, 291–95 and failure mode of decentralized things, 317–19 inherent incompleteness of, 314–17 contributions, to open-source software, 242–43 coordination costs, 313–14 Cope, David, 117, 119 Copyright Arbitration Royalty Panel (CARP), 147n core in centrally planned economies, 235, 236 as counterpart to the crowd, 15 crowd as, 230–31 crowd as independent of, 271–75 DAO vs., 303 handling of bad actors, 234 leveraging of crowd by, 260–70 libraries as, 230 mismatching of problem to, 256–58 Cornell Aeronautical Laboratory, 72 “Corporal Coles hand,” 273–74 counterfeit goods, 290 Cowen, Tyler, 208–9 Craigslist, 138–39 Crawford, Kate, 52 creative destruction, 330 creativity definitions of, 113 human connection in digitized world, 122–24 limits of computers’ contributions, 119–22 machines and, 110–19 other forms of computer-aided activity vs., 119–22 credit cards, 214–16 credit scores, 46–47 CRISPR, 258 CRISPR-Cas9 gene-editing tool, 271–72 Crocker, F. B., 19 crop spraying, 101 cross-elasticity, 216, 218 cross-selling, 47 crowd acquiring innovation via, 264–66 acquiring new customers via, 263–64 automated investing, 266–70 bad actors in, 234 and Bitcoin, 279–88 and companies, 301–27 core as counterpart to, 15 core’s leveraging of, 260–70 and “decentralizing all the things,” 278–300 and deficiencies of experts, 255–59 defined, 14 early history, 229–35 experts vs. outsiders, 252–75 failure to adhere to organizing principles, 246–49 finding right resource among, 261 genome sequencing contributions, 252–55 GE’s use of, 10–11 as independent of the core, 271–75 and marginal utility, 258–59 market as, 235–39 for market research, 261–63 medical device design, 272–75 methods for handling unruliness of, 232–35 open-source software development by, 240–45 organizing, 239–49 origins, 229–30 and prediction markets, 237–39 principles for effective harnessing of, 241–45 Wikipedia and, 246–49 crowdfunding, 13–14, 262–63 crowdlending platforms, 263 cryptocurrency, 280, 296–97, 308; See also Bitcoin Cunningham, Ward, 247 CuratedAI, 121 curation Android vs. iOS, 167 core’s use of, 232 as key to successful platforms, 169 with open platforms, 165 currency, See Bitcoin current accounts, 202 curse of knowledge, 21 customers, using crowd to acquire, 263–64 customer service, free apps and, 162 Cvent, 189 Cyclopaedia: or, An Universal Dictionary of Arts and Sciences (Chambers), 246 Dalzell, Rick, 142 DANCE and advancements in robotics, 103 and Cambrian Explosion of robotics, 95–98 Danzinger, Shai, 39–40 DAO (decentralized autonomous organization) attacks on, 303–5 failure mode of, 318 and inherent incompleteness of contracts, 315 origins, 302–3 Daojia, 192 DARPA, 103–4 Dartmouth artificial intelligence conference (1956), 67, 69 data centers, 77–78 data-driven decision making, 46–60 credit scores, 46–47 increase in, 42 superiority of System 2 decisions, 58–60 data gathering as benefit of open platforms, 164 humans vs. machines, 53–54 Davenport, Thomas, 54, 56, 81 David, Paul, 21 Davis, Ernest, 71 D.


pages: 385 words: 111,807

A Pelican Introduction Economics: A User's Guide by Ha-Joon Chang

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Affordable Care Act / Obamacare, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, corporate raider, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Gunnar Myrdal, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, information asymmetry, intangible asset, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land reform, liberation theology, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, Pareto efficiency, Paul Samuelson, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, Scramble for Africa, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Vilfredo Pareto, Washington Consensus, working-age population, World Values Survey

.* (Not even Adam Smith has a school named after him.) Like the Austrians, Schumpeter worked under the shadow of the Marxist school – so much so that the first four chapters of his magnum opus, Capitalism, Socialism, and Democracy (henceforth CSD), published in 1942, are devoted to Marx.17 Joan Robinson, the famous Keynesian economist, once famously quipped that Schumpeter was just ‘Marx with the adjectives changed’. Gales of creative destruction: Schumpeter’s theory of capitalist development Schumpeter developed Marx’s emphasis on the role of technological development as the driving force of capitalism. He argued that capitalism develops through innovations by entrepreneurs, namely, the creation of new production technologies, new products and new markets. Innovations give the successful entrepreneurs temporary monopolies in their respective markets, allowing them to earn exceptional profit, which he called the entrepreneurial profit.

This competition driven by technological innovations, in Schumpeter’s view, is much more powerful and important than Neoclassical price competition – producers trying to undercut each other with lower prices, by increasing the efficiency with which they use given technologies. He argued that competition through innovation is ‘as much more effective than [price competition] as a bombardment is in comparison with forcing a door’. On this, Schumpeter has proven prescient. He argued that no firm, however entrenched it may look, is safe from these ‘gales of creative destruction’ in the long run. The decline of companies like IBM and General Motors, or the disappearance of Kodak, which at their peaks dominated the world in their respective industries, demonstrates the power of competition through innovation. Why did Schumpeter predict the atrophy of capitalism and why was he wrong? Despite being such a believer in the dynamism of capitalism, Schumpeter was not optimistic about its future.

As I discussed in Chapter 4, the Schumpeterians and the Austrians denounce the state of perfect competition, which the Neoclassical economists idealize, as a state of economic stasis, where there is no innovation. When the lure of (temporary) monopoly profit is exactly what motivates firms to innovate, clamping down on – or even breaking up – monopolies will reduce innovation and bring about technological stagnation. In what Schumpeter calls the ‘gales of creative destruction’, they argue, no monopoly is safe in the long run; General Motors, IBM, Xerox, Kodak, Microsoft, Sony, BlackBerry, Nokia and many other companies that once had near-monopoly of their respective markets and had been considered invincible have lost such positions and even disappeared into the dustbin of history, as in the case of Kodak.1 What constitutes a market failure depends on your theory of how markets work I have just shown that the same market dominated by a monopoly can be seen as a most successful one by one school of economics (the Schumpeterian school or the Austrian school) and as a case of most abject failure by another (the Neoclassical school).


pages: 576 words: 105,655

Austerity: The History of a Dangerous Idea by Mark Blyth

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accounting loophole / creative accounting, balance sheet recession, bank run, banking crisis, Black Swan, Bretton Woods, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, deindustrialization, disintermediation, diversification, en.wikipedia.org, ending welfare as we know it, Eugene Fama: efficient market hypothesis, eurozone crisis, financial repression, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, Gini coefficient, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, interest rate swap, invisible hand, Irish property bubble, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, Long Term Capital Management, market bubble, market clearing, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Occupy movement, offshore financial centre, paradox of thrift, Philip Mirowski, price stability, quantitative easing, rent-seeking, reserve currency, road to serfdom, savings glut, short selling, structural adjustment programs, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, unorthodox policies, value at risk, Washington Consensus, zero-sum game

Rather, it was just a particularly marked transitional period of technological and organizational change that became hyperpoliticized, one of those “recurrent ‘recessions’ that are due to the disequilibrating impact of new products or methods.”112 We know this, he maintained, because capitalism, properly viewed, is a system in which constant change and adaptation is the name of the game. “Economic progress, in capitalist society, means turmoil.”113 Capitalism therefore cannot be judged over the short run. In fact, “we must judge its performance over time, as it unfolds through decades and even centuries.”114 By definition, then, compensating for turmoil, acting on the immediate short run, not only halts the process of creative destruction by entrepreneurs that lies at the heart of capitalism; doing so is guaranteed to produce more malinvestment that simply stores up trouble ahead since the job of austerity is left undone. Capitalism, Socialism and Democracy appears, then, as a longer and more elaborate restatement of his earlier beliefs. Nothing has changed for Schumpeter, except everything around him. Indeed, rather than engaging Keynes and his ideas directly, Capitalism, Socialism and Democracy abrogates a robust defense of liberalism in favor of a lengthy discussion of Marx and a bureaucratic-cultural explanation as to why capitalism will inevitably be replaced by socialism.

Austrian school economists continued to give austerity a globalized intellectual home, while German ordoliberals, as we shall shortly see, gave austerity a national base of operations. 5 THE INTELLECTUAL HISTORY OF A DANGEROUS IDEA, 1942–2012 Part One: Austerity Finds a European Home—and an American Pied-à-Terre Welcome to Germany: Erst Sparen, Dann Kaufen! One1 of Joseph Schumpeter’s lasting contributions to economic thought was his concept of gales of “creative destruction” that sweep through the economy.2 Torn asunder by the entrepreneurial utilization of technology, continual organizational innovation, and the rigors of competition, businesses rise and fall, driving the business cycle over time. It is, then, hard to imagine a less Schumpeterian economy than Germany’s. Consider, for example, when some of Germany’s flagship companies, which are still with us today, were founded: BASF (chemicals), 1865; Krups (appliances), 1846; ThyssenKrupp (metalworks), 1891 and 1811; Daimler/Mercedes Benz (automotive), 1901 and 1926; Siemens (engineering), 1847, to name but a few.

See risk-management techniques Portugal, 3, 4 bailout in, 71–73 Eurozone Current Account Imbalances, 78 fig. 3.1 Eurozone Ten-Year Government Bond Yields, 80 fig. 3.2 government debt 2006–2012, 47 fig. 2.3 slow growth crisis, 68–71 “Positive Theory of Fiscal Deficits and Government Debt in a Democracy, A” (Alesini), 167 Posner, Richard, 55 Prescott, Edward, 55, 157 President’s Conference on Unemployment, 120 Prices and Production (Hayek), 144 Principles of Political Economy (Mill), 116 Quiggin, John, 55 and Australian expectations-augmented austerity, 209 “zombie economics”, 10, 234 Rand, Ayn Atlas Shrugged, 130 rational expectations hypothesis, 42 Real Business Cycle school, 157 real estate “collateralized debt obligation”, 28 “tranching the security”, 28, 30–31 equity, 28 mezzanine, 28 senior, 28 “uncorrelated within their class”, 27–28 REBLL alliance, 103, 178–180, 179–180, 205, 216–226, 217 fig. 6.1 GDP and consumption growth in 2009, 221 table 6.1 See also names of countries recapitalization, 45, 52 Reinhardt, Carmen, 11, 73, 241 Ricardian equivalence, 41, 49 Ricardo, David, 115–117, 117–119, 171 in Germany, 195 risk-management techniques, 49 hedging, 32 long position, 32 options, 32 portfolio diversification, 31 short sell, 32 Ritschl, Albrecht, 193 Road to Serfdom, The (Hayek), 144 Robins, Lionel, 144 Robinson, Joan, 122, 126 Rodrik, Dani, 162, 163 Rogoff, Kenneth, 11, 73 Romania austerity in, 18, 103, 190, 216–226, 217 fig. 6.1, 221 Romney, Mitt, 243 Roosevelt, Franklin Delano, 126 administration policies, 128 balancing the budget, 188 Röpke, Wilhelm, 138 Rothbard, Murray, 148 Sachs, Jeffrey, 60 Saez, Emanuel, 243 Say’s law, 137 Sbrancia, M. Belen, 241 Scandinavia, 225 Schäuble, Wolfgang, 61 Schiff, Peter, 149 Schularick, Moritz, 73 Schumpeter, Joseph, 17, 119, 151 and creative destruction, 132–134 and the New Liberals, 118 Capitalism, Socialism and Democracy, 128 Economics of the Recovery Program, The, 128 on austerity, 101, 121, 125–131 on the capital structure of capitalism, 120, 125 Second Treatise of Government (Locke), 104 securitization, 24 Shambaugh, Jay, 90 Sherman Acts, 119 Siemens, 132 sigma, 32, 33, 34 Skidelsky, Lord, 56 Smith, Adam, 15, 17, 100–101, 119, 167 and productive parsimony, 110–112 and public debt, 109–110 producing austerity, 114–115, 127 relationship between the state and the market, 112–113, 115–122, 123 Société Générale, 87 Soros, George, 77 sovereign debt crisis, 5, 7 Adam Smith on, 113 in Europe, 51, 79 in Greece, 62–64 Spain, 1, 3, 4, 5, 6, 222, 225 austerity in, 176 capital-flow cycle in, 11 Eurozone Current Account Imbalances, 78 fig. 3.1 Eurozone Ten-Year Government Bond Yields, 80 fig. 3.2 government debt 2006–2012 real estate in rise in prices, 27, 64–68 unemployment in, 2 Sperling, Gene, 12 stagflation, 40 Standard & Poors, 86 starve the beast theory of public spending, 167 Steinbrück, Peer, 52 Stigler, George, 155 Stiglitz, Joseph, 55 “Successful Austerity in the United States, Europe and Japan” (Battini), 214–215 Summers, Larry, 58 supply-side economics, 111, 242 See also demand-side economics Svensson, Lars E.


pages: 484 words: 104,873

Rise of the Robots: Technology and the Threat of a Jobless Future by Martin Ford

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3D printing, additive manufacturing, Affordable Care Act / Obamacare, AI winter, algorithmic trading, Amazon Mechanical Turk, artificial general intelligence, assortative mating, autonomous vehicles, banking crisis, basic income, Baxter: Rethink Robotics, Bernie Madoff, Bill Joy: nanobots, call centre, Capital in the Twenty-First Century by Thomas Piketty, Chris Urmson, Clayton Christensen, clean water, cloud computing, collateralized debt obligation, commoditize, computer age, creative destruction, debt deflation, deskilling, diversified portfolio, Erik Brynjolfsson, factory automation, financial innovation, Flash crash, Fractional reserve banking, Freestyle chess, full employment, Goldman Sachs: Vampire Squid, Gunnar Myrdal, High speed trading, income inequality, indoor plumbing, industrial robot, informal economy, iterative process, Jaron Lanier, job automation, John Markoff, John Maynard Keynes: technological unemployment, John von Neumann, Kenneth Arrow, Khan Academy, knowledge worker, labor-force participation, labour mobility, liquidity trap, low skilled workers, low-wage service sector, Lyft, manufacturing employment, Marc Andreessen, McJob, moral hazard, Narrative Science, Network effects, new economy, Nicholas Carr, Norbert Wiener, obamacare, optical character recognition, passive income, Paul Samuelson, performance metric, Peter Thiel, Plutocrats, plutocrats, post scarcity, precision agriculture, price mechanism, Ray Kurzweil, rent control, rent-seeking, reshoring, RFID, Richard Feynman, Richard Feynman, Rodney Brooks, secular stagnation, self-driving car, Silicon Valley, Silicon Valley startup, single-payer health, software is eating the world, sovereign wealth fund, speech recognition, Spread Networks laid a new fibre optics cable between New York and Chicago, stealth mode startup, stem cell, Stephen Hawking, Steve Jobs, Steven Levy, Steven Pinker, strong AI, Stuxnet, technological singularity, telepresence, telepresence robot, The Bell Curve by Richard Herrnstein and Charles Murray, The Coming Technological Singularity, The Future of Employment, Thomas L Friedman, too big to fail, Tyler Cowen: Great Stagnation, union organizing, Vernor Vinge, very high income, Watson beat the top human players on Jeopardy!, women in the workforce

What’s more, they offer compelling evidence for how the relationship between technology and employment has changed. There is a widely held belief—based on historical evidence stretching back at least as far as the industrial revolution—that while technology may certainly destroy jobs, businesses, and even entire industries, it will also create entirely new occupations, and the ongoing process of “creative destruction” will result in the emergence of new industries and employment sectors—often in areas that we can’t yet imagine. A classic example is the rise of the automotive industry in the early twentieth century, and the corresponding demise of businesses engaged in manufacturing horse-drawn carriages. As we saw in Chapter 3, however, information technology has now reached the point where it can be considered a true utility, much like electricity.

As we saw in Chapter 3, however, information technology has now reached the point where it can be considered a true utility, much like electricity. It seems nearly inconceivable that successful new industries will emerge that do not take full advantage of that powerful new utility, as well as the distributed machine intelligence that accompanies it. As a result, emerging industries will rarely, if ever, be highly labor-intensive. The threat to overall employment is that as creative destruction unfolds, the “destruction” will fall primarily on labor-intensive businesses in traditional areas like retail and food preparation, while the “creation” will generate new businesses and industries that simply don’t hire many people. In other words, the economy is likely on a path toward a tipping point where job creation will begin to fall consistently short of what is required to fully employ the workforce.

A 2014 report by a coalition of bank regulators from the United States and nine other developed countries warned that “five years after the crisis large firms have made only some progress” in addressing the risks associated with derivatives, and that “progress has been uneven and remains, on the whole, unsatisfactory.”24 In other words, the danger that even a localized increase in loan defaults could set off another global crisis remains very real. The most frightening long-term scenario of all might be if the global economic system eventually manages to adapt to the new reality. In a perverse process of creative destruction, the mass-market industries that currently power our economy would be replaced by new industries producing high-value products and services geared exclusively toward a super-wealthy elite. The vast majority of humanity would effectively be disenfranchised. Economic mobility would become nonexistent. The plutocracy would shut itself away in gated communities or in elite cities, perhaps guarded by autonomous military robots and drones.


pages: 351 words: 100,791

The World Beyond Your Head: On Becoming an Individual in an Age of Distraction by Matthew B. Crawford

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airport security, Cass Sunstein, choice architecture, collateralized debt obligation, creative destruction, David Brooks, delayed gratification, dematerialisation, deskilling, digital Maoism, Google Glasses, hive mind, index card, informal economy, Jaron Lanier, large denomination, new economy, new new economy, Norman Mailer, online collectivism, Plutocrats, plutocrats, Richard Thaler, Rodney Brooks, self-driving car, Silicon Valley, Silicon Valley ideology, the built environment, the scientific method, The Wisdom of Crowds, theory of mind, Walter Mischel, winner-take-all economy

He goes on: There are hundreds of examples of this, to which the process of mechanization is continually adding new ones. These losses are usually irretrievable. It is pathetic to watch the endless efforts—equipped with microscopy and chemistry, with mathematics and electronics—to reproduce a single violin of the kind the half-literate Stradivari turned out as a matter of routine more than 200 years ago.12 Cultural Revolutions aren’t imposed only by totalitarian regimes. We call ours “the creative destruction of capitalism,” and shower venture capital on “disruptive technologies,” especially ones that promise to mechanize human interaction. It hardly needs to be said that the results are both positive and negative. But it does need to be said that in the university, the survival of our traditions of intellectual apprenticeship should not be taken for granted. They will not be well equipped to defend themselves against the Maoist MBAs if they are not aware of themselves as traditions, but remain wed to a conception of knowledge as something that is transmissible to atomized individuals, without loss.

massification and social class and sovereign self and uncertain notions of of will autotelic activities Avalon (Toyota) Averaged American, The (Igo) Bach, Johann Sebastian ball bearings barbarians, skateboarders as Baroque era bartending baseball baseball bats Beat era Beckerath, Rudolf von Bedos, Dom Behavioral and Brain Sciences behavioral conditioning behavioral economics Benihana biases big data, era of blackjack Blind Spot Assist (Mercedes) bluegrass BMW Boardwalk Hall Auditorium organ Bono, Chris Boody, John motivation by reverse engineering by Boudreau, Bruce Brake Assist (Mercedes) Brewer, Talbot Brombaugh, John Brooks, David Burke, Edmund business-class lounge Calvin, John Canada cane capital concentration of social capitalism affective creative destruction in carbon fiber caretaking practices carpenters Car Talk cartoons cave, allegory of cell phone, driving while on centralization of authority certainty Chamberlain, Neville character Charles de Gaulle airport chiff children’s television chimpanzees China Cultural Revolution in choice freedom as and presentation of options as totem of consumer capitalism choice architects chopsticks Churchill, Winston Cindy (bookkeeper) Circuit of the Americas citizens, relationship of (sovereign) to Civil War, English Clark, Andy classical conditioning Clinton, Bill clustering cognition, advanced cognitive extension cognitive psychology cognitive sciences coherence colored walls commerce, regulation of communism communitarianism computational theory of mind concentration of motorcycle riders concepts, skilled activities and conflict, between self and world conformity individuality vs.

massification and social class and sovereign self and uncertain notions of of will autotelic activities Avalon (Toyota) Averaged American, The (Igo) Bach, Johann Sebastian ball bearings barbarians, skateboarders as Baroque era bartending baseball baseball bats Beat era Beckerath, Rudolf von Bedos, Dom Behavioral and Brain Sciences behavioral conditioning behavioral economics Benihana biases big data, era of blackjack Blind Spot Assist (Mercedes) bluegrass BMW Boardwalk Hall Auditorium organ Bono, Chris Boody, John motivation by reverse engineering by Boudreau, Bruce Brake Assist (Mercedes) Brewer, Talbot Brombaugh, John Brooks, David Burke, Edmund business-class lounge Calvin, John Canada cane capital concentration of social capitalism affective creative destruction in carbon fiber caretaking practices carpenters Car Talk cartoons cave, allegory of cell phone, driving while on centralization of authority certainty Chamberlain, Neville character Charles de Gaulle airport chiff children’s television chimpanzees China Cultural Revolution in choice freedom as and presentation of options as totem of consumer capitalism choice architects chopsticks Churchill, Winston Cindy (bookkeeper) Circuit of the Americas citizens, relationship of (sovereign) to Civil War, English Clark, Andy classical conditioning Clinton, Bill clustering cognition, advanced cognitive extension cognitive psychology cognitive sciences coherence colored walls commerce, regulation of communism communitarianism computational theory of mind concentration of motorcycle riders concepts, skilled activities and conflict, between self and world conformity individuality vs. consciousness consent conservatives consumer credit contingencies contract, authority of conversations, retrospective understanding enhanced by cooking, see short-order cooks cooperation Corporate Gaming Act courts, failing to appear in craft craps creative destruction creativity Critique of Judgment (Kant) cross-modal binding cultural authority cultural jigs Cultural Revolution culture culture of performance Cussins, Adrian cybernetics Davis, Miles death instinct pleasure principle and the will and debt Declaration of Independence Declaration of the Rights of Man Demain, Erik Demain, Martin democracy without flattening social effects of in statistical constructs Democracy in America (Tocqueville) Denmark Dennett, Daniel depression deregulation Descartes, René American individualism and epistemology of on primary vs. secondary qualities design: attention and of automobiles computer-aided in glassmaking interior in machine gambling in organ making determinism de Zengotita, Thomas Diagnostic and Statistical Manual of Mental Disorders Diderot, Denis differentiation from others as basis of communal feeling as basis of individuality and identity politics as incubator of genuine attachments as inherently hierarchal vs. viewing oneself as representative “digital Maoism” dissidents distraction in cultural crisis of attention as neuroscience finding political economy and summary view of diversity divorce dogs, Frisbees as caught by Dreyfus, Hubert driving Droid Dumbaugh, Eric Dunkin’ Donuts Ebbesen, E.


pages: 324 words: 92,805

The Impulse Society: America in the Age of Instant Gratification by Paul Roberts

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, American Society of Civil Engineers: Report Card, asset allocation, business process, Cass Sunstein, centre right, choice architecture, collateralized debt obligation, collective bargaining, computerized trading, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, David Brooks, delayed gratification, double helix, factory automation, financial deregulation, financial innovation, fixed income, full employment, game design, greed is good, If something cannot go on forever, it will stop - Herbert Stein's Law, impulse control, income inequality, inflation targeting, invisible hand, job automation, John Markoff, Joseph Schumpeter, knowledge worker, late fees, Long Term Capital Management, loss aversion, low skilled workers, mass immigration, new economy, Nicholas Carr, obamacare, Occupy movement, oil shale / tar sands, performance metric, postindustrial economy, profit maximization, Report Card for America’s Infrastructure, reshoring, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Rodney Brooks, Ronald Reagan, shareholder value, Silicon Valley, speech recognition, Steve Jobs, technoutopianism, the built environment, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, Walter Mischel, winner-take-all economy

The very innovations that were shrinking the farming sector were also creating entirely new sectors, such as railroads, manufacturing, road building, and utilities. These new sectors offered not only higher wages, but also entirely new kinds of employment. Making a car, for example, required steel workers and tire makers—plus a lot of engineers and designers and marketing experts and Freudian analysts—and the wages from these new jobs led to even more economic activity. This “gale of creative destruction,” as economist Joseph Schumpeter called it, was the defining force of industrial capitalism, “incessantly destroying the old [economic order], incessantly creating a new one.” And generally speaking, the new order was a definite improvement. In most industrial societies, this surge in new prosperity was broadly enjoyed. We got higher wages, lower prices, and a steady stream of innovations, such as jet engines and X-ray photography and color TV, which lifted everyone’s living standards while creating still more avenues for growth and employment.

We got higher wages, lower prices, and a steady stream of innovations, such as jet engines and X-ray photography and color TV, which lifted everyone’s living standards while creating still more avenues for growth and employment. When economists, historians, and your grandparents wax rhapsodic about the postwar economy, they are not being sentimental: it was a prosperity machine. So what happened to the machine? Why has the age-old pattern of creative destruction become one that often seems mainly about destruction? Again, there are many parts to this story—cultural, political, and ideological. But an important one is that our innovation has, somewhat paradoxically, become less disruptive—at least, in the way Schumpeter meant. The industrial revolution of Ford’s era was hugely disruptive because it involved multiple breakthroughs—automobiles and assembly lines, but also logistics, business administration, accounting, petrochemicals, pharmaceuticals, and communication, among others—all feeding off one another and creating an economic whole that was much larger than the sum of its parts.

In the United States, another six million manufacturing jobs, or a third of the total, went away between 2000 and 2007.11 Granted, we should not sentimentalize manufacturing jobs, which are often monotonous, dangerous, and unpleasant; many a factory worker would likely be glad to upgrade to something better. Nor, obviously, is there anything inherently wrong with automation or even offshoring. They are simply instruments of Schumpeter’s creative destruction: In “destroying” these older jobs in industrialized economies, automation and offshoring are, ideally, “creating” room for the next generation of jobs that will allow those displaced workers to step up the ladder to more productivity, better wages, and higher aspirations. Except that, under the Impulse Society, this is not what has happened. Displaced workers by and large have not stepped up to the next rung on the job ladder—or not in the numbers necessary to maintain the pattern of rising postwar prosperity.


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Peers Inc: How People and Platforms Are Inventing the Collaborative Economy and Reinventing Capitalism by Robin Chase

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3D printing, Airbnb, Amazon Web Services, Andy Kessler, banking crisis, barriers to entry, basic income, Benevolent Dictator For Life (BDFL), bitcoin, blockchain, Burning Man, business climate, call centre, car-free, cloud computing, collaborative consumption, collaborative economy, collective bargaining, commoditize, congestion charging, creative destruction, crowdsourcing, cryptocurrency, decarbonisation, don't be evil, Elon Musk, en.wikipedia.org, ethereum blockchain, Ferguson, Missouri, Firefox, frictionless, Gini coefficient, hive mind, income inequality, index fund, informal economy, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Jane Jacobs, Jeff Bezos, jimmy wales, job satisfaction, Kickstarter, Lean Startup, Lyft, means of production, megacity, Minecraft, minimum viable product, Network effects, new economy, Oculus Rift, openstreetmap, optical character recognition, pattern recognition, peer-to-peer, peer-to-peer lending, peer-to-peer model, Richard Stallman, ride hailing / ride sharing, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, self-driving car, shareholder value, sharing economy, Silicon Valley, six sigma, Skype, smart cities, smart grid, Snapchat, sovereign wealth fund, Steve Crocker, Steve Jobs, Steven Levy, TaskRabbit, The Death and Life of Great American Cities, The Future of Employment, The Nature of the Firm, transaction costs, Turing test, turn-by-turn navigation, Uber and Lyft, Zipcar

And to top it off, Peers Inc’s most valuable assets—the peers’ talent, creativity, and drive—are the very things that are the least manageable and least predictable. So how do you spark the necessary change when your institution is deeply conventional and has been for decades? Dan Doney (head of innovation at the U.S. Defense Intelligence Agency) explained to me that “virtually everything in a bureaucracy resists change. It is always ‘We need to stick to the plan.’ But innovation requires creative destruction—that is, the free flow of resources from ideas that are falling behind to new and better ideas. To embrace this principle, an organization must decentralize decision-making, delegating to the edge as much as possible. Our mantra: Start small. Scale fast. Fail cheap.” Regardless of whether you are big business or big government, this is sound advice. Create Pilots out of Edge Cases, Expand with Success The Defense Intelligence Agency has 17,000 employees, two-thirds of whom are civilians, and a budget of about $4.4 billion a year.7 Dan sought to establish a platform for innovation reform, focusing internally first, seeking ideas that lay within the organization before attempting to incorporate practices, methods, and capabilities from outside.

Legacy companies usually fight to protect the status quo, and to be fair, this is the easiest choice, since they are weighed down by their existing hard and soft assets—buildings, employees, processes, and know-how. The weight of these legacy assets are responsible for the decreasing life span of companies on the S&P 500. Many people have written about the need for big companies to reinvent themselves and the difficulty of doing so, perhaps most prominently Clay Christensen (The Innovator’s Dilemma) and Dick Foster (Creative Destruction). We can think about the music industry, which was just about ready to collapse under the pressure of Napster, a platform that unlocked the excess capacity found in other people’s music, until iTunes came up with a business model—a platform—for selling single songs quickly and easily. This gave the music industry another decade. Spotify and Pandora, however, advanced the business model yet again.

“Freelancing in America: A National Survey of the New Workforce,” 2014, independent study commissioned by the Freelancers Union and ElanceoDesk, http://chaoscc.ro/wp-content/uploads/2014/09/freelancinginamerica_report-1.pdf. 17. Søren Mark Peterson, “Loser-Generated Content: From Participation to Exploitation,” First Monday 13, no. 3 (2008), http://firstmonday.org/article/view/2141/1948. CHAPTER 8: EMBRACING THE CHANGE 1. “Creative Destruction Whips Through Corporate America,” INNOSIGHT Executive Briefing, Winter 2012. 2. Barry Libert, Yoram Wind, Megan Beck Fenley, “What Airbnb, Uber, and Alibaba Have in Common,” Harvard Business Review, November 20, 2014, https://hbr.org/2014/11/what-airbnb-uber-and-alibaba-have-in-common. 3. Dan Bieler, “The Collaborative Economy Will Drive Business Growth and Innovation,” Forrester.com, May 19, 2014, http://blogs.forrester.com/dan_bieler/14-05-19-the_collaborative_economy_will_drive_business_innovation_and_growth. 4.


pages: 403 words: 111,119

Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist by Kate Raworth

3D printing, Asian financial crisis, bank run, basic income, battle of ideas, Berlin Wall, bitcoin, blockchain, Branko Milanovic, Bretton Woods, Buckminster Fuller, call centre, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, choice architecture, clean water, cognitive bias, collapse of Lehman Brothers, complexity theory, creative destruction, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, dematerialisation, Douglas Engelbart, Douglas Engelbart, en.wikipedia.org, energy transition, Erik Brynjolfsson, ethereum blockchain, Eugene Fama: efficient market hypothesis, experimental economics, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, Financial Instability Hypothesis, full employment, global supply chain, global village, Henri Poincaré, hiring and firing, Howard Zinn, Hyman Minsky, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of writing, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, land reform, land value tax, Landlord’s Game, loss aversion, low skilled workers, M-Pesa, Mahatma Gandhi, market fundamentalism, Martin Wolf, means of production, megacity, mobile money, Mont Pelerin Society, Myron Scholes, neoliberal agenda, Network effects, Occupy movement, off grid, offshore financial centre, oil shale / tar sands, out of africa, Paul Samuelson, peer-to-peer, planetary scale, price mechanism, quantitative easing, randomized controlled trial, Richard Thaler, Ronald Reagan, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Simon Kuznets, smart cities, smart meter, South Sea Bubble, statistical model, Steve Ballmer, The Chicago School, The Great Moderation, the map is not the territory, the market place, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, Torches of Freedom, trickle-down economics, ultimatum game, universal basic income, Upton Sinclair, Vilfredo Pareto, wikimedia commons

In the 1920s John Maynard Keynes critiqued the use of comparative statics, pointing out that it is precisely what happens in between those snapshots of economic events that is of greatest interest. ‘Economists set themselves too easy, too useless a task,’ he wrote, ‘if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.’17 In the 1940s, Joseph Schumpeter drew on Marx’s insights into dynamism to describe how capitalism’s inherent process of ‘creative destruction’, through continual waves of innovation and decline, gave rise to business cycles.18 In the 1950s, Bill Phillips created his MONIAC precisely with the aim of replacing comparative statics with system dynamics, complete with the time lags and fluctuations that can be observed as water flows into and out of tanks. In the 1960s Joan Robinson lambasted equilibrium economic thinking, insisting that, ‘a model applicable to actual history has to be capable of getting out of equilibrium; indeed it must normally not be in it’.19 And in the 1970s, the father of neoliberalism, Friedrich Hayek, decried the economist’s ‘propensity to imitate as closely as possible the procedures of the brilliantly successful physical sciences – an attempt which in our field may lead to outright error’.20 So let’s finally heed their collective advice, push equilibrium thinking to one side, and start to think in systems instead.

Page numbers in italics denote illustrations A Aalborg, Denmark, 290 Abbott, Anthony ‘Tony’, 31 ABCD group, 148 Abramovitz, Moses, 262 absolute decoupling, 260–61 Acemoglu, Daron, 86 advertising, 58, 106–7, 112, 281 Agbodjinou, Sénamé, 231 agriculture, 5, 46, 72–3, 148, 155, 178, 181, 183 Alaska, 9 Alaska Permanent Fund, 194 Alperovitz, Gar, 177 alternative enterprise designs, 190–91 altruism, 100, 104 Amazon, 192, 196, 276 Amazon rainforest, 105–6, 253 American Economic Association, 3 American Enterprise Institute, 67 American Tobacco Corporation, 107 Andes, 54 animal spirits, 110 Anthropocene epoch, 48, 253 anthropocentrism, 115 Apertuso, 230 Apple, 85, 192 Archer Daniels Midland (ADM), 148 Arendt, Hannah, 115–16 Argentina, 55, 274 Aristotle, 32, 272 Arrow, Kenneth, 134 Articles of Association and Memoranda, 233 Arusha, Tanzania, 202 Asia Wage Floor Alliance, 177 Asian financial crisis (1997), 90 Asknature.org, 232 Athens, 57 austerity, 163 Australia, 31, 103, 177, 180, 211, 224–6, 255, 260 Austria, 263, 274 availability bias, 112 AXIOM, 230 Axtell, Robert, 150 Ayres, Robert, 263 B B Corp, 241 Babylon, 13 Baker, Josephine, 157 balancing feedback loops, 138–41, 155, 271 Ballmer, Steve, 231 Bangla Pesa, 185–6, 293 Bangladesh, 10, 226 Bank for International Settlements, 256 Bank of America, 149 Bank of England, 145, 147, 256 banking, see under finance Barnes, Peter, 201 Barroso, José Manuel, 41 Bartlett, Albert Allen ‘Al’, 247 basic income, 177, 194, 199–201 basic personal values, 107–9 Basle, Switzerland, 80 Bauwens, Michel, 197 Beckerman, Wilfred, 258 Beckham, David, 171 Beech-Nut Packing Company, 107 behavioural economics, 11, 111–14 behavioural psychology, 103, 128 Beinhocker, Eric, 158 Belgium, 236, 252 Bentham, Jeremy, 98 Benyus, Janine, 116, 218, 223–4, 227, 232, 237, 241 Berger, John, 12, 281 Berlin Wall, 141 Bermuda, 277 Bernanke, Ben, 146 Bernays, Edward, 107, 112, 281–3 Bhopal gas disaster (1984), 9 Bible, 19, 114, 151 Big Bang (1986), 87 billionaires, 171, 200, 289 biodiversity, 10, 46, 48–9, 52, 85, 115, 155, 208, 210, 242, 299 as common pool resource, 201 and land conversion, 49 and inequality, 172 and reforesting, 50 biomass, 73, 118, 210, 212, 221 biomimicry, 116, 218, 227, 229 bioplastic, 224, 293 Birmingham, West Midlands, 10 Black, Fischer, 100–101 Blair, Anthony ‘Tony’, 171 Blockchain, 187, 192 blood donation, 104, 118 Body Shop, The, 232–4 Bogotá, Colombia, 119 Bolivia, 54 Boston, Massachusetts, 3 Bowen, Alex, 261 Bowles, Sam, 104 Box, George, 22 Boyce, James, 209 Brasselberg, Jacob, 187 Brazil, 124, 226, 281, 290 bread riots, 89 Brisbane, Australia, 31 Brown, Gordon, 146 Brynjolfsson, Erik, 193, 194, 258 Buddhism, 54 buen vivir, 54 Bullitt Center, Seattle, 217 Bunge, 148 Burkina Faso, 89 Burmark, Lynell, 13 business, 36, 43, 68, 88–9 automation, 191–5, 237, 258, 278 boom and bust, 246 and circular economy, 212, 215–19, 220, 224, 227–30, 232–4, 292 and complementary currencies, 184–5, 292 and core economy, 80 and creative destruction, 142 and feedback loops, 148 and finance, 183, 184 and green growth, 261, 265, 269 and households, 63, 68 living metrics, 241 and market, 68, 88 micro-businesses, 9 and neoliberalism, 67, 87 ownership, 190–91 and political funding, 91–2, 171–2 and taxation, 23, 276–7 workers’ rights, 88, 91, 269 butterfly economy, 220–42 C C–ROADS (Climate Rapid Overview and Decision Support), 153 C40 network, 280 calculating man, 98 California, United States, 213, 224, 293 Cambodia, 254 Cameron, David, 41 Canada, 196, 255, 260, 281, 282 cancer, 124, 159, 196 Capital Institute, 236 carbon emissions, 49–50, 59, 75 and decoupling, 260, 266 and forests, 50, 52 and inequality, 58 reduction of, 184, 201, 213, 216–18, 223–7, 239–41, 260, 266 stock–flow dynamics, 152–4 taxation, 201, 213 Cargill, 148 Carney, Mark, 256 Caterpillar, 228 Catholic Church, 15, 19 Cato Institute, 67 Celts, 54 central banks, 6, 87, 145, 146, 147, 183, 184, 256 Chang, Ha-Joon, 82, 86, 90 Chaplin, Charlie, 157 Chiapas, Mexico, 121–2 Chicago Board Options Exchange (CBOE), 100–101 Chicago School, 34, 99 Chile, 7, 42 China, 1, 7, 48, 154, 289–90 automation, 193 billionaires, 200, 289 greenhouse gas emissions, 153 inequality, 164 Lake Erhai doughnut analysis, 56 open-source design, 196 poverty reduction, 151, 198 renewable energy, 239 tiered pricing, 213 Chinese Development Bank, 239 chrematistics, 32, 273 Christianity, 15, 19, 114, 151 cigarettes, 107, 124 circular economy, 220–42, 257 Circular Flow diagram, 19–20, 28, 62–7, 64, 70, 78, 87, 91, 92, 93, 262 Citigroup, 149 Citizen Reaction Study, 102 civil rights movement, 77 Cleveland, Ohio, 190 climate change, 1, 3, 5, 29, 41, 45–53, 63, 74, 75–6, 91, 141, 144, 201 circular economy, 239, 241–2 dynamics of, 152–5 and G20, 31 and GDP growth, 255, 256, 260, 280 and heuristics, 114 and human rights, 10 and values, 126 climate positive cities, 239 closed systems, 74 coffee, 221 cognitive bias, 112–14 Colander, David, 137 Colombia, 119 common-pool resources, 82–3, 181, 201–2 commons, 69, 82–4, 287 collaborative, 78, 83, 191, 195, 196, 264, 292 cultural, 83 digital, 82, 83, 192, 197, 281 and distribution, 164, 180, 181–2, 205, 267 Embedded Economy, 71, 73, 77–8, 82–4, 85, 92 knowledge, 197, 201–2, 204, 229, 231, 292 commons and money creation, see complementary currencies natural, 82, 83, 180, 181–2, 201, 265 and regeneration, 229, 242, 267, 292 and state, 85, 93, 197, 237 and systems, 160 tragedy of, 28, 62, 69, 82, 181 triumph of, 83 and values, 106, 108 Commons Trusts, 201 complementary currencies, 158, 182–8, 236, 292 complex systems, 28, 129–62 complexity science, 136–7 Consumer Reaction Study, 102 consumerism, 58, 102, 121, 280–84 cooking, 45, 80, 186 Coote, Anna, 278 Copenhagen, Denmark, 124 Copernicus, Nicolaus, 14–15 copyright, 195, 197, 204 core economy, 79–80 Corporate To Do List, 215–19 Costa Rica, 172 Council of Economic Advisers, US, 6, 37 Cox, Jo, 117 cradle to cradle, 224 creative destruction, 142 Cree, 282 Crompton, Tom, 125–6 cross-border flows, 89–90 crowdsourcing, 204 cuckoos, 32, 35, 36, 38, 40, 54, 60, 159, 244, 256, 271 currencies, 182–8, 236, 274, 292 D da Vinci, Leonardo, 13, 94–5 Dallas, Texas, 120 Daly, Herman, 74, 143, 271 Danish Nudging Network, 124 Darwin, Charles, 14 Debreu, Gerard, 134 debt, 37, 146–7, 172–3, 182–5, 247, 255, 269 decoupling, 193, 210, 258–62, 273 defeat device software, 216 deforestation, 49–50, 74, 208, 210 degenerative linear economy, 211–19, 222–3, 237 degrowth, 244 DeMartino, George, 161 democracy, 77, 171–2, 258 demurrage, 274 Denmark, 180, 275, 290 deregulation, 82, 87, 269 derivatives, 100–101, 149 Devas, Charles Stanton, 97 Dey, Suchitra, 178 Diamond, Jared, 154 diarrhoea, 5 differential calculus, 131, 132 digital revolution, 191–2, 264 diversify–select–amplify, 158 double spiral, 54 Doughnut model, 10–11, 11, 23–5, 44, 51 and aspiration, 58–9, 280–84 big picture, 28, 42, 61–93 distribution, 29, 52, 57, 58, 76, 93, 158, 163–205 ecological ceiling, 10, 11, 44, 45, 46, 49, 51, 218, 254, 295, 298 goal, 25–8, 31–60 and governance, 57, 59 growth agnosticism, 29–30, 243–85 human nature, 28–9, 94–128 and population, 57–8 regeneration, 29, 158, 206–42 social foundation, 10, 11, 44, 45, 49, 51, 58, 77, 174, 200, 254, 295–6 systems, 28, 129–62 and technology, 57, 59 Douglas, Margaret, 78–9 Dreyfus, Louis, 148 ‘Dumb and Dumber in Macroeconomics’ (Solow), 135 Durban, South Africa, 214 E Earning by Learning, 120 Earth-system science, 44–53, 115, 216, 288, 298 Easter Island, 154 Easterlin, Richard, 265–6 eBay, 105, 192 eco-literacy, 115 ecological ceiling, 10, 11, 44, 45, 46, 49, 51, 218, 254, 295, 298 Ecological Performance Standards, 241 Econ 101 course, 8, 77 Economics (Lewis), 114 Economics (Samuelson), 19–20, 63–7, 70, 74, 78, 86, 91, 92, 93, 262 Economy for the Common Good, 241 ecosystem services, 7, 116, 269 Ecuador, 54 education, 9, 43, 45, 50–52, 85, 169–70, 176, 200, 249, 279 economic, 8, 11, 18, 22, 24, 36, 287–93 environmental, 115, 239–40 girls’, 57, 124, 178, 198 online, 83, 197, 264, 290 pricing, 118–19 efficient market hypothesis, 28, 62, 68, 87 Egypt, 48, 89 Eisenstein, Charles, 116 electricity, 9, 45, 236, 240 and Bangla Pesa, 186 cars, 231 Ethereum, 187–8 and MONIAC, 75, 262 pricing, 118, 213 see also renewable energy Elizabeth II, Queen of the United Kingdom, 145 Ellen MacArthur Foundation, 220 Embedded Economy, 71–93, 263 business, 88–9 commons, 82–4 Earth, 72–6 economy, 77–8 finance, 86–8 household, 78–81 market, 81–2 power, 91–92 society, 76–7 state, 84–6 trade, 89–90 employment, 36, 37, 51, 142, 176 automation, 191–5, 237, 258, 278 labour ownership, 188–91 workers’ rights, 88, 90, 269 Empty World, 74 Engels, Friedrich, 88 environment and circular economy, 220–42, 257 conservation, 121–2 and degenerative linear economy, 211–19, 222–3 degradation, 5, 9, 10, 29, 44–53, 74, 154, 172, 196, 206–42 education on, 115, 239–40 externalities, 152 fair share, 216–17 and finance, 234–7 generosity, 218–19, 223–7 green growth, 41, 210, 243–85 nudging, 123–5 taxation and quotas, 213–14, 215 zero impact, 217–18, 238, 241 Environmental Dashboard, 240–41 environmental economics, 7, 11, 114–16 Environmental Kuznets Curve, 207–11, 241 environmental space, 54 Epstein, Joshua, 150 equilibrium theory, 134–62 Ethereum, 187–8 ethics, 160–62 Ethiopia, 9, 226, 254 Etsy, 105 Euclid, 13, 15 European Central Bank, 145, 275 European Commission, 41 European Union (EU), 92, 153, 210, 222, 255, 258 Evergreen Cooperatives, 190 Evergreen Direct Investing (EDI), 273 exogenous shocks, 141 exponential growth, 39, 246–85 externalities, 143, 152, 213 Exxon Valdez oil spill (1989), 9 F Facebook, 192 fair share, 216–17 Fama, Eugene, 68, 87 fascism, 234, 277 Federal Reserve, US, 87, 145, 146, 271, 282 feedback loops, 138–41, 143, 148, 155, 250, 271 feminist economics, 11, 78–81, 160 Ferguson, Thomas, 91–2 finance animal spirits, 110 bank runs, 139 Black–Scholes model, 100–101 boom and bust, 28–9, 110, 144–7 and Circular Flow, 63–4, 87 and complex systems, 134, 138, 139, 140, 141, 145–7 cross-border flows, 89 deregulation, 87 derivatives, 100–101, 149 and distribution, 169, 170, 173, 182–4, 198–9, 201 and efficient market hypothesis, 63, 68 and Embedded Economy, 71, 86–8 and financial-instability hypothesis, 87, 146 and GDP growth, 38 and media, 7–8 mobile banking, 199–200 and money creation, 87, 182–5 and regeneration, 227, 229, 234–7 in service to life, 159, 234–7 stakeholder finance, 190 and sustainability, 216, 235–6, 239 financial crisis (2008), 1–4, 5, 40, 63, 86, 141, 144, 278, 290 and efficient market hypothesis, 87 and equilibrium theory, 134, 145 and financial-instability hypothesis, 87 and inequality, 90, 170, 172, 175 and money creation, 182 and worker’s rights, 278 financial flows, 89 Financial Times, 183, 266, 289 financial-instability hypothesis, 87, 146 First Green Bank, 236 First World War (1914–18), 166, 170 Fisher, Irving, 183 fluid values, 102, 106–9 food, 3, 43, 45, 50, 54, 58, 59, 89, 198 food banks, 165 food price crisis (2007–8), 89, 90, 180 Ford, 277–8 foreign direct investment, 89 forest conservation, 121–2 fossil fuels, 59, 73, 75, 92, 212, 260, 263 Foundations of Economic Analysis (Samuelson), 17–18 Foxconn, 193 framing, 22–3 France, 43, 165, 196, 238, 254, 256, 281, 290 Frank, Robert, 100 free market, 33, 37, 67, 68, 70, 81–2, 86, 90 free open-source hardware (FOSH), 196–7 free open-source software (FOSS), 196 free trade, 70, 90 Freeman, Ralph, 18–19 freshwater cycle, 48–9 Freud, Sigmund, 107, 281 Friedman, Benjamin, 258 Friedman, Milton, 34, 62, 66–9, 84–5, 88, 99, 183, 232 Friends of the Earth, 54 Full World, 75 Fuller, Buckminster, 4 Fullerton, John, 234–6, 273 G G20, 31, 56, 276, 279–80 G77, 55 Gal, Orit, 141 Gandhi, Mohandas, 42, 293 Gangnam Style, 145 Gardens of Democracy, The (Liu & Hanauer), 158 gender equality, 45, 51–2, 57, 78–9, 85, 88, 118–19, 124, 171, 198 generosity, 218–19, 223–9 geometry, 13, 15 George, Henry, 149, 179 Georgescu-Roegen, Nicholas, 252 geothermal energy, 221 Gerhardt, Sue, 283 Germany, 2, 41, 100, 118, 165, 189, 211, 213, 254, 256, 260, 274 Gessel, Silvio, 274 Ghent, Belgium, 236 Gift Relationship, The (Titmuss), 118–19 Gigerenzer, Gerd, 112–14 Gintis, Herb, 104 GiveDirectly, 200 Glass–Steagall Act (1933), 87 Glennon, Roger, 214 Global Alliance for Tax Justice, 277 global material footprints, 210–11 Global Village Construction Set, 196 globalisation, 89 Goerner, Sally, 175–6 Goffmann, Erving, 22 Going for Growth, 255 golden rule, 91 Goldman Sachs, 149, 170 Gómez-Baggethun, Erik, 122 Goodall, Chris, 211 Goodwin, Neva, 79 Goody, Jade, 124 Google, 192 Gore, Albert ‘Al’, 172 Gorgons, 244, 256, 257, 266 graffiti, 15, 25, 287 Great Acceleration, 46, 253–4 Great Depression (1929–39), 37, 70, 170, 173, 183, 275, 277, 278 Great Moderation, 146 Greece, Ancient, 4, 13, 32, 48, 54, 56–7, 160, 244 green growth, 41, 210, 243–85 Greenham, Tony, 185 greenhouse gas emissions, 31, 46, 50, 75–6, 141, 152–4 and decoupling, 260, 266 and Environmental Kuznets Curve, 208, 210 and forests, 50, 52 and G20, 31 and inequality, 58 reduction of, 184, 201–2, 213, 216–18, 223–7, 239–41, 256, 259–60, 266, 298 stock–flow dynamics, 152–4 and taxation, 201, 213 Greenland, 141, 154 Greenpeace, 9 Greenspan, Alan, 87 Greenwich, London, 290 Grenoble, France, 281 Griffiths, Brian, 170 gross domestic product (GDP), 25, 31–2, 35–43, 57, 60, 84, 164 as cuckoo, 32, 35, 36, 38, 40, 54, 60, 159, 244, 256, 271 and Environmental Kuznets Curve, 207–11 and exponential growth, 39, 53, 246–85 and growth agnosticism, 29–30, 240, 243–85 and inequality, 173 and Kuznets Curve, 167, 173, 188–9 gross national product (GNP), 36–40 Gross World Product, 248 Grossman, Gene, 207–8, 210 ‘grow now, clean up later’, 207 Guatemala, 196 H Haifa, Israel, 120 Haldane, Andrew, 146 Han Dynasty, 154 Hanauer, Nick, 158 Hansen, Pelle, 124 Happy Planet Index, 280 Hardin, Garrett, 69, 83, 181 Harvard University, 2, 271, 290 von Hayek, Friedrich, 7–8, 62, 66, 67, 143, 156, 158 healthcare, 43, 50, 57, 85, 123, 125, 170, 176, 200, 269, 279 Heilbroner, Robert, 53 Henry VIII, King of England and Ireland, 180 Hepburn, Cameron, 261 Herbert Simon, 111 heuristics, 113–14, 118, 123 high-income countries growth, 30, 244–5, 254–72, 282 inequality, 165, 168, 169, 171 labour, 177, 188–9, 278 overseas development assistance (ODA), 198–9 resource intensive lifestyles, 46, 210–11 trade, 90 Hippocrates, 160 History of Economic Analysis (Schumpeter), 21 HIV/AIDS, 123 Holocene epoch, 46–8, 75, 115, 253 Homo economicus, 94–103, 109, 127–8 Homo sapiens, 38, 104, 130 Hong Kong, 180 household, 78 housing, 45, 59, 176, 182–3, 269 Howe, Geoffrey, 67 Hudson, Michael, 183 Human Development Index, 9, 279 human nature, 28 human rights, 10, 25, 45, 49, 50, 95, 214, 233 humanistic economics, 42 hydropower, 118, 260, 263 I Illinois, United States, 179–80 Imago Mundi, 13 immigration, 82, 199, 236, 266 In Defense of Economic Growth (Beckerman), 258 Inclusive Wealth Index, 280 income, 51, 79–80, 82, 88, 176–8, 188–91, 194, 199–201 India, 2, 9, 10, 42, 124, 164, 178, 196, 206–7, 242, 290 Indonesia, 90, 105–6, 164, 168, 200 Indus Valley civilisation, 48 inequality, 1, 5, 25, 41, 63, 81, 88, 91, 148–52, 209 and consumerism, 111 and democracy, 171 and digital revolution, 191–5 and distribution, 163–205 and environmental degradation, 172 and GDP growth, 173 and greenhouse gas emissions, 58 and intellectual property, 195–8 and Kuznets Curve, 29, 166–70, 173–4 and labour ownership, 188–91 and land ownership, 178–82 and money creation, 182–8 and social welfare, 171 Success to the Successful, 148, 149, 151, 166 inflation, 36, 248, 256, 275 insect pollination services, 7 Institute of Economic Affairs, 67 institutional economics, 11 intellectual property rights, 195–8, 204 interest, 36, 177, 182, 184, 275–6 Intergovernmental Panel on Climate Change, 25 International Monetary Fund (IMF), 170, 172, 173, 183, 255, 258, 271 Internet, 83–4, 89, 105, 192, 202, 264 Ireland, 277 Iroquois Onondaga Nation, 116 Israel, 100, 103, 120 Italy, 165, 196, 254 J Jackson, Tim, 58 Jakubowski, Marcin, 196 Jalisco, Mexico, 217 Japan, 168, 180, 211, 222, 254, 256, 263, 275 Jevons, William Stanley, 16, 97–8, 131, 132, 137, 142 John Lewis Partnership, 190 Johnson, Lyndon Baines, 37 Johnson, Mark, 38 Johnson, Todd, 191 JPMorgan Chase, 149, 234 K Kahneman, Daniel, 111 Kamkwamba, William, 202, 204 Kasser, Tim, 125–6 Keen, Steve, 146, 147 Kelly, Marjorie, 190–91, 233 Kennedy, John Fitzgerald, 37, 250 Kennedy, Paul, 279 Kenya, 118, 123, 180, 185–6, 199–200, 226, 292 Keynes, John Maynard, 7–8, 22, 66, 69, 134, 184, 251, 277–8, 284, 288 Kick It Over movement, 3, 289 Kingston, London, 290 Knight, Frank, 66, 99 knowledge commons, 202–4, 229, 292 Kokstad, South Africa, 56 Kondratieff waves, 246 Korzybski, Alfred, 22 Krueger, Alan, 207–8, 210 Kuhn, Thomas, 22 Kumhof, Michael, 172 Kuwait, 255 Kuznets, Simon, 29, 36, 39–40, 166–70, 173, 174, 175, 204, 207 KwaZulu Natal, South Africa, 56 L labour ownership, 188–91 Lake Erhai, Yunnan, 56 Lakoff, George, 23, 38, 276 Lamelara, Indonesia, 105–6 land conversion, 49, 52, 299 land ownership, 178–82 land-value tax, 73, 149, 180 Landesa, 178 Landlord’s Game, The, 149 law of demand, 16 laws of motion, 13, 16–17, 34, 129, 131 Lehman Brothers, 141 Leopold, Aldo, 115 Lesotho, 118, 199 leverage points, 159 Lewis, Fay, 178 Lewis, Justin, 102 Lewis, William Arthur, 114, 167 Lietaer, Bernard, 175, 236 Limits to Growth, 40, 154, 258 Linux, 231 Liu, Eric, 158 living metrics, 240–42 living purpose, 233–4 Lomé, Togo, 231 London School of Economics (LSE), 2, 34, 65, 290 London Underground, 12 loss aversion, 112 low-income countries, 90, 164–5, 168, 173, 180, 199, 201, 209, 226, 254, 259 Lucas, Robert, 171 Lula da Silva, Luiz Inácio, 124 Luxembourg, 277 Lyle, John Tillman, 214 Lyons, Oren, 116 M M–PESA, 199–200 MacDonald, Tim, 273 Machiguenga, 105–6 MacKenzie, Donald, 101 macroeconomics, 36, 62–6, 76, 80, 134–5, 145, 147, 150, 244, 280 Magie, Elizabeth, 149, 153 Malala effect, 124 malaria, 5 Malawi, 118, 202, 204 Malaysia, 168 Mali, Taylor, 243 Malthus, Thomas, 252 Mamsera Rural Cooperative, 190 Manhattan, New York, 9, 41 Mani, Muthukumara, 206 Manitoba, 282 Mankiw, Gregory, 2, 34 Mannheim, Karl, 22 Maoris, 54 market, 81–2 and business, 88 circular flow, 64 and commons, 83, 93, 181, 200–201 efficiency of, 28, 62, 68, 87, 148, 181 and equilibrium theory, 131–5, 137, 143–7, 155, 156 free market, 33, 37, 67–70, 90, 208 and households, 63, 69, 78, 79 and maxi-max rule, 161 and pricing, 117–23, 131, 160 and rational economic man, 96, 100–101, 103, 104 and reciprocity, 105, 106 reflexivity of, 144–7 and society, 69–70 and state, 84–6, 200, 281 Marshall, Alfred, 17, 98, 133, 165, 253, 282 Marx, Karl, 88, 142, 165, 272 Massachusetts Institute of Technology (MIT), 17–20, 152–5 massive open online courses (MOOCs), 290 Matthew Effect, 151 Max-Neef, Manfred, 42 maxi-max rule, 161 maximum wage, 177 Maya civilisation, 48, 154 Mazzucato, Mariana, 85, 195, 238 McAfee, Andrew, 194, 258 McDonough, William, 217 Meadows, Donella, 40, 141, 159, 271, 292 Medusa, 244, 257, 266 Merkel, Angela, 41 Messerli, Elspeth, 187 Metaphors We Live By (Lakoff & Johnson), 38 Mexico, 121–2, 217 Michaels, Flora S., 6 micro-businesses, 9, 173, 178 microeconomics, 132–4 microgrids, 187–8 Micronesia, 153 Microsoft, 231 middle class, 6, 46, 58 middle-income countries, 90, 164, 168, 173, 180, 226, 254 migration, 82, 89–90, 166, 195, 199, 236, 266, 286 Milanovic, Branko, 171 Mill, John Stuart, 33–4, 73, 97, 250, 251, 283, 284, 288 Millo, Yuval, 101 minimum wage, 82, 88, 176 Minsky, Hyman, 87, 146 Mises, Ludwig von, 66 mission zero, 217 mobile banking, 199–200 mobile phones, 222 Model T revolution, 277–8 Moldova, 199 Mombasa, Kenya, 185–6 Mona Lisa (da Vinci), 94 money creation, 87, 164, 177, 182–8, 205 MONIAC (Monetary National Income Analogue Computer), 64–5, 75, 142, 262 Monoculture (Michaels), 6 Monopoly, 149 Mont Pelerin Society, 67, 93 Moral Consequences of Economic Growth, The (Friedman), 258 moral vacancy, 41 Morgan, Mary, 99 Morogoro, Tanzania, 121 Moyo, Dambisa, 258 Muirhead, Sam, 230, 231 MultiCapital Scorecard, 241 Murphy, David, 264 Murphy, Richard, 185 musical tastes, 110 Myriad Genetics, 196 N national basic income, 177 Native Americans, 115, 116, 282 natural capital, 7, 116, 269 Natural Economic Order, The (Gessel), 274 Nedbank, 216 negative externalities, 213 negative interest rates, 275–6 neoclassical economics, 134, 135 neoliberalism, 7, 62–3, 67–70, 81, 83, 84, 88, 93, 143, 170, 176 Nepal, 181, 199 Nestlé, 217 Netherlands, 211, 235, 224, 226, 238, 277 networks, 110–11, 117, 118, 123, 124–6, 174–6 neuroscience, 12–13 New Deal, 37 New Economics Foundation, 278, 283 New Year’s Day, 124 New York, United States, 9, 41, 55 Newlight Technologies, 224, 226, 293 Newton, Isaac, 13, 15–17, 32–3, 95, 97, 129, 131, 135–7, 142, 145, 162 Nicaragua, 196 Nigeria, 164 nitrogen, 49, 52, 212–13, 216, 218, 221, 226, 298 ‘no pain, no gain’, 163, 167, 173, 204, 209 Nobel Prize, 6–7, 43, 83, 101, 167 Norway, 281 nudging, 112, 113, 114, 123–6 O Obama, Barack, 41, 92 Oberlin, Ohio, 239, 240–41 Occupy movement, 40, 91 ocean acidification, 45, 46, 52, 155, 242, 298 Ohio, United States, 190, 239 Okun, Arthur, 37 onwards and upwards, 53 Open Building Institute, 196 Open Source Circular Economy (OSCE), 229–32 open systems, 74 open-source design, 158, 196–8, 265 open-source licensing, 204 Organisation for Economic Co-operation and Development (OECD), 38, 210, 255–6, 258 Origin of Species, The (Darwin), 14 Ormerod, Paul, 110, 111 Orr, David, 239 Ostrom, Elinor, 83, 84, 158, 160, 181–2 Ostry, Jonathan, 173 OSVehicle, 231 overseas development assistance (ODA), 198–200 ownership of wealth, 177–82 Oxfam, 9, 44 Oxford University, 1, 36 ozone layer, 9, 50, 115 P Pachamama, 54, 55 Pakistan, 124 Pareto, Vilfredo, 165–6, 175 Paris, France, 290 Park 20|20, Netherlands, 224, 226 Parker Brothers, 149 Patagonia, 56 patents, 195–6, 197, 204 patient capital, 235 Paypal, 192 Pearce, Joshua, 197, 203–4 peer-to-peer networks, 187, 192, 198, 203, 292 People’s QE, 184–5 Perseus, 244 Persia, 13 Peru, 2, 105–6 Phillips, Adam, 283 Phillips, William ‘Bill’, 64–6, 75, 142, 262 phosphorus, 49, 52, 212–13, 218, 298 Physiocrats, 73 Pickett, Kate, 171 pictures, 12–25 Piketty, Thomas, 169 Playfair, William, 16 Poincaré, Henri, 109, 127–8 Polanyi, Karl, 82, 272 political economy, 33–4, 42 political funding, 91–2, 171–2 political voice, 43, 45, 51–2, 77, 117 pollution, 29, 45, 52, 85, 143, 155, 206–17, 226, 238, 242, 254, 298 population, 5, 46, 57, 155, 199, 250, 252, 254 Portugal, 211 post-growth society, 250 poverty, 5, 9, 37, 41, 50, 88, 118, 148, 151 emotional, 283 and inequality, 164–5, 168–9, 178 and overseas development assistance (ODA), 198–200 and taxation, 277 power, 91–92 pre-analytic vision, 21–2 prescription medicines, 123 price-takers, 132 prices, 81, 118–23, 131, 160 Principles of Economics (Mankiw), 34 Principles of Economics (Marshall), 17, 98 Principles of Political Economy (Mill), 288 ProComposto, 226 Propaganda (Bernays), 107 public relations, 107, 281 public spending v. investment, 276 public–private patents, 195 Putnam, Robert, 76–7 Q quantitative easing (QE), 184–5 Quebec, 281 Quesnay, François, 16, 73 R Rabot, Ghent, 236 Rancière, Romain, 172 rating and review systems, 105 rational economic man, 94–103, 109, 111, 112, 126, 282 Reagan, Ronald, 67 reciprocity, 103–6, 117, 118, 123 reflexivity of markets, 144 reinforcing feedback loops, 138–41, 148, 250, 271 relative decoupling, 259 renewable energy biomass energy, 118, 221 and circular economy, 221, 224, 226, 235, 238–9, 274 and commons, 83, 85, 185, 187–8, 192, 203, 264 geothermal energy, 221 and green growth, 257, 260, 263, 264, 267 hydropower, 118, 260, 263 pricing, 118 solar energy, see solar energy wave energy, 221 wind energy, 75, 118, 196, 202–3, 221, 233, 239, 260, 263 rentier sector, 180, 183, 184 reregulation, 82, 87, 269 resource flows, 175 resource-intensive lifestyles, 46 Rethinking Economics, 289 Reynebeau, Guy, 237 Ricardo, David, 67, 68, 73, 89, 250 Richardson, Katherine, 53 Rifkin, Jeremy, 83, 264–5 Rise and Fall of the Great Powers, The (Kennedy), 279 risk, 112, 113–14 Robbins, Lionel, 34 Robinson, James, 86 Robinson, Joan, 142 robots, 191–5, 237, 258, 278 Rockefeller Foundation, 135 Rockford, Illinois, 179–80 Rockström, Johan, 48, 55 Roddick, Anita, 232–4 Rogoff, Kenneth, 271, 280 Roman Catholic Church, 15, 19 Rombo, Tanzania, 190 Rome, Ancient, 13, 48, 154 Romney, Mitt, 92 Roosevelt, Franklin Delano, 37 rooted membership, 190 Rostow, Walt, 248–50, 254, 257, 267–70, 284 Ruddick, Will, 185 rule of thumb, 113–14 Ruskin, John, 42, 223 Russia, 200 rust belt, 90, 239 S S curve, 251–6 Sainsbury’s, 56 Samuelson, Paul, 17–21, 24–5, 38, 62–7, 70, 74, 84, 91, 92, 93, 262, 290–91 Sandel, Michael, 41, 120–21 Sanergy, 226 sanitation, 5, 51, 59 Santa Fe, California, 213 Santinagar, West Bengal, 178 São Paolo, Brazil, 281 Sarkozy, Nicolas, 43 Saumweder, Philipp, 226 Scharmer, Otto, 115 Scholes, Myron, 100–101 Schumacher, Ernst Friedrich, 42, 142 Schumpeter, Joseph, 21 Schwartz, Shalom, 107–9 Schwarzenegger, Arnold, 163, 167, 204 ‘Science and Complexity’ (Weaver), 136 Scotland, 57 Seaman, David, 187 Seattle, Washington, 217 second machine age, 258 Second World War (1939–45), 18, 37, 70, 170 secular stagnation, 256 self-interest, 28, 68, 96–7, 99–100, 102–3 Selfish Society, The (Gerhardt), 283 Sen, Amartya, 43 Shakespeare, William, 61–3, 67, 93 shale gas, 264, 269 Shang Dynasty, 48 shareholders, 82, 88, 189, 191, 227, 234, 273, 292 sharing economy, 264 Sheraton Hotel, Boston, 3 Siegen, Germany, 290 Silicon Valley, 231 Simon, Julian, 70 Sinclair, Upton, 255 Sismondi, Jean, 42 slavery, 33, 77, 161 Slovenia, 177 Small Is Beautiful (Schumacher), 42 smart phones, 85 Smith, Adam, 33, 57, 67, 68, 73, 78–9, 81, 96–7, 103–4, 128, 133, 160, 181, 250 social capital, 76–7, 122, 125, 172 social contract, 120, 125 social foundation, 10, 11, 44, 45, 49, 51, 58, 77, 174, 200, 254, 295–6 social media, 83, 281 Social Progress Index, 280 social pyramid, 166 society, 76–7 solar energy, 59, 75, 111, 118, 187–8, 190 circular economy, 221, 222, 223, 224, 226–7, 239 commons, 203 zero-energy buildings, 217 zero-marginal-cost revolution, 84 Solow, Robert, 135, 150, 262–3 Soros, George, 144 South Africa, 56, 177, 214, 216 South Korea, 90, 168 South Sea Bubble (1720), 145 Soviet Union (1922–91), 37, 67, 161, 279 Spain, 211, 238, 256 Spirit Level, The (Wilkinson & Pickett), 171 Sraffa, Piero, 148 St Gallen, Switzerland, 186 Stages of Economic Growth, The (Rostow), 248–50, 254 stakeholder finance, 190 Standish, Russell, 147 state, 28, 33, 69–70, 78, 82, 160, 176, 180, 182–4, 188 and commons, 85, 93, 197, 237 and market, 84–6, 200, 281 partner state, 197, 237–9 and robots, 195 stationary state, 250 Steffen, Will, 46, 48 Sterman, John, 66, 143, 152–4 Steuart, James, 33 Stiglitz, Joseph, 43, 111, 196 stocks and flows, 138–41, 143, 144, 152 sub-prime mortgages, 141 Success to the Successful, 148, 149, 151, 166 Sugarscape, 150–51 Summers, Larry, 256 Sumner, Andy, 165 Sundrop Farms, 224–6 Sunstein, Cass, 112 supply and demand, 28, 132–6, 143, 253 supply chains, 10 Sweden, 6, 255, 275, 281 swishing, 264 Switzerland, 42, 66, 80, 131, 186–7, 275 T Tableau économique (Quesnay), 16 tabula rasa, 20, 25, 63, 291 takarangi, 54 Tanzania, 121, 190, 202 tar sands, 264, 269 taxation, 78, 111, 165, 170, 176, 177, 237–8, 276–9 annual wealth tax, 200 environment, 213–14, 215 global carbon tax, 201 global financial transactions tax, 201, 235 land-value tax, 73, 149, 180 non-renewable resources, 193, 237–8, 278–9 People’s QE, 185 tax relief v. tax justice, 23, 276–7 TED (Technology, Entertainment, Design), 202, 258 Tempest, The (Shakespeare), 61, 63, 93 Texas, United States, 120 Thailand, 90, 200 Thaler, Richard, 112 Thatcher, Margaret, 67, 69, 76 Theory of Moral Sentiments (Smith), 96 Thompson, Edward Palmer, 180 3D printing, 83–4, 192, 198, 231, 264 thriving-in-balance, 54–7, 62 tiered pricing, 213–14 Tigray, Ethiopia, 226 time banking, 186 Titmuss, Richard, 118–19 Toffler, Alvin, 12, 80 Togo, 231, 292 Torekes, 236–7 Torras, Mariano, 209 Torvalds, Linus, 231 trade, 62, 68–9, 70, 89–90 trade unions, 82, 176, 189 trademarks, 195, 204 Transatlantic Trade and Investment Partnership (TTIP), 92 transport, 59 trickle-down economics, 111, 170 Triodos, 235 Turkey, 200 Tversky, Amos, 111 Twain, Mark, 178–9 U Uganda, 118, 125 Ulanowicz, Robert, 175 Ultimatum Game, 105, 117 unemployment, 36, 37, 276, 277–9 United Kingdom Big Bang (1986), 87 blood donation, 118 carbon dioxide emissions, 260 free trade, 90 global material footprints, 211 money creation, 182 MONIAC (Monetary National Income Analogue Computer), 64–5, 75, 142, 262 New Economics Foundation, 278, 283 poverty, 165, 166 prescription medicines, 123 wages, 188 United Nations, 55, 198, 204, 255, 258, 279 G77 bloc, 55 Human Development Index, 9, 279 Sustainable Development Goals, 24, 45 United States American Economic Association meeting (2015), 3 blood donation, 118 carbon dioxide emissions, 260 Congress, 36 Council of Economic Advisers, 6, 37 Earning by Learning, 120 Econ 101 course, 8, 77 Exxon Valdez oil spill (1989), 9 Federal Reserve, 87, 145, 146, 271, 282 free trade, 90 Glass–Steagall Act (1933), 87 greenhouse gas emissions, 153 global material footprint, 211 gross national product (GNP), 36–40 inequality, 170, 171 land-value tax, 73, 149, 180 political funding, 91–2, 171 poverty, 165, 166 productivity and employment, 193 rust belt, 90, 239 Transatlantic Trade and Investment Partnership (TTIP), 92 wages, 188 universal basic income, 200 University of Berkeley, 116 University of Denver, 160 urbanisation, 58–9 utility, 35, 98, 133 V values, 6, 23, 34, 35, 42, 117, 118, 121, 123–6 altruism, 100, 104 anthropocentric, 115 extrinsic, 115 fluid, 28, 102, 106–9 and networks, 110–11, 117, 118, 123, 124–6 and nudging, 112, 113, 114, 123–6 and pricing, 81, 120–23 Veblen, Thorstein, 82, 109, 111, 142 Venice, 195 verbal framing, 23 Verhulst, Pierre, 252 Victor, Peter, 270 Viner, Jacob, 34 virtuous cycles, 138, 148 visual framing, 23 Vitruvian Man, 13–14 Volkswagen, 215–16 W Wacharia, John, 186 Wall Street, 149, 234, 273 Wallich, Henry, 282 Walras, Léon, 131, 132, 133–4, 137 Ward, Barbara, 53 Warr, Benjamin, 263 water, 5, 9, 45, 46, 51, 54, 59, 79, 213–14 wave energy, 221 Ways of Seeing (Berger), 12, 281 Wealth of Nations, The (Smith), 74, 78, 96, 104 wealth ownership, 177–82 Weaver, Warren, 135–6 weightless economy, 261–2 WEIRD (Western, educated, industrialised, rich, democratic), 103–5, 110, 112, 115, 117, 282 West Bengal, India, 124, 178 West, Darrell, 171–2 wetlands, 7 whale hunting, 106 Wiedmann, Tommy, 210 Wikipedia, 82, 223 Wilkinson, Richard, 171 win–win trade, 62, 68, 89 wind energy, 75, 118, 196, 202–3, 221, 233, 239, 260, 263 Wizard of Oz, The, 241 Woelab, 231, 293 Wolf, Martin, 183, 266 women’s rights, 33, 57, 107, 160, 201 and core economy, 69, 79–81 education, 57, 124, 178, 198 and land ownership, 178 see also gender equality workers’ rights, 88, 91, 269 World 3 model, 154–5 World Bank, 6, 41, 119, 164, 168, 171, 206, 255, 258 World No Tobacco Day, 124 World Trade Organization, 6, 89 worldview, 22, 54, 115 X xenophobia, 266, 277, 286 Xenophon, 4, 32, 56–7, 160 Y Yandle, Bruce, 208 Yang, Yuan, 1–3, 289–90 yin yang, 54 Yousafzai, Malala, 124 YouTube, 192 Yunnan, China, 56 Z Zambia, 10 Zanzibar, 9 Zara, 276 Zeitvorsoge, 186–7 zero environmental impact, 217–18, 238, 241 zero-hour contracts, 88 zero-humans-required production, 192 zero-interest loans, 183 zero-marginal-cost revolution, 84, 191, 264 zero-waste manufacturing, 227 Zinn, Howard, 77 PICTURE ACKNOWLEDGEMENTS Illustrations are reproduced by kind permission of: archive.org

Page numbers in italics denote illustrations A Aalborg, Denmark, 290 Abbott, Anthony ‘Tony’, 31 ABCD group, 148 Abramovitz, Moses, 262 absolute decoupling, 260–61 Acemoglu, Daron, 86 advertising, 58, 106–7, 112, 281 Agbodjinou, Sénamé, 231 agriculture, 5, 46, 72–3, 148, 155, 178, 181, 183 Alaska, 9 Alaska Permanent Fund, 194 Alperovitz, Gar, 177 alternative enterprise designs, 190–91 altruism, 100, 104 Amazon, 192, 196, 276 Amazon rainforest, 105–6, 253 American Economic Association, 3 American Enterprise Institute, 67 American Tobacco Corporation, 107 Andes, 54 animal spirits, 110 Anthropocene epoch, 48, 253 anthropocentrism, 115 Apertuso, 230 Apple, 85, 192 Archer Daniels Midland (ADM), 148 Arendt, Hannah, 115–16 Argentina, 55, 274 Aristotle, 32, 272 Arrow, Kenneth, 134 Articles of Association and Memoranda, 233 Arusha, Tanzania, 202 Asia Wage Floor Alliance, 177 Asian financial crisis (1997), 90 Asknature.org, 232 Athens, 57 austerity, 163 Australia, 31, 103, 177, 180, 211, 224–6, 255, 260 Austria, 263, 274 availability bias, 112 AXIOM, 230 Axtell, Robert, 150 Ayres, Robert, 263 B B Corp, 241 Babylon, 13 Baker, Josephine, 157 balancing feedback loops, 138–41, 155, 271 Ballmer, Steve, 231 Bangla Pesa, 185–6, 293 Bangladesh, 10, 226 Bank for International Settlements, 256 Bank of America, 149 Bank of England, 145, 147, 256 banking, see under finance Barnes, Peter, 201 Barroso, José Manuel, 41 Bartlett, Albert Allen ‘Al’, 247 basic income, 177, 194, 199–201 basic personal values, 107–9 Basle, Switzerland, 80 Bauwens, Michel, 197 Beckerman, Wilfred, 258 Beckham, David, 171 Beech-Nut Packing Company, 107 behavioural economics, 11, 111–14 behavioural psychology, 103, 128 Beinhocker, Eric, 158 Belgium, 236, 252 Bentham, Jeremy, 98 Benyus, Janine, 116, 218, 223–4, 227, 232, 237, 241 Berger, John, 12, 281 Berlin Wall, 141 Bermuda, 277 Bernanke, Ben, 146 Bernays, Edward, 107, 112, 281–3 Bhopal gas disaster (1984), 9 Bible, 19, 114, 151 Big Bang (1986), 87 billionaires, 171, 200, 289 biodiversity, 10, 46, 48–9, 52, 85, 115, 155, 208, 210, 242, 299 as common pool resource, 201 and land conversion, 49 and inequality, 172 and reforesting, 50 biomass, 73, 118, 210, 212, 221 biomimicry, 116, 218, 227, 229 bioplastic, 224, 293 Birmingham, West Midlands, 10 Black, Fischer, 100–101 Blair, Anthony ‘Tony’, 171 Blockchain, 187, 192 blood donation, 104, 118 Body Shop, The, 232–4 Bogotá, Colombia, 119 Bolivia, 54 Boston, Massachusetts, 3 Bowen, Alex, 261 Bowles, Sam, 104 Box, George, 22 Boyce, James, 209 Brasselberg, Jacob, 187 Brazil, 124, 226, 281, 290 bread riots, 89 Brisbane, Australia, 31 Brown, Gordon, 146 Brynjolfsson, Erik, 193, 194, 258 Buddhism, 54 buen vivir, 54 Bullitt Center, Seattle, 217 Bunge, 148 Burkina Faso, 89 Burmark, Lynell, 13 business, 36, 43, 68, 88–9 automation, 191–5, 237, 258, 278 boom and bust, 246 and circular economy, 212, 215–19, 220, 224, 227–30, 232–4, 292 and complementary currencies, 184–5, 292 and core economy, 80 and creative destruction, 142 and feedback loops, 148 and finance, 183, 184 and green growth, 261, 265, 269 and households, 63, 68 living metrics, 241 and market, 68, 88 micro-businesses, 9 and neoliberalism, 67, 87 ownership, 190–91 and political funding, 91–2, 171–2 and taxation, 23, 276–7 workers’ rights, 88, 91, 269 butterfly economy, 220–42 C C–ROADS (Climate Rapid Overview and Decision Support), 153 C40 network, 280 calculating man, 98 California, United States, 213, 224, 293 Cambodia, 254 Cameron, David, 41 Canada, 196, 255, 260, 281, 282 cancer, 124, 159, 196 Capital Institute, 236 carbon emissions, 49–50, 59, 75 and decoupling, 260, 266 and forests, 50, 52 and inequality, 58 reduction of, 184, 201, 213, 216–18, 223–7, 239–41, 260, 266 stock–flow dynamics, 152–4 taxation, 201, 213 Cargill, 148 Carney, Mark, 256 Caterpillar, 228 Catholic Church, 15, 19 Cato Institute, 67 Celts, 54 central banks, 6, 87, 145, 146, 147, 183, 184, 256 Chang, Ha-Joon, 82, 86, 90 Chaplin, Charlie, 157 Chiapas, Mexico, 121–2 Chicago Board Options Exchange (CBOE), 100–101 Chicago School, 34, 99 Chile, 7, 42 China, 1, 7, 48, 154, 289–90 automation, 193 billionaires, 200, 289 greenhouse gas emissions, 153 inequality, 164 Lake Erhai doughnut analysis, 56 open-source design, 196 poverty reduction, 151, 198 renewable energy, 239 tiered pricing, 213 Chinese Development Bank, 239 chrematistics, 32, 273 Christianity, 15, 19, 114, 151 cigarettes, 107, 124 circular economy, 220–42, 257 Circular Flow diagram, 19–20, 28, 62–7, 64, 70, 78, 87, 91, 92, 93, 262 Citigroup, 149 Citizen Reaction Study, 102 civil rights movement, 77 Cleveland, Ohio, 190 climate change, 1, 3, 5, 29, 41, 45–53, 63, 74, 75–6, 91, 141, 144, 201 circular economy, 239, 241–2 dynamics of, 152–5 and G20, 31 and GDP growth, 255, 256, 260, 280 and heuristics, 114 and human rights, 10 and values, 126 climate positive cities, 239 closed systems, 74 coffee, 221 cognitive bias, 112–14 Colander, David, 137 Colombia, 119 common-pool resources, 82–3, 181, 201–2 commons, 69, 82–4, 287 collaborative, 78, 83, 191, 195, 196, 264, 292 cultural, 83 digital, 82, 83, 192, 197, 281 and distribution, 164, 180, 181–2, 205, 267 Embedded Economy, 71, 73, 77–8, 82–4, 85, 92 knowledge, 197, 201–2, 204, 229, 231, 292 commons and money creation, see complementary currencies natural, 82, 83, 180, 181–2, 201, 265 and regeneration, 229, 242, 267, 292 and state, 85, 93, 197, 237 and systems, 160 tragedy of, 28, 62, 69, 82, 181 triumph of, 83 and values, 106, 108 Commons Trusts, 201 complementary currencies, 158, 182–8, 236, 292 complex systems, 28, 129–62 complexity science, 136–7 Consumer Reaction Study, 102 consumerism, 58, 102, 121, 280–84 cooking, 45, 80, 186 Coote, Anna, 278 Copenhagen, Denmark, 124 Copernicus, Nicolaus, 14–15 copyright, 195, 197, 204 core economy, 79–80 Corporate To Do List, 215–19 Costa Rica, 172 Council of Economic Advisers, US, 6, 37 Cox, Jo, 117 cradle to cradle, 224 creative destruction, 142 Cree, 282 Crompton, Tom, 125–6 cross-border flows, 89–90 crowdsourcing, 204 cuckoos, 32, 35, 36, 38, 40, 54, 60, 159, 244, 256, 271 currencies, 182–8, 236, 274, 292 D da Vinci, Leonardo, 13, 94–5 Dallas, Texas, 120 Daly, Herman, 74, 143, 271 Danish Nudging Network, 124 Darwin, Charles, 14 Debreu, Gerard, 134 debt, 37, 146–7, 172–3, 182–5, 247, 255, 269 decoupling, 193, 210, 258–62, 273 defeat device software, 216 deforestation, 49–50, 74, 208, 210 degenerative linear economy, 211–19, 222–3, 237 degrowth, 244 DeMartino, George, 161 democracy, 77, 171–2, 258 demurrage, 274 Denmark, 180, 275, 290 deregulation, 82, 87, 269 derivatives, 100–101, 149 Devas, Charles Stanton, 97 Dey, Suchitra, 178 Diamond, Jared, 154 diarrhoea, 5 differential calculus, 131, 132 digital revolution, 191–2, 264 diversify–select–amplify, 158 double spiral, 54 Doughnut model, 10–11, 11, 23–5, 44, 51 and aspiration, 58–9, 280–84 big picture, 28, 42, 61–93 distribution, 29, 52, 57, 58, 76, 93, 158, 163–205 ecological ceiling, 10, 11, 44, 45, 46, 49, 51, 218, 254, 295, 298 goal, 25–8, 31–60 and governance, 57, 59 growth agnosticism, 29–30, 243–85 human nature, 28–9, 94–128 and population, 57–8 regeneration, 29, 158, 206–42 social foundation, 10, 11, 44, 45, 49, 51, 58, 77, 174, 200, 254, 295–6 systems, 28, 129–62 and technology, 57, 59 Douglas, Margaret, 78–9 Dreyfus, Louis, 148 ‘Dumb and Dumber in Macroeconomics’ (Solow), 135 Durban, South Africa, 214 E Earning by Learning, 120 Earth-system science, 44–53, 115, 216, 288, 298 Easter Island, 154 Easterlin, Richard, 265–6 eBay, 105, 192 eco-literacy, 115 ecological ceiling, 10, 11, 44, 45, 46, 49, 51, 218, 254, 295, 298 Ecological Performance Standards, 241 Econ 101 course, 8, 77 Economics (Lewis), 114 Economics (Samuelson), 19–20, 63–7, 70, 74, 78, 86, 91, 92, 93, 262 Economy for the Common Good, 241 ecosystem services, 7, 116, 269 Ecuador, 54 education, 9, 43, 45, 50–52, 85, 169–70, 176, 200, 249, 279 economic, 8, 11, 18, 22, 24, 36, 287–93 environmental, 115, 239–40 girls’, 57, 124, 178, 198 online, 83, 197, 264, 290 pricing, 118–19 efficient market hypothesis, 28, 62, 68, 87 Egypt, 48, 89 Eisenstein, Charles, 116 electricity, 9, 45, 236, 240 and Bangla Pesa, 186 cars, 231 Ethereum, 187–8 and MONIAC, 75, 262 pricing, 118, 213 see also renewable energy Elizabeth II, Queen of the United Kingdom, 145 Ellen MacArthur Foundation, 220 Embedded Economy, 71–93, 263 business, 88–9 commons, 82–4 Earth, 72–6 economy, 77–8 finance, 86–8 household, 78–81 market, 81–2 power, 91–92 society, 76–7 state, 84–6 trade, 89–90 employment, 36, 37, 51, 142, 176 automation, 191–5, 237, 258, 278 labour ownership, 188–91 workers’ rights, 88, 90, 269 Empty World, 74 Engels, Friedrich, 88 environment and circular economy, 220–42, 257 conservation, 121–2 and degenerative linear economy, 211–19, 222–3 degradation, 5, 9, 10, 29, 44–53, 74, 154, 172, 196, 206–42 education on, 115, 239–40 externalities, 152 fair share, 216–17 and finance, 234–7 generosity, 218–19, 223–7 green growth, 41, 210, 243–85 nudging, 123–5 taxation and quotas, 213–14, 215 zero impact, 217–18, 238, 241 Environmental Dashboard, 240–41 environmental economics, 7, 11, 114–16 Environmental Kuznets Curve, 207–11, 241 environmental space, 54 Epstein, Joshua, 150 equilibrium theory, 134–62 Ethereum, 187–8 ethics, 160–62 Ethiopia, 9, 226, 254 Etsy, 105 Euclid, 13, 15 European Central Bank, 145, 275 European Commission, 41 European Union (EU), 92, 153, 210, 222, 255, 258 Evergreen Cooperatives, 190 Evergreen Direct Investing (EDI), 273 exogenous shocks, 141 exponential growth, 39, 246–85 externalities, 143, 152, 213 Exxon Valdez oil spill (1989), 9 F Facebook, 192 fair share, 216–17 Fama, Eugene, 68, 87 fascism, 234, 277 Federal Reserve, US, 87, 145, 146, 271, 282 feedback loops, 138–41, 143, 148, 155, 250, 271 feminist economics, 11, 78–81, 160 Ferguson, Thomas, 91–2 finance animal spirits, 110 bank runs, 139 Black–Scholes model, 100–101 boom and bust, 28–9, 110, 144–7 and Circular Flow, 63–4, 87 and complex systems, 134, 138, 139, 140, 141, 145–7 cross-border flows, 89 deregulation, 87 derivatives, 100–101, 149 and distribution, 169, 170, 173, 182–4, 198–9, 201 and efficient market hypothesis, 63, 68 and Embedded Economy, 71, 86–8 and financial-instability hypothesis, 87, 146 and GDP growth, 38 and media, 7–8 mobile banking, 199–200 and money creation, 87, 182–5 and regeneration, 227, 229, 234–7 in service to life, 159, 234–7 stakeholder finance, 190 and sustainability, 216, 235–6, 239 financial crisis (2008), 1–4, 5, 40, 63, 86, 141, 144, 278, 290 and efficient market hypothesis, 87 and equilibrium theory, 134, 145 and financial-instability hypothesis, 87 and inequality, 90, 170, 172, 175 and money creation, 182 and worker’s rights, 278 financial flows, 89 Financial Times, 183, 266, 289 financial-instability hypothesis, 87, 146 First Green Bank, 236 First World War (1914–18), 166, 170 Fisher, Irving, 183 fluid values, 102, 106–9 food, 3, 43, 45, 50, 54, 58, 59, 89, 198 food banks, 165 food price crisis (2007–8), 89, 90, 180 Ford, 277–8 foreign direct investment, 89 forest conservation, 121–2 fossil fuels, 59, 73, 75, 92, 212, 260, 263 Foundations of Economic Analysis (Samuelson), 17–18 Foxconn, 193 framing, 22–3 France, 43, 165, 196, 238, 254, 256, 281, 290 Frank, Robert, 100 free market, 33, 37, 67, 68, 70, 81–2, 86, 90 free open-source hardware (FOSH), 196–7 free open-source software (FOSS), 196 free trade, 70, 90 Freeman, Ralph, 18–19 freshwater cycle, 48–9 Freud, Sigmund, 107, 281 Friedman, Benjamin, 258 Friedman, Milton, 34, 62, 66–9, 84–5, 88, 99, 183, 232 Friends of the Earth, 54 Full World, 75 Fuller, Buckminster, 4 Fullerton, John, 234–6, 273 G G20, 31, 56, 276, 279–80 G77, 55 Gal, Orit, 141 Gandhi, Mohandas, 42, 293 Gangnam Style, 145 Gardens of Democracy, The (Liu & Hanauer), 158 gender equality, 45, 51–2, 57, 78–9, 85, 88, 118–19, 124, 171, 198 generosity, 218–19, 223–9 geometry, 13, 15 George, Henry, 149, 179 Georgescu-Roegen, Nicholas, 252 geothermal energy, 221 Gerhardt, Sue, 283 Germany, 2, 41, 100, 118, 165, 189, 211, 213, 254, 256, 260, 274 Gessel, Silvio, 274 Ghent, Belgium, 236 Gift Relationship, The (Titmuss), 118–19 Gigerenzer, Gerd, 112–14 Gintis, Herb, 104 GiveDirectly, 200 Glass–Steagall Act (1933), 87 Glennon, Roger, 214 Global Alliance for Tax Justice, 277 global material footprints, 210–11 Global Village Construction Set, 196 globalisation, 89 Goerner, Sally, 175–6 Goffmann, Erving, 22 Going for Growth, 255 golden rule, 91 Goldman Sachs, 149, 170 Gómez-Baggethun, Erik, 122 Goodall, Chris, 211 Goodwin, Neva, 79 Goody, Jade, 124 Google, 192 Gore, Albert ‘Al’, 172 Gorgons, 244, 256, 257, 266 graffiti, 15, 25, 287 Great Acceleration, 46, 253–4 Great Depression (1929–39), 37, 70, 170, 173, 183, 275, 277, 278 Great Moderation, 146 Greece, Ancient, 4, 13, 32, 48, 54, 56–7, 160, 244 green growth, 41, 210, 243–85 Greenham, Tony, 185 greenhouse gas emissions, 31, 46, 50, 75–6, 141, 152–4 and decoupling, 260, 266 and Environmental Kuznets Curve, 208, 210 and forests, 50, 52 and G20, 31 and inequality, 58 reduction of, 184, 201–2, 213, 216–18, 223–7, 239–41, 256, 259–60, 266, 298 stock–flow dynamics, 152–4 and taxation, 201, 213 Greenland, 141, 154 Greenpeace, 9 Greenspan, Alan, 87 Greenwich, London, 290 Grenoble, France, 281 Griffiths, Brian, 170 gross domestic product (GDP), 25, 31–2, 35–43, 57, 60, 84, 164 as cuckoo, 32, 35, 36, 38, 40, 54, 60, 159, 244, 256, 271 and Environmental Kuznets Curve, 207–11 and exponential growth, 39, 53, 246–85 and growth agnosticism, 29–30, 240, 243–85 and inequality, 173 and Kuznets Curve, 167, 173, 188–9 gross national product (GNP), 36–40 Gross World Product, 248 Grossman, Gene, 207–8, 210 ‘grow now, clean up later’, 207 Guatemala, 196 H Haifa, Israel, 120 Haldane, Andrew, 146 Han Dynasty, 154 Hanauer, Nick, 158 Hansen, Pelle, 124 Happy Planet Index, 280 Hardin, Garrett, 69, 83, 181 Harvard University, 2, 271, 290 von Hayek, Friedrich, 7–8, 62, 66, 67, 143, 156, 158 healthcare, 43, 50, 57, 85, 123, 125, 170, 176, 200, 269, 279 Heilbroner, Robert, 53 Henry VIII, King of England and Ireland, 180 Hepburn, Cameron, 261 Herbert Simon, 111 heuristics, 113–14, 118, 123 high-income countries growth, 30, 244–5, 254–72, 282 inequality, 165, 168, 169, 171 labour, 177, 188–9, 278 overseas development assistance (ODA), 198–9 resource intensive lifestyles, 46, 210–11 trade, 90 Hippocrates, 160 History of Economic Analysis (Schumpeter), 21 HIV/AIDS, 123 Holocene epoch, 46–8, 75, 115, 253 Homo economicus, 94–103, 109, 127–8 Homo sapiens, 38, 104, 130 Hong Kong, 180 household, 78 housing, 45, 59, 176, 182–3, 269 Howe, Geoffrey, 67 Hudson, Michael, 183 Human Development Index, 9, 279 human nature, 28 human rights, 10, 25, 45, 49, 50, 95, 214, 233 humanistic economics, 42 hydropower, 118, 260, 263 I Illinois, United States, 179–80 Imago Mundi, 13 immigration, 82, 199, 236, 266 In Defense of Economic Growth (Beckerman), 258 Inclusive Wealth Index, 280 income, 51, 79–80, 82, 88, 176–8, 188–91, 194, 199–201 India, 2, 9, 10, 42, 124, 164, 178, 196, 206–7, 242, 290 Indonesia, 90, 105–6, 164, 168, 200 Indus Valley civilisation, 48 inequality, 1, 5, 25, 41, 63, 81, 88, 91, 148–52, 209 and consumerism, 111 and democracy, 171 and digital revolution, 191–5 and distribution, 163–205 and environmental degradation, 172 and GDP growth, 173 and greenhouse gas emissions, 58 and intellectual property, 195–8 and Kuznets Curve, 29, 166–70, 173–4 and labour ownership, 188–91 and land ownership, 178–82 and money creation, 182–8 and social welfare, 171 Success to the Successful, 148, 149, 151, 166 inflation, 36, 248, 256, 275 insect pollination services, 7 Institute of Economic Affairs, 67 institutional economics, 11 intellectual property rights, 195–8, 204 interest, 36, 177, 182, 184, 275–6 Intergovernmental Panel on Climate Change, 25 International Monetary Fund (IMF), 170, 172, 173, 183, 255, 258, 271 Internet, 83–4, 89, 105, 192, 202, 264 Ireland, 277 Iroquois Onondaga Nation, 116 Israel, 100, 103, 120 Italy, 165, 196, 254 J Jackson, Tim, 58 Jakubowski, Marcin, 196 Jalisco, Mexico, 217 Japan, 168, 180, 211, 222, 254, 256, 263, 275 Jevons, William Stanley, 16, 97–8, 131, 132, 137, 142 John Lewis Partnership, 190 Johnson, Lyndon Baines, 37 Johnson, Mark, 38 Johnson, Todd, 191 JPMorgan Chase, 149, 234 K Kahneman, Daniel, 111 Kamkwamba, William, 202, 204 Kasser, Tim, 125–6 Keen, Steve, 146, 147 Kelly, Marjorie, 190–91, 233 Kennedy, John Fitzgerald, 37, 250 Kennedy, Paul, 279 Kenya, 118, 123, 180, 185–6, 199–200, 226, 292 Keynes, John Maynard, 7–8, 22, 66, 69, 134, 184, 251, 277–8, 284, 288 Kick It Over movement, 3, 289 Kingston, London, 290 Knight, Frank, 66, 99 knowledge commons, 202–4, 229, 292 Kokstad, South Africa, 56 Kondratieff waves, 246 Korzybski, Alfred, 22 Krueger, Alan, 207–8, 210 Kuhn, Thomas, 22 Kumhof, Michael, 172 Kuwait, 255 Kuznets, Simon, 29, 36, 39–40, 166–70, 173, 174, 175, 204, 207 KwaZulu Natal, South Africa, 56 L labour ownership, 188–91 Lake Erhai, Yunnan, 56 Lakoff, George, 23, 38, 276 Lamelara, Indonesia, 105–6 land conversion, 49, 52, 299 land ownership, 178–82 land-value tax, 73, 149, 180 Landesa, 178 Landlord’s Game, The, 149 law of demand, 16 laws of motion, 13, 16–17, 34, 129, 131 Lehman Brothers, 141 Leopold, Aldo, 115 Lesotho, 118, 199 leverage points, 159 Lewis, Fay, 178 Lewis, Justin, 102 Lewis, William Arthur, 114, 167 Lietaer, Bernard, 175, 236 Limits to Growth, 40, 154, 258 Linux, 231 Liu, Eric, 158 living metrics, 240–42 living purpose, 233–4 Lomé, Togo, 231 London School of Economics (LSE), 2, 34, 65, 290 London Underground, 12 loss aversion, 112 low-income countries, 90, 164–5, 168, 173, 180, 199, 201, 209, 226, 254, 259 Lucas, Robert, 171 Lula da Silva, Luiz Inácio, 124 Luxembourg, 277 Lyle, John Tillman, 214 Lyons, Oren, 116 M M–PESA, 199–200 MacDonald, Tim, 273 Machiguenga, 105–6 MacKenzie, Donald, 101 macroeconomics, 36, 62–6, 76, 80, 134–5, 145, 147, 150, 244, 280 Magie, Elizabeth, 149, 153 Malala effect, 124 malaria, 5 Malawi, 118, 202, 204 Malaysia, 168 Mali, Taylor, 243 Malthus, Thomas, 252 Mamsera Rural Cooperative, 190 Manhattan, New York, 9, 41 Mani, Muthukumara, 206 Manitoba, 282 Mankiw, Gregory, 2, 34 Mannheim, Karl, 22 Maoris, 54 market, 81–2 and business, 88 circular flow, 64 and commons, 83, 93, 181, 200–201 efficiency of, 28, 62, 68, 87, 148, 181 and equilibrium theory, 131–5, 137, 143–7, 155, 156 free market, 33, 37, 67–70, 90, 208 and households, 63, 69, 78, 79 and maxi-max rule, 161 and pricing, 117–23, 131, 160 and rational economic man, 96, 100–101, 103, 104 and reciprocity, 105, 106 reflexivity of, 144–7 and society, 69–70 and state, 84–6, 200, 281 Marshall, Alfred, 17, 98, 133, 165, 253, 282 Marx, Karl, 88, 142, 165, 272 Massachusetts Institute of Technology (MIT), 17–20, 152–5 massive open online courses (MOOCs), 290 Matthew Effect, 151 Max-Neef, Manfred, 42 maxi-max rule, 161 maximum wage, 177 Maya civilisation, 48, 154 Mazzucato, Mariana, 85, 195, 238 McAfee, Andrew, 194, 258 McDonough, William, 217 Meadows, Donella, 40, 141, 159, 271, 292 Medusa, 244, 257, 266 Merkel, Angela, 41 Messerli, Elspeth, 187 Metaphors We Live By (Lakoff & Johnson), 38 Mexico, 121–2, 217 Michaels, Flora S., 6 micro-businesses, 9, 173, 178 microeconomics, 132–4 microgrids, 187–8 Micronesia, 153 Microsoft, 231 middle class, 6, 46, 58 middle-income countries, 90, 164, 168, 173, 180, 226, 254 migration, 82, 89–90, 166, 195, 199, 236, 266, 286 Milanovic, Branko, 171 Mill, John Stuart, 33–4, 73, 97, 250, 251, 283, 284, 288 Millo, Yuval, 101 minimum wage, 82, 88, 176 Minsky, Hyman, 87, 146 Mises, Ludwig von, 66 mission zero, 217 mobile banking, 199–200 mobile phones, 222 Model T revolution, 277–8 Moldova, 199 Mombasa, Kenya, 185–6 Mona Lisa (da Vinci), 94 money creation, 87, 164, 177, 182–8, 205 MONIAC (Monetary National Income Analogue Computer), 64–5, 75, 142, 262 Monoculture (Michaels), 6 Monopoly, 149 Mont Pelerin Society, 67, 93 Moral Consequences of Economic Growth, The (Friedman), 258 moral vacancy, 41 Morgan, Mary, 99 Morogoro, Tanzania, 121 Moyo, Dambisa, 258 Muirhead, Sam, 230, 231 MultiCapital Scorecard, 241 Murphy, David, 264 Murphy, Richard, 185 musical tastes, 110 Myriad Genetics, 196 N national basic income, 177 Native Americans, 115, 116, 282 natural capital, 7, 116, 269 Natural Economic Order, The (Gessel), 274 Nedbank, 216 negative externalities, 213 negative interest rates, 275–6 neoclassical economics, 134, 135 neoliberalism, 7, 62–3, 67–70, 81, 83, 84, 88, 93, 143, 170, 176 Nepal, 181, 199 Nestlé, 217 Netherlands, 211, 235, 224, 226, 238, 277 networks, 110–11, 117, 118, 123, 124–6, 174–6 neuroscience, 12–13 New Deal, 37 New Economics Foundation, 278, 283 New Year’s Day, 124 New York, United States, 9, 41, 55 Newlight Technologies, 224, 226, 293 Newton, Isaac, 13, 15–17, 32–3, 95, 97, 129, 131, 135–7, 142, 145, 162 Nicaragua, 196 Nigeria, 164 nitrogen, 49, 52, 212–13, 216, 218, 221, 226, 298 ‘no pain, no gain’, 163, 167, 173, 204, 209 Nobel Prize, 6–7, 43, 83, 101, 167 Norway, 281 nudging, 112, 113, 114, 123–6 O Obama, Barack, 41, 92 Oberlin, Ohio, 239, 240–41 Occupy movement, 40, 91 ocean acidification, 45, 46, 52, 155, 242, 298 Ohio, United States, 190, 239 Okun, Arthur, 37 onwards and upwards, 53 Open Building Institute, 196 Open Source Circular Economy (OSCE), 229–32 open systems, 74 open-source design, 158, 196–8, 265 open-source licensing, 204 Organisation for Economic Co-operation and Development (OECD), 38, 210, 255–6, 258 Origin of Species, The (Darwin), 14 Ormerod, Paul, 110, 111 Orr, David, 239 Ostrom, Elinor, 83, 84, 158, 160, 181–2 Ostry, Jonathan, 173 OSVehicle, 231 overseas development assistance (ODA), 198–200 ownership of wealth, 177–82 Oxfam, 9, 44 Oxford University, 1, 36 ozone layer, 9, 50, 115 P Pachamama, 54, 55 Pakistan, 124 Pareto, Vilfredo, 165–6, 175 Paris, France, 290 Park 20|20, Netherlands, 224, 226 Parker Brothers, 149 Patagonia, 56 patents, 195–6, 197, 204 patient capital, 235 Paypal, 192 Pearce, Joshua, 197, 203–4 peer-to-peer networks, 187, 192, 198, 203, 292 People’s QE, 184–5 Perseus, 244 Persia, 13 Peru, 2, 105–6 Phillips, Adam, 283 Phillips, William ‘Bill’, 64–6, 75, 142, 262 phosphorus, 49, 52, 212–13, 218, 298 Physiocrats, 73 Pickett, Kate, 171 pictures, 12–25 Piketty, Thomas, 169 Playfair, William, 16 Poincaré, Henri, 109, 127–8 Polanyi, Karl, 82, 272 political economy, 33–4, 42 political funding, 91–2, 171–2 political voice, 43, 45, 51–2, 77, 117 pollution, 29, 45, 52, 85, 143, 155, 206–17, 226, 238, 242, 254, 298 population, 5, 46, 57, 155, 199, 250, 252, 254 Portugal, 211 post-growth society, 250 poverty, 5, 9, 37, 41, 50, 88, 118, 148, 151 emotional, 283 and inequality, 164–5, 168–9, 178 and overseas development assistance (ODA), 198–200 and taxation, 277 power, 91–92 pre-analytic vision, 21–2 prescription medicines, 123 price-takers, 132 prices, 81, 118–23, 131, 160 Principles of Economics (Mankiw), 34 Principles of Economics (Marshall), 17, 98 Principles of Political Economy (Mill), 288 ProComposto, 226 Propaganda (Bernays), 107 public relations, 107, 281 public spending v. investment, 276 public–private patents, 195 Putnam, Robert, 76–7 Q quantitative easing (QE), 184–5 Quebec, 281 Quesnay, François, 16, 73 R Rabot, Ghent, 236 Rancière, Romain, 172 rating and review systems, 105 rational economic man, 94–103, 109, 111, 112, 126, 282 Reagan, Ronald, 67 reciprocity, 103–6, 117, 118, 123 reflexivity of markets, 144 reinforcing feedback loops, 138–41, 148, 250, 271 relative decoupling, 259 renewable energy biomass energy, 118, 221 and circular economy, 221, 224, 226, 235, 238–9, 274 and commons, 83, 85, 185, 187–8, 192, 203, 264 geothermal energy, 221 and green growth, 257, 260, 263, 264, 267 hydropower, 118, 260, 263 pricing, 118 solar energy, see solar energy wave energy, 221 wind energy, 75, 118, 196, 202–3, 221, 233, 239, 260, 263 rentier sector, 180, 183, 184 reregulation, 82, 87, 269 resource flows, 175 resource-intensive lifestyles, 46 Rethinking Economics, 289 Reynebeau, Guy, 237 Ricardo, David, 67, 68, 73, 89, 250 Richardson, Katherine, 53 Rifkin, Jeremy, 83, 264–5 Rise and Fall of the Great Powers, The (Kennedy), 279 risk, 112, 113–14 Robbins, Lionel, 34 Robinson, James, 86 Robinson, Joan, 142 robots, 191–5, 237, 258, 278 Rockefeller Foundation, 135 Rockford, Illinois, 179–80 Rockström, Johan, 48, 55 Roddick, Anita, 232–4 Rogoff, Kenneth, 271, 280 Roman Catholic Church, 15, 19 Rombo, Tanzania, 190 Rome, Ancient, 13, 48, 154 Romney, Mitt, 92 Roosevelt, Franklin Delano, 37 rooted membership, 190 Rostow, Walt, 248–50, 254, 257, 267–70, 284 Ruddick, Will, 185 rule of thumb, 113–14 Ruskin, John, 42, 223 Russia, 200 rust belt, 90, 239 S S curve, 251–6 Sainsbury’s, 56 Samuelson, Paul, 17–21, 24–5, 38, 62–7, 70, 74, 84, 91, 92, 93, 262, 290–91 Sandel, Michael, 41, 120–21 Sanergy, 226 sanitation, 5, 51, 59 Santa Fe, California, 213 Santinagar, West Bengal, 178 São Paolo, Brazil, 281 Sarkozy, Nicolas, 43 Saumweder, Philipp, 226 Scharmer, Otto, 115 Scholes, Myron, 100–101 Schumacher, Ernst Friedrich, 42, 142 Schumpeter, Joseph, 21 Schwartz, Shalom, 107–9 Schwarzenegger, Arnold, 163, 167, 204 ‘Science and Complexity’ (Weaver), 136 Scotland, 57 Seaman, David, 187 Seattle, Washington, 217 second machine age, 258 Second World War (1939–45), 18, 37, 70, 170 secular stagnation, 256 self-interest, 28, 68, 96–7, 99–100, 102–3 Selfish Society, The (Gerhardt), 283 Sen, Amartya, 43 Shakespeare, William, 61–3, 67, 93 shale gas, 264, 269 Shang Dynasty, 48 shareholders, 82, 88, 189, 191, 227, 234, 273, 292 sharing economy, 264 Sheraton Hotel, Boston, 3 Siegen, Germany, 290 Silicon Valley, 231 Simon, Julian, 70 Sinclair, Upton, 255 Sismondi, Jean, 42 slavery, 33, 77, 161 Slovenia, 177 Small Is Beautiful (Schumacher), 42 smart phones, 85 Smith, Adam, 33, 57, 67, 68, 73, 78–9, 81, 96–7, 103–4, 128, 133, 160, 181, 250 social capital, 76–7, 122, 125, 172 social contract, 120, 125 social foundation, 10, 11, 44, 45, 49, 51, 58, 77, 174, 200, 254, 295–6 social media, 83, 281 Social Progress Index, 280 social pyramid, 166 society, 76–7 solar energy, 59, 75, 111, 118, 187–8, 190 circular economy, 221, 222, 223, 224, 226–7, 239 commons, 203 zero-energy buildings, 217 zero-marginal-cost revolution, 84 Solow, Robert, 135, 150, 262–3 Soros, George, 144 South Africa, 56, 177, 214, 216 South Korea, 90, 168 South Sea Bubble (1720), 145 Soviet Union (1922–91), 37, 67, 161, 279 Spain, 211, 238, 256 Spirit Level, The (Wilkinson & Pickett), 171 Sraffa, Piero, 148 St Gallen, Switzerland, 186 Stages of Economic Growth, The (Rostow), 248–50, 254 stakeholder finance, 190 Standish, Russell, 147 state, 28, 33, 69–70, 78, 82, 160, 176, 180, 182–4, 188 and commons, 85, 93, 197, 237 and market, 84–6, 200, 281 partner state, 197, 237–9 and robots, 195 stationary state, 250 Steffen, Will, 46, 48 Sterman, John, 66, 143, 152–4 Steuart, James, 33 Stiglitz, Joseph, 43, 111, 196 stocks and flows, 138–41, 143, 144, 152 sub-prime mortgages, 141 Success to the Successful, 148, 149, 151, 166 Sugarscape, 150–51 Summers, Larry, 256 Sumner, Andy, 165 Sundrop Farms, 224–6 Sunstein, Cass, 112 supply and demand, 28, 132–6, 143, 253 supply chains, 10 Sweden, 6, 255, 275, 281 swishing, 264 Switzerland, 42, 66, 80, 131, 186–7, 275 T Tableau économique (Quesnay), 16 tabula rasa, 20, 25, 63, 291 takarangi, 54 Tanzania, 121, 190, 202 tar sands, 264, 269 taxation, 78, 111, 165, 170, 176, 177, 237–8, 276–9 annual wealth tax, 200 environment, 213–14, 215 global carbon tax, 201 global financial transactions tax, 201, 235 land-value tax, 73, 149, 180 non-renewable resources, 193, 237–8, 278–9 People’s QE, 185 tax relief v. tax justice, 23, 276–7 TED (Technology, Entertainment, Design), 202, 258 Tempest, The (Shakespeare), 61, 63, 93 Texas, United States, 120 Thailand, 90, 200 Thaler, Richard, 112 Thatcher, Margaret, 67, 69, 76 Theory of Moral Sentiments (Smith), 96 Thompson, Edward Palmer, 180 3D printing, 83–4, 192, 198, 231, 264 thriving-in-balance, 54–7, 62 tiered pricing, 213–14 Tigray, Ethiopia, 226 time banking, 186 Titmuss, Richard, 118–19 Toffler, Alvin, 12, 80 Togo, 231, 292 Torekes, 236–7 Torras, Mariano, 209 Torvalds, Linus, 231 trade, 62, 68–9, 70, 89–90 trade unions, 82, 176, 189 trademarks, 195, 204 Transatlantic Trade and Investment Partnership (TTIP), 92 transport, 59 trickle-down economics, 111, 170 Triodos, 235 Turkey, 200 Tversky, Amos, 111 Twain, Mark, 178–9 U Uganda, 118, 125 Ulanowicz, Robert, 175 Ultimatum Game, 105, 117 unemployment, 36, 37, 276, 277–9 United Kingdom Big Bang (1986), 87 blood donation, 118 carbon dioxide emissions, 260 free trade, 90 global material footprints, 211 money creation, 182 MONIAC (Monetary National Income Analogue Computer), 64–5, 75, 142, 262 New Economics Foundation, 278, 283 poverty, 165, 166 prescription medicines, 123 wages, 188 United Nations, 55, 198, 204, 255, 258, 279 G77 bloc, 55 Human Development Index, 9, 279 Sustainable Development Goals, 24, 45 United States American Economic Association meeting (2015), 3 blood donation, 118 carbon dioxide emissions, 260 Congress, 36 Council of Economic Advisers, 6, 37 Earning by Learning, 120 Econ 101 course, 8, 77 Exxon Valdez oil spill (1989), 9 Federal Reserve, 87, 145, 146, 271, 282 free trade, 90 Glass–Steagall Act (1933), 87 greenhouse gas emissions, 153 global material footprint, 211 gross national product (GNP), 36–40 inequality, 170, 171 land-value tax, 73, 149, 180 political funding, 91–2, 171 poverty, 165, 166 productivity and employment, 193 rust belt, 90, 239 Transatlantic Trade and Investment Partnership (TTIP), 92 wages, 188 universal basic income, 200 University of Berkeley, 116 University of Denver, 160 urbanisation, 58–9 utility, 35, 98, 133 V values, 6, 23, 34, 35, 42, 117, 118, 121, 123–6 altruism, 100, 104 anthropocentric, 115 extrinsic, 115 fluid, 28, 102, 106–9 and networks, 110–11, 117, 118, 123, 124–6 and nudging, 112, 113, 114, 123–6 and pricing, 81, 120–23 Veblen, Thorstein, 82, 109, 111, 142 Venice, 195 verbal framing, 23 Verhulst, Pierre, 252 Victor, Peter, 270 Viner, Jacob, 34 virtuous cycles, 138, 148 visual framing, 23 Vitruvian Man, 13–14 Volkswagen, 215–16 W Wacharia, John, 186 Wall Street, 149, 234, 273 Wallich, Henry, 282 Walras, Léon, 131, 132, 133–4, 137 Ward, Barbara, 53 Warr, Benjamin, 263 water, 5, 9, 45, 46, 51, 54, 59, 79, 213–14 wave energy, 221 Ways of Seeing (Berger), 12, 281 Wealth of Nations, The (Smith), 74, 78, 96, 104 wealth ownership, 177–82 Weaver, Warren, 135–6 weightless economy, 261–2 WEIRD (Western, educated, industrialised, rich, democratic), 103–5, 110, 112, 115, 117, 282 West Bengal, India, 124, 178 West, Darrell, 171–2 wetlands, 7 whale hunting, 106 Wiedmann, Tommy, 210 Wikipedia, 82, 223 Wilkinson, Richard, 171 win–win trade, 62, 68, 89 wind energy, 75, 118, 196, 202–3, 221, 233, 239, 260, 263 Wizard of Oz, The, 241 Woelab, 231, 293 Wolf, Martin, 183, 266 women’s rights, 33, 57, 107, 160, 201 and core economy, 69, 79–81 education, 57, 124, 178, 198 and land ownership, 178 see also gender equality workers’ rights, 88, 91, 269 World 3 model, 154–5 World Bank, 6, 41, 119, 164, 168, 171, 206, 255, 258 World No Tobacco Day, 124 World Trade Organization, 6, 89 worldview, 22, 54, 115 X xenophobia, 266, 277, 286 Xenophon, 4, 32, 56–7, 160 Y Yandle, Bruce, 208 Yang, Yuan, 1–3, 289–90 yin yang, 54 Yousafzai, Malala, 124 YouTube, 192 Yunnan, China, 56 Z Zambia, 10 Zanzibar, 9 Zara, 276 Zeitvorsoge, 186–7 zero environmental impact, 217–18, 238, 241 zero-hour contracts, 88 zero-humans-required production, 192 zero-interest loans, 183 zero-marginal-cost revolution, 84, 191, 264 zero-waste manufacturing, 227 Zinn, Howard, 77 PICTURE ACKNOWLEDGEMENTS Illustrations are reproduced by kind permission of: archive.org


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As the Future Catches You: How Genomics & Other Forces Are Changing Your Work, Health & Wealth by Juan Enriquez

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Albert Einstein, Berlin Wall, bioinformatics, borderless world, British Empire, Buckminster Fuller, creative destruction, double helix, global village, half of the world's population has never made a phone call, Howard Rheingold, Jeff Bezos, Joseph Schumpeter, Kevin Kelly, knowledge economy, more computing power than Apollo, new economy, personalized medicine, purchasing power parity, Ray Kurzweil, Richard Feynman, Richard Feynman, Robert Metcalfe, Search for Extraterrestrial Intelligence, SETI@home, Silicon Valley, spice trade, stem cell, the new new thing

Western Europe is not immune to massive changes … And could easily lose its way if it keeps trying to stop … Key technologies … And keeps bleeding brains to areas like Silicon Valley. Technology is not kind … It does not wait … It does not say please … It slams into existing systems … And often destroys them … While creating a new system.12 (Today’s chi-chi economist, Joseph Schumpeter … died half a century ago … trained as a lawyer … coined the term “creative destruction”: new products and discoveries relentlessly destroy the old … By age 30, he had three clear goals in mind: to become “Europe’s greatest lover of beautiful women and Europe’s greatest horseman—and perhaps also the world’s greatest economist.” He claims to have achieved two out of three.)13 COUNTRIES CAN EITHER SURF … EVER LARGER … AND MORE POWERFUL … WAVES OF CHANGE … OR THEY CAN TRY TO STOP THEM … AND GET CRUSHED.

See www.niehs.nih.gov/envgenom/elsi.htm. 10. Let’s talk about sex … Gina Bari Kolata, Clone: The Road to Dolly, and the Path Ahead (New York: William Morrow, 1998). Lori B. Andrews, The Clone Age: Adventures in the New World of Reproductive Technology (New York: Henry Holt, 1999). 11. Juan Enriquez, “Green Biotech and European Competitiveness,” Trends in Biotechnology, April 2001. 12. This process of creative destruction was identified over half a century ago by an Austrian economist turned Harvard professor, Joseph Schumpeter. See Joseph Schumpeter, Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process (New York: McGraw-Hill, 1939). 13. Charles J. Whalen, “Today’s Hottest Economist Died Fifty Years Ago,” Business Week, December 11, 2000. Chapter XII: Sleepless … (and Angry) in Seattle 1.


pages: 142 words: 45,733

Utopia or Bust: A Guide to the Present Crisis by Benjamin Kunkel

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anti-communist, Bretton Woods, capital controls, Carmen Reinhart, creative destruction, David Graeber, declining real wages, full employment, Hyman Minsky, income inequality, late capitalism, liberal capitalism, liquidity trap, means of production, money: store of value / unit of account / medium of exchange, mortgage debt, Occupy movement, peak oil, price stability, profit motive, savings glut, Slavoj Žižek, The Wealth of Nations by Adam Smith, transatlantic slave trade, War on Poverty, We are the 99%, women in the workforce, Works Progress Administration, zero-sum game

In Valences of the Dialectic, one of the most striking suggestions made in the introductory essay is that Hegel, who articulated his omnivorous philosophical logic at a time when industrial capitalism was hardly more than a local English affair, may have been seized by an intimation of the ultimately global logic of capitalism: capitalism too is forever enlarging itself, and bringing under one rule the most disparate people and places. So does creative destruction on the economic plane resemble the dialectic’s refusal to freeze or reify its concepts and stand pat. Dialectical thought, then, would be at once the mirror of capitalism and (in Marxist hands) its rival: the totalizing imperative that is the dialectic confronting the totality that is capitalism. From this it follows that the dialectic, despite the musty air of the word, may be set to come into its own only today, with the universal installation of capitalism.

The temporary triumph of some important firms and the destruction of others might set the stage for higher rates of growth, but this growth would take off, after a vast “slaughter of capital values” (as Marx once put it), from a lower plane of overall prosperity. The abandonment of American factories could only accelerate, and the unemployment rate with it. Even then, following a bout of creative destruction the likes of which the world has never seen, the result would presumably be, though Brenner doesn’t say so, the eventual reemergence of overcompetition and incipient global stagnation. The strength of this vision lies in its treatment of the great supposed virtue of contemporary capitalism—unfettered international competition—as its deadly vice. Out of a historian’s tact or a socialist’s despair, Brenner never implies the possibility of any tolerable reform of the system or lets slip a prayer for revolution.


pages: 240 words: 60,660

Models. Behaving. Badly.: Why Confusing Illusion With Reality Can Lead to Disaster, on Wall Street and in Life by Emanuel Derman

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Albert Einstein, Asian financial crisis, Augustin-Louis Cauchy, Black-Scholes formula, British Empire, Brownian motion, capital asset pricing model, Cepheid variable, creative destruction, crony capitalism, diversified portfolio, Douglas Hofstadter, Emanuel Derman, Eugene Fama: efficient market hypothesis, fixed income, Henri Poincaré, I will remember that I didn’t make the world, and it doesn’t satisfy my equations, Isaac Newton, law of one price, Mikhail Gorbachev, Myron Scholes, quantitative trading / quantitative finance, random walk, Richard Feynman, Richard Feynman, riskless arbitrage, savings glut, Schrödinger's Cat, Sharpe ratio, stochastic volatility, the scientific method, washing machines reduced drudgery, yield curve

They used sublimation as a metaphor to describe the way capitalism’s endless urge for new sources of profits results in the destruction of traditional values. Solid-to-vapor is an apt summary of the evanescence of value, financial and ethical, that has taken place throughout the great and ongoing financial crisis that commenced in 2007. The United States, the global evangelist for the benefits of creative destruction, has favored its own church. When governments of emerging markets complained that foreign investors were fearfully yanking capital from their markets during the Asian financial crisis of 1997, liberal democrats in the West told them that this was the way free markets worked. Now we prop up our own markets because it suits us to do so. The great financial crisis has been marked by the failure of models both qualitative and quantitative.

coin tossing Coleridge, Samuel Taylor collateralized default obligations (CDOs) collective model, of nucleus Collie, Max commodities communism: in South Africa The Communist Manifesto (Marx and Engels) complex numbers, theory of computer programs consciousness Consolidated Edison stock contempt content: Goethe’s view about method and method and contradictions control: purpose of models and theories and self- and theory of controlling engineering devices Cornell, Joseph Cornford, Francis corporate bonds corporate welfare corporations: bailouts of cosmology Coulomb, Charles creative destruction credit crisis (2007) credit markets curls: electromagnetic theory and currency/cash darkness: Goethe’s view about light and light and Darwin, Charles de Klerk, F. W. De Morgan, Augustus debt markets debt securities deduction Deleuze, Gilles deliciousness: analogy with risk democracy derivative emotions derivatives, financial Derman, Chaim (father) Derman, Emanuel: childhood and youth of education of in England eyesight of four questions of graduate education of moth in refrigerator example and professional background of quantum dream of Derman, Joshua (son) Derman, Sonia (mother) Derman, Sonya (daughter) Descartes, René desires: definition of disappointment and freedom and money and Spinoza’s emotions theory and will and desperation: love and devotion; Spinoza’s emotions theory and diagrams, Feynman diffusion Dirac Equation: analogies and bare and dressed electrons and Dirac wave function and as explanation of reality idea of electrons and impact on physics of intuition and knowledge and matter and metaphors and nature of models and nature of theories and positrons and quantum electrodynamics and Standard Model and as successful theory Dirac, Paul Dirac sea distance: measurement of divergences: electromagnetic theory and diversification domino computer dressed electrons drift Du Fay, Charles “Ducks Ditty” (song) Dyson, Freeman Earth: as magnet earthquakes: probability of economic models See also financial models; specific model Eddington, A.


pages: 540 words: 168,921

The Relentless Revolution: A History of Capitalism by Joyce Appleby

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1919 Motor Transport Corps convoy, agricultural Revolution, anti-communist, Asian financial crisis, asset-backed security, Bartolomé de las Casas, Bernie Madoff, Bretton Woods, BRICs, British Empire, call centre, collateralized debt obligation, collective bargaining, Columbian Exchange, commoditize, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, deskilling, Doha Development Round, double entry bookkeeping, epigenetics, equal pay for equal work, European colonialism, facts on the ground, failed state, Firefox, fixed income, Ford paid five dollars a day, Francisco Pizarro, Frederick Winslow Taylor, full employment, Gordon Gekko, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Hernando de Soto, hiring and firing, illegal immigration, informal economy, interchangeable parts, interest rate swap, invention of movable type, invention of the printing press, invention of the steam engine, invisible hand, Isaac Newton, James Hargreaves, James Watt: steam engine, Jeff Bezos, joint-stock company, Joseph Schumpeter, knowledge economy, land reform, Livingstone, I presume, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, moral hazard, Parag Khanna, Ponzi scheme, profit maximization, profit motive, race to the bottom, Ralph Nader, refrigerator car, Ronald Reagan, Scramble for Africa, Silicon Valley, Silicon Valley startup, South China Sea, South Sea Bubble, special economic zone, spice trade, spinning jenny, strikebreaker, the built environment, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thorstein Veblen, total factor productivity, trade route, transatlantic slave trade, transatlantic slave trade, transcontinental railway, union organizing, Unsafe at Any Speed, Upton Sinclair, urban renewal, War on Poverty, working poor, Works Progress Administration, Yogi Berra, Yom Kippur War

By the last three decades of the nineteenth century the United States and Germany had nurtured the innovations that picked up the beat of economic development. Constant innovations didn’t come without cost, because every improved device rendered obsolete its predecessor. Prodded by the lure of stronger sales and higher profits, backers of incessant inventiveness hurt established industries and firms. The early-twentieth-century Austrian economist Joseph Schumpeter captured the essence of capitalism, with his “creative destruction” of the old by the new.28 Rarely has anyone so precisely hit the nail on the head, implying the consequences associated with both “creative” and “destruction.” Less catchy is the economists’ take on this, “early obsolescence,” a phrase meant to indicate that commercial objects don’t grow old; they just become obsolete when they are replaced by something better. Retrospectively we can see that innovation pushed the relentless revolution of capitalism, yet why or how one country or region grabbed the technological lead remains a bit obscure.

Less glamorous than the department stores with their great ground-floor display cases were companies like Sears, Roebuck and Montgomery Ward that pioneered mail-order retailing. As early as 1900, their famous catalogs featured a thousand pages of illustrated items.17 In the inexorable logic of market success, these modern emporiums began the long war of attrition against mom-and-pop stores, the little shops that had long serviced local neighborhoods. Capitalism’s “creative destruction” had found a new battlefield. Trains and trolley cars made it feasible to build houses in the suburbs of the cities where people worked. The same streetcars, interurban trolleys, and private automobiles that carried men “downtown,” as the American city center became known, at the beginning and ending of the workday were also available for shoppers, most of them women, in the middle of the day.

Forced to dissolve his trust, Rockefeller created a cluster of smaller Standard Oils. And therein lies a capitalist morality play. When in 1909 a federal court ordered the dissolution of Standard Oil, managers who had chafed under the centralization of authority in the company’s New York City headquarters had the chance to try new techniques. There’s almost a law hidden here, a corollary to Joseph Schumpeter’s famous remark that capitalism involved creative destruction. Capitalism benefits from periodic liberation from established authorities, freeing those who yearn to experiment, innovate, and learn from fresh ideas.50 Corporate power in the United States waxed strong as the nineteenth century came to an end. The imperialist forays of Western governments into Africa and Asia made them more accommodating of their domestic capitalists. It took ratification of the Sixteenth Amendment to the Constitution in 1913 before the federal government had an effective way to raise revenue, but the difficulty of passing an income tax gives a sense of the unusual limits on government power when confronting business interests in the United States.51 On racial and sexual matters, on the other hand, states drastically restricted the movement of African Americans and dictated the norms of intimate behavior.


pages: 578 words: 168,350

Scale: The Universal Laws of Growth, Innovation, Sustainability, and the Pace of Life in Organisms, Cities, Economies, and Companies by Geoffrey West

Alfred Russel Wallace, Anton Chekhov, Benoit Mandelbrot, Black Swan, British Empire, butterfly effect, carbon footprint, Cesare Marchetti: Marchetti’s constant, clean water, complexity theory, computer age, conceptual framework, continuous integration, corporate social responsibility, correlation does not imply causation, creative destruction, dark matter, Deng Xiaoping, double helix, Edward Glaeser, endogenous growth, Ernest Rutherford, first square of the chessboard, first square of the chessboard / second half of the chessboard, Frank Gehry, Geoffrey West, Santa Fe Institute, Guggenheim Bilbao, housing crisis, Index librorum prohibitorum, invention of agriculture, invention of the telephone, Isaac Newton, Jane Jacobs, Jeff Bezos, Johann Wolfgang von Goethe, John von Neumann, Kenneth Arrow, laissez-faire capitalism, life extension, Mahatma Gandhi, mandelbrot fractal, Marchetti’s constant, Masdar, megacity, Murano, Venice glass, Murray Gell-Mann, New Urbanism, Peter Thiel, profit motive, publish or perish, Ray Kurzweil, Richard Feynman, Richard Feynman, Richard Florida, Silicon Valley, smart cities, Stephen Hawking, Steve Jobs, Stewart Brand, technological singularity, The Coming Technological Singularity, The Death and Life of Great American Cities, the scientific method, too big to fail, transaction costs, urban planning, urban renewal, Vernor Vinge, Vilfredo Pareto, Von Neumann architecture, Whole Earth Catalog, Whole Earth Review, wikimedia commons, working poor

See science of companies company mortality, 6, 191, 393–410 growth of sales, 395 revenue of major U.S. companies, 393, 394 revenue with inflation deflator, 393, 394 survivorship/mortality curves, 397, 398–400, 400–402 competition, 381 complex adaptive systems, 23–24, 116, 430–31, 433, 435 big data and, 439 cities as, 355–56 complexity characteristics of complex systems, 21–25, 72 definitions of, 19–21 grand unified theory of, 430–31 scaling and, 19–25 science of, 23, 79–81 simplicity underlying, 90–93, 116 turbulence and, 72 composite risk index, 315 compound interest, 217, 218 Compustat, 385–86, 393 computer analysis, 22–23, 75 computer programming, 264–65 consciousness, 87, 178–79, 181–82, 282, 283 conservation of electric charge, 197–98 conservation of energy, 164–65, 197–98 contraception, 227, 229 contraction of time, 332 Copernicus, Nicolaus, 37 Coriolanus (Shakespeare), 252–53 Cornell University, 274, 298, 300 “corporate social responsibility,” 233 cosmic scale factor, 209 Cowan, George, 438 Cray-2, 439–40 “creative destruction,” 403 Creative Destruction (Foster), 404 Crick, Francis, 84, 437 crime, 30, 261, 278, 279 in Japan, 277, 279 ranking of cities and, 355–59 crinkliness (fractality), 130, 139, 141, 152, 291 crumpled balls of paper, 153 cube-square law, 39–42, 43, 58, 59, 158–59 cumulative advantage, 368–71 cyberattacks, 134 cyborgs, 163, 422 Daepp, Madeleine, 402–3 Dallas, 251, 297–98 damage-based theories of aging, 199–203 decline of body functions with age, 195, 197, 201, 202 dark energy, 238 Darwin, Charles (Darwinism), 23–24, 60, 63, 87, 89–90, 98, 106, 185, 228, 428 Darwin, Charles Galton, 331–32 Darwinian fitness, 115 data.

REQUIESCANT IN PACE Although there are significant differences, it’s hard not to be struck by how similar the growth and death of companies and organisms are when viewed through the lens of scaling—and how dissimilar they both are to cities. Companies are surprisingly biological and from an evolutionary perspective their mortality is an important ingredient for generating innovative vitality resulting from “creative destruction” and “the survival of the fittest.” Just as all organisms must die in order that the new and novel may blossom, so it is that all companies disappear or morph to allow new innovative variations to flourish: better to have the excitement and innovation of a Google or Tesla than the stagnation of a geriatric IBM or General Motors. This is the underlying culture of the free market system. The great turnover of companies and especially the continual churning of mergers and acquisitions are integral to the market process.

That’s only a 12 percent survival rate, the other 88 percent having gone bankrupt, merged, or fallen from the list because of underperformance. More poignant, perhaps, is that most of those on the list in 1955 are unrecognizable and completely forgotten today; how many remember Armstrong Rubber or Pacific Vegetable Oil? In 2000 Foster wrote an influential best-seller on business, aptly titled Creative Destruction.8 He was much taken by the ideas on complexity being developed at the Santa Fe Institute, so much so that he joined the board of trustees and persuaded McKinsey to fund a professorship in finance which was held by Doyne Farmer. I got to know him when I first engaged with SFI in the late 1990s. He was convinced that the scaling and network ideas that we had been developing in biology could provide major insights into how companies function.


pages: 226 words: 71,540

Epic Win for Anonymous: How 4chan's Army Conquered the Web by Cole Stryker

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4chan, barriers to entry, Berlin Wall, Chelsea Manning, cognitive dissonance, Columbine, commoditize, creative destruction, crowdsourcing, Firefox, future of journalism, hive mind, informal economy, Internet Archive, Julian Assange, Mark Zuckerberg, Marshall McLuhan, Mason jar, pre–internet, Silicon Valley, slashdot, social web, Stephen Hawking, Steve Jobs, Stewart Brand, technoutopianism, wage slave, We are Anonymous. We are Legion, Whole Earth Catalog, WikiLeaks

O’Farrell agrees there’s no way to guarantee that something will go viral, but there are ways to help it along, like putting it in a familiar format; making it easy to parody with basic software; and pitching well to editors and bloggers—but only if the content has legs and clear legal rights. So this is 4chan’s lighter side that has bled out into the rest of the web. Participatory culture, meme creation, viral media: whatever you want to call it, we’re experiencing something new and exciting, and 4chan is at its forefront. And yet 4chan is not just creativity. It’s also creative destruction. We’ve already seen how anonymous trolls tried to ruin Jessi Slaughter’s life. What would happen if they went after global corporations or political candidates of the highest order? What happens when a toddler gets bored building sandcastles? He totters over to the next kid’s creation and obliterates it with one unexpected kick. Chapter 8 * * * Merry Pranksters, Freedom Fighters, or Sadistic Bullies?

The smartest, funniest, fastest, strongest content wins, regardless of how popular, good-looking, or renowned the post’s author is. Anonymous neither accepts nor grants acclaim. There are essentially twin themes that make 4chan what it is: the participatory creative culture and the spontaneous social activism. They can be seen as two manifestations of a process that social media researcher danah boyd calls “hacking the attention economy.” Whether through creativity or creative destruction, 4chan’s /b/tards (or lowercase a anonymous) and the politically oriented trolls (or capital A Anonymous) are exceptionally skilled at getting people to take notice, without spending a single dollar to promote their work. Neither of these capabilities could exist on Facebook at the same scale because they are only made possible by 4chan’s emphasis on anonymity and ephemerality. Many have speculated that if Christopher Poole had played his cards right, he could have made bank with a community as big and as dynamic as 4chan.


pages: 298 words: 81,200

Where Good Ideas Come from: The Natural History of Innovation by Steven Johnson

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Ada Lovelace, Albert Einstein, Alfred Russel Wallace, carbon-based life, Cass Sunstein, cleantech, complexity theory, conceptual framework, cosmic microwave background, creative destruction, crowdsourcing, data acquisition, digital Maoism, digital map, discovery of DNA, Dmitri Mendeleev, double entry bookkeeping, double helix, Douglas Engelbart, Douglas Engelbart, Drosophila, Edmond Halley, Edward Lloyd's coffeehouse, Ernest Rutherford, Geoffrey West, Santa Fe Institute, greed is good, Hans Lippershey, Henri Poincaré, hive mind, Howard Rheingold, hypertext link, invention of air conditioning, invention of movable type, invention of the printing press, invention of the telephone, Isaac Newton, Islamic Golden Age, Jacquard loom, James Hargreaves, James Watt: steam engine, Jane Jacobs, Jaron Lanier, John Snow's cholera map, Joseph Schumpeter, Joseph-Marie Jacquard, Kevin Kelly, lone genius, Louis Daguerre, Louis Pasteur, Mason jar, mass immigration, Mercator projection, On the Revolutions of the Heavenly Spheres, online collectivism, packet switching, PageRank, patent troll, pattern recognition, price mechanism, profit motive, Ray Oldenburg, Richard Florida, Richard Thaler, Ronald Reagan, side project, Silicon Valley, silicon-based life, six sigma, Solar eclipse in 1919, spinning jenny, Steve Jobs, Steve Wozniak, Stewart Brand, The Death and Life of Great American Cities, The Great Good Place, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, transaction costs, urban planning

But over the past two centuries those old buildings have hosted an entire cavalcade of different uses: they have served as the hub of an industrial port; as the primary supply point of meat for a city of eight million people; as a refuge for beatniks and dropouts; as the epicenter of the gay rights movement. Jacobs’s point was that the frenetic energy of a large city, the urban version of creative destruction, creates a natural supply of older, less-desirable environments that can be imaginatively reoccupied by the small or the eccentric, the subcultures that Fischer found so essential to urban life. Artists, poets, and entrepreneurs are the vibrant fish swimming among the coral of the Keeling Islands: they find it easier to live in an exoskeleton that has long since been abandoned by its original host.

Economists and social historians have documented multiple factors that drove the march of the market: capitalist economies had a better track record of long-term increases in GDP; economic actors had more liberty to make individual choices; economic self-interest is an undeniable motivating force for human beings. But few defenses of capitalism’s economic virtues failed to mention its protean force. Even its critics acknowledged the market’s drive for novelty and innovation, as in Joseph Schumpeter’s famous theory of “creative destruction.” 7 This framework is adapted from Yochai Benkler’s book The Wealth of Networks. Benkler’s point is that we have extensive experience with three of the four possible combinations. Private corporations are centralized and market-based. The marketplace itself is decentralized and, obviously, market-based. Planned economies are centralized and non-market-based. But the magic square is the fourth one: that of decentralized, non-market environments.


pages: 240 words: 75,304

Time Lord: Sir Sandford Fleming and the Creation of Standard Time by Clark Blaise

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British Empire, creative destruction, Dava Sobel, James Watt: steam engine, John Harrison: Longitude, Khartoum Gordon, Robert Gordon, Silicon Valley, transcontinental railway, traveling salesman, Upton Sinclair

It was in England that the Romantic embrace of nature reached doctrinal intensity, where rambles in the Lake District inspired poetry, where the great and permanent forms of nature were invoked as guides in time of crisis and despair. One thinks of nature’s power not only to soothe but to inspire reveries of timelessness, as in Keats’s “Ode on a Grecian Urn” (1818). But England soon embraced the Industrial Revolution with even deeper fervor, so that within little more than a generation, the nation had been transformed into a virtual laboratory for creative destruction. Thirty years after Keats’s ode, in The Communist Manifesto, time became cheaper than sand, not dearer than gold, a servant, not a master. It could be leased back to an employer at a fair rate and for a set duration, or even confiscated by the proposed new state on the behalf of labor. The social structure and the political order were transformed, but not by Marx and Engels. The revolutionary agent was speed, the new velocity introduced by trains and the telegraph.

The European notion of travel was brief, direct, uncomfortable; the American, lengthy, leisurely, luxurious. Grand-trunk rail service of 1870 America is comparable to interstate travel by Winnebago today. THE ARCHAIC, if charming, clutter of ancient quartiers, a series of medieval hamlets making up the metropolis called Paris, did not escape redefinition by the railroad model. Baron Haussmann, in his redesign of Paris (what David Harvey termed its “creative destruction”), used his once-in-a-millennium opportunity to impose a bold grid of straight, broad, railroad-style boulevards through the nooks and crannies of medieval Paris. Proud France had been humiliated by technocratic, militaristic Germany, and part of the blame for the scale of the defeat was thought to rest with the country’s reverential embrace of its own self-regard. Europe’s first revolutionary society had grown complacent.


pages: 296 words: 82,501

Stuffocation by James Wallman

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3D printing, Airbnb, back-to-the-land, Berlin Wall, big-box store, Black Swan, BRICs, carbon footprint, Cass Sunstein, clean water, collaborative consumption, commoditize, creative destruction, crowdsourcing, David Brooks, Fall of the Berlin Wall, happiness index / gross national happiness, high net worth, income inequality, Intergovernmental Panel on Climate Change (IPCC), James Hargreaves, Joseph Schumpeter, Kitchen Debate, Martin Wolf, mass immigration, McMansion, means of production, Nate Silver, Occupy movement, Paul Samuelson, post-industrial society, Post-materialism, post-materialism, Richard Florida, Richard Thaler, sharing economy, Silicon Valley, Simon Kuznets, Skype, spinning jenny, The Signal and the Noise by Nate Silver, Thorstein Veblen, Tyler Cowen: Great Stagnation, World Values Survey, Zipcar

Actually, while you were about it, this theory did not just sound like a number of industries, it sounded a lot like capitalism. The Austrian American economist Joseph Schumpeter noticed this. “The same process of industrial mutation – if I may use that biological term,” Schumpeter wrote, “incessantly revolutionises the economic structure from within, incessantly destroys the old, incessantly creating a new one. This process of Creative Destruction is the essential fact about Capitalism.” Seen this way, it is little wonder that obsolescence and the waste that came with the throwaway culture resonated so strongly with the captains of consciousness. To them, obsolescence and waste were more than simply ways to increase profits. They were not just by-products of the industrial equivalent of evolution. They were proof that industry, and society, was evolving.

The Birth of Death Dating “American men bought 150 million throwaway collars and cuffs in 1872.” Source: Giles Slade, Made to Break (Cambridge: Harvard University Press, 2006). “The same process of industrial mutation – if I may use that biological term,” Schumpeter wrote, “incessantly revolutionises the economic structure from within, incessantly destroys the old, incessantly creating a new one. This process of Creative Destruction is the essential fact about Capitalism.” From Joseph Schumpeter, Capitalism, Socialism and Democracy (New York: Harper, 1942). Christine Frederick For more on Christine Frederick, read Christine McGaffey Frederick, Selling Mrs. Consumer (New York: Business Borse, 1929); also Janice Rutherford, Selling Mrs. Consumer: Christine Frederick and the Rise of Household Efficiency (Athens, Georgia: University of Georgia Press, 2003).


pages: 252 words: 73,131

The Inner Lives of Markets: How People Shape Them—And They Shape Us by Tim Sullivan

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Airbnb, airport security, Al Roth, Alvin Roth, Andrei Shleifer, attribution theory, autonomous vehicles, barriers to entry, Brownian motion, centralized clearinghouse, Chuck Templeton: OpenTable, clean water, conceptual framework, constrained optimization, continuous double auction, creative destruction, deferred acceptance, Donald Trump, Edward Glaeser, experimental subject, first-price auction, framing effect, frictionless, fundamental attribution error, George Akerlof, Goldman Sachs: Vampire Squid, Gunnar Myrdal, helicopter parent, information asymmetry, Internet of things, invisible hand, Isaac Newton, iterative process, Jean Tirole, Jeff Bezos, Johann Wolfgang von Goethe, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Arrow, late fees, linear programming, Lyft, market clearing, market design, market friction, medical residency, multi-sided market, mutually assured destruction, Nash equilibrium, Occupy movement, Pareto efficiency, Paul Samuelson, Peter Thiel, pets.com, pez dispenser, pre–internet, price mechanism, price stability, prisoner's dilemma, profit motive, proxy bid, RAND corporation, ride hailing / ride sharing, Robert Shiller, Robert Shiller, Ronald Coase, school choice, school vouchers, sealed-bid auction, second-price auction, second-price sealed-bid, sharing economy, Silicon Valley, spectrum auction, Steve Jobs, Tacoma Narrows Bridge, technoutopianism, telemarketer, The Market for Lemons, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, transaction costs, two-sided market, uranium enrichment, Vickrey auction, Vilfredo Pareto, winner-take-all economy

Akerlof, with characteristic modesty, has observed that this was merely a return to the approach that iconic economists like Joseph Schumpeter and John Maynard Keynes had taken to describe the economy, where there was no pretension of modeling a complete system. Aspects of a market just drop from the sky. For instance, why do humans have the tendencies and instincts in market transactions that Keynes famously described as our “animal spirits”? Where did the entrepreneurs that wrought Schumpeter’s “creative destruction” come from? In both cases, they were assumed into existence, based on shrewd observation or perhaps appeal to the work of other disciplines. (If you want to understand animal spirits or other whims of human nature, economists are probably the last people you’d want to ask.) The journal editors and peer reviewers who read the paper only saw the square that Akerlof was describing rather than the topological insight, as it were.

., 169–170, 172 Camp, Garrett, 170 candle auctions, 82 capitalism, free-market, 172–173 car service platform, 169–171 cash-back bonus, 116 cash-for-sludge transactions, 167–169 See also Summers, Larry centralized clearinghouses, 140–141 Champagne fairs, 105–106, 126–128 Changi POW camp, 175–177 Le Chatelier, Henry Louis, 29 Le Chatelier’s principle, 29 cheap talk, 62–66, 69 chess, difference between Cold War and, 26 See also poker, bluffing in child labor, 180 cigarettes, as currency in German POW camp, 8–9 Clarke, Edward, 93 Clavell, James, 175 clerkship offers, with federal judges, 140 coat hook, 151–152, 174 Codes of the Underworld (Gambetta), 68 Cold War, difference between chess and, 26 See also poker, bluffing in Collectible Supplies, 128–129 “College Admissions and the Stability of Marriage” (Gale and Shapley), 137 commitment, signs of, 62–63, 69–71, 72–75 community game, 178–179 competition models of, 35, 166, 172–173 platform, 124–126 unethical conduct with, 180–181 “Competition is for Losers” (Thiel), 173 competitive equilibrium, existence of, 29, 31–34, 36–37, 40, 45, 76 competitive markets, 35, 124–126, 172–174, 180–181 See also platforms competitive signaling, 70–71 congestion pricing model, 86, 94 constrained optimization, 85–86, 133 contractorsfromhell.com, 120 copycat competitors, 172–173 corporate philanthropy, 72–75 Cowles, Alfred, 25, 27 Cowles Commission for Research in Economics, 25, 27, 31, 134 “creative destruction,” 50 credit card platforms, 113–116, 123–124 criminal organizations, informational challenges of, 68 currency, at Stalag VII-A POW camp, 8–9 customer feedback, 52, 74–75 Davis, Harry, 154, 157 Debreu, Gérard, 20, 24, 25, 32–33, 36–37 decentralized match, 139–140 deferred acceptance algorithm, 137–141, 145–149 Delmonico, Frank, 164 descending price auctions, 81–82 design, auction, 14, 101–102 Digital Dealing (Hall), 94 Discover card, 115–116 distribution of income, 22 Domar, Evsey, 36–37 Dorosin, Neil, 142–144 Douglas Aircraft Company, 25 Dow, Bob, 1–2 Dow, Edna, 1–2 Drèze, Jacques, 85–86 dumping toxic waste, transactions for, 167–169 Dutch auctions, 81–82 dysfunction, market, 36, 75–77, 143 eBay adverse selection on, 51–55, 57 auction listings, 94–97 concerns on model for, 43, 46, 48 on seller motivation for giving to charities, 73–75 start of, 39–41 as two-sided market, 109, 119 e-commerce, 41–43, 52–55 “The Economic Organization of a P.O.W.


pages: 268 words: 74,724

Who Needs the Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank by John Tamny

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Airbnb, bank run, banks create money, Bernie Madoff, bitcoin, Bretton Woods, Carmen Reinhart, corporate raider, correlation does not imply causation, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, Donald Trump, Downton Abbey, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, Home mortgage interest deduction, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, liquidity trap, Mark Zuckerberg, market bubble, money market fund, moral hazard, mortgage tax deduction, NetJets, offshore financial centre, oil shock, peak oil, Peter Thiel, price stability, profit motive, quantitative easing, race to the bottom, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Steve Jobs, The Wealth of Nations by Adam Smith, too big to fail, Uber for X, War on Poverty, yield curve

Compare this to the three decades prior to the post-2008 regulatory buildup, in which an average of more than one hundred new banks opened per year.16 Why the change? Some of it is happily attributable to market forces. As mentioned previously, nonbank sources of credit have been eroding the dominance of traditional banks for more than a century. The Internet has sped up the process of Schumpterian “creative destruction.” After that, the increasingly intrusive regulations foisted on traditional banks have rendered them rather weak relative to inventive outside-the-banking-system sources of credit. As Robert H. Smith described it in The Changed Face of Banking: After 2008 . . . banks came under new scrutiny from Washington involving pressure to reestablish themselves as safer, stronger partners to the financial system.

Forbes, http://www.forbes.com/pictures/mfl45ekhem/robert-downey-jr-20/. 14. Paul Scott, “From Washed-Up Drug Addict to $100M Man,” Daily Mail Online, May 23, 2013. 15. Ibid. CHAPTER FOUR 1. Claire Cain, “Wearing Your Failures on Your Sleeve,” New York Times, November 8, 2014. 2. Mike Isaac, “Upstarts Raiding Giants for Staff in Silicon Valley,” New York Times, August 19, 2015. 3. Thomas K. McCraw, Prophet of Innovation: Joseph Schumpeter and Creative Destruction (Cambridge, Mass.: Belknap Press, 2007), 70. 4. Ibid., 73. 5. Julianne Pepitone & Stacy Cawley, “Facebook’s first big investor, Peter Thiel, cashes out,” CNNMoney, August 20, 2012. 6. Peter Thiel, with Blake Masters, Zero to One (New York: Crown Business, 2014), 84. 7. Tim Harford, Adapt: Why Success Always Starts with Failure (New York: Farrar Strauss and Giroux, 2011), 236. 8. George Gilder, Knowledge and Power (Washington, D.C.: Regnery, 2013), 5. 9.


pages: 270 words: 73,485

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One by Meghnad Desai

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3D printing, bank run, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, correlation coefficient, correlation does not imply causation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, German hyperinflation, Gunnar Myrdal, Home mortgage interest deduction, imperial preference, income inequality, inflation targeting, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, market bubble, market clearing, means of production, Mexican peso crisis / tequila crisis, mortgage debt, Myron Scholes, negative equity, Northern Rock, oil shale / tar sands, oil shock, open economy, Paul Samuelson, price stability, purchasing power parity, pushing on a string, quantitative easing, reserve currency, rising living standards, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, seigniorage, Silicon Valley, Simon Kuznets, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, women in the workforce

The equilibrium tradition is the more dominant one, especially in recent years. The tradition of Marx and Wicksell takes the disequilibrium path. And there are insights in the disequilibrium tradition which can be illuminating. It was Joseph Schumpeter who gave economics not only a theory but a vision – weltanschauung – about how capitalism flourished through a series of cycles of booms and busts. Creative Destruction The second half of the nineteenth century witnessed one of the many episodes of globalization. This one was built on the industrial and financial revolutions. The new inventions in transport and communications – railroads, steamships and the introduction of the telegraph – had connected the many parts of the world. International trade had knitted together the world economy, spanning the Americas to the Antipodes and all continents in between.

(i) Clayton Act (i) Clinton Administration (i) closed economy (i), (ii), (iii), (iv), (v), (vi) Cobb, Charles (i) Cobb-Douglas Production Function (i), (ii) coincidence, vs.causation (i) Cold War (i) collateralized debt obligations (CDO) (i) colonization (i) Combinations (trade unions), as harmful (i) Committee on the Bank of England Charter (i) commodity markets price rises (i) regulation (i) Common Market (i) communications, advances in (i), (ii) companies, collapse of (i) comparative advantage (i) compatibility microeconomics/macroeconomics (i), (ii), (iii) unique static equilibrium/moving data (i) competition and efficiency (i) imperfect (i) theory of (Marshall) (i) computer technology development of (i), (ii); see also technological innovations stock markets (i) confidence, rise and fall (i) conflicting interests (i), (ii) Connally, John (i) consols (i) consumer credit (i) consumption function (i), (ii) contagion (i), (ii) control of money supply (i) convertibility (i) cooperation (i) correlation/coincidence, vs. causation (i) corruption (i) Countrywide Financial (i) Cournot, Antoine Augustin (i) Cowles, Alfred (i) Cowles Foundation (i) creative destruction (i) credit business dependence (i) cheap (i) as driver of investment (i) credit cards (i) credit default swaps (CDS) (i) crises beginnings of (i) developing countries (i) Juglar’s theory (i) Mexican (i) proliferation (i) as recurrent (i), (ii) as regular occurrences (i) ten year pattern (i) unpredictability (i) crisis of 1825 (i) crisis of profitability (i) Crosland, Anthony (i) The Future of Socialism (i) currency, convertibility (i) depreciation (i) pegging (i), (ii) cycles (i) banking system as root (i) combinations of (i) Goodwin (i), (ii) Juglar’s study (i) Keynes on (i) long (i) loss of interest in (i) Marx’s theories (i), (ii) measuring (i) origins (i) random events (i) reproduction by Keynesian models (i) rocking horse analogy (i) short (i) Wicksell’s theory (i) see also Frisch; Kondratieff cycles debit cards (i) Debreu, Gerard (i), (ii) debt crises (i) easy availability (i) levels (i) see also government debt debt-fueled boom (i) debts brokers (i) farmers’ (i) post-World War II (i) purchase of (i) decisions, patterns (i) deficits, endemic (i) deflation (i) deindustrialization (i), (ii) Deism (i) demand, factors in (i) demographics (i) demutualization (i) depreciation (i) advocacy of (i) Ricardo’s theory (i) value of goods (i) deregulation, banking (i) derivatives (i), (ii) Deserted Village, The (Oliver Goldsmith) (i) deutschmark (i) developing countries, Wicksellian boom (i) disequilibrium dynamic (i), (ii), (iii), (iv) stock (i) system, capitalism as (i) tradition (i) displacement effect, technological innovations (i) division of knowledge (i) division of labor (i), (ii) dollar purchasing power (i) as reserve currency (i), (ii) dollar exchange standard (i), (ii) dot.com boom (i) double deficits (i) Douglas, Paul (i), (ii) Dow Jones (i) Duménil, Gerard (i) durable goods (i) Dutch Disease (i) dynamic stochastic general equilibrium (DSGE) models (i), (ii) econometric modeling (i), (ii) Econometric Society (i), (ii) econometrics (i), (ii) economic activity, shift (i) economic analysis, applicability (i) economic cycles (i) Marx/Engels (i) see also Kondratieff cycles economic data, proliferation (i) economic growth, problems of (i) economic policy, activism (i) economic sectors, conflicting interests (i), (ii) economic slump, post-World War I (i) economic stagnation (i) economic theory (i) and individual lives (i) economic trajectories (i) economic vocabulary (i), (ii), (iii) economics background to (i) celebrated (i) changing scope of (i) as dismal science (i) professionalization (i) teaching of (i) “Economics and Knowledge” (Hayek) (i) economies, interconnections (i) economies of scale (i) economists, research methods (i) economy changing nature of (i) equilibrium/disequilibrium (i) visions of (i) efficiency, use of term (i) efficient market hypothesis (EMH) (i), (ii), (iii) Eisenhower, Dwight D.


pages: 222 words: 70,132

Move Fast and Break Things: How Facebook, Google, and Amazon Cornered Culture and Undermined Democracy by Jonathan Taplin

1960s counterculture, 3D printing, affirmative action, Affordable Care Act / Obamacare, Airbnb, Amazon Mechanical Turk, American Legislative Exchange Council, Apple's 1984 Super Bowl advert, back-to-the-land, barriers to entry, basic income, battle of ideas, big data - Walmart - Pop Tarts, bitcoin, Brewster Kahle, Buckminster Fuller, Burning Man, Clayton Christensen, commoditize, creative destruction, crony capitalism, crowdsourcing, data is the new oil, David Brooks, David Graeber, don't be evil, Donald Trump, Douglas Engelbart, Douglas Engelbart, Dynabook, Edward Snowden, Elon Musk, equal pay for equal work, Erik Brynjolfsson, future of journalism, future of work, George Akerlof, George Gilder, Google bus, Hacker Ethic, Howard Rheingold, income inequality, informal economy, information asymmetry, information retrieval, Internet Archive, Internet of things, invisible hand, Jaron Lanier, Jeff Bezos, job automation, John Markoff, John Maynard Keynes: technological unemployment, John von Neumann, Joseph Schumpeter, Kevin Kelly, Kickstarter, labor-force participation, life extension, Marc Andreessen, Mark Zuckerberg, Menlo Park, Metcalfe’s law, Mother of all demos, move fast and break things, move fast and break things, natural language processing, Network effects, new economy, Norbert Wiener, offshore financial centre, packet switching, Paul Graham, Peter Thiel, Plutocrats, plutocrats, pre–internet, Ray Kurzweil, recommendation engine, rent-seeking, revision control, Robert Bork, Robert Gordon, Robert Metcalfe, Ronald Reagan, Sand Hill Road, secular stagnation, self-driving car, sharing economy, Silicon Valley, Silicon Valley ideology, smart grid, Snapchat, software is eating the world, Steve Jobs, Stewart Brand, technoutopianism, The Chicago School, The Market for Lemons, Tim Cook: Apple, trade route, transfer pricing, trickle-down economics, Tyler Cowen: Great Stagnation, universal basic income, unpaid internship, We wanted flying cars, instead we got 140 characters, web application, Whole Earth Catalog, winner-take-all economy, women in the workforce, Y Combinator

Since at least 1995, professors at business schools have dismissed this kind of behavior as a natural outgrowth of the Austrian economist Joseph Schumpeter’s notion of “creative destruction.” The growth of the tech economy with its constant change would create a new kind of employee: oriented to the short term and focused on potential ability rather than acquired knowledge. But most of us are like Epicurus or even the monks of Camaldoli. We need a life narrative in which we take pride in being good at a specific task, and we value the experiences we have lived through. Many of my colleagues on the faculty of USC certainly approach their work with this reverence for knowledge, but their students have new pressures on them to adopt the culture of creative destruction. They are expected to get a well-paying job the minute they leave college. No more thoughts of bumming around Europe for a year before you “get serious.”


pages: 105 words: 18,832

The Collapse of Western Civilization: A View From the Future by Naomi Oreskes, Erik M. Conway

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anti-communist, correlation does not imply causation, creative destruction, en.wikipedia.org, energy transition, Intergovernmental Panel on Climate Change (IPCC), invisible hand, laissez-faire capitalism, market fundamentalism, mass immigration, means of production, oil shale / tar sands, Pierre-Simon Laplace, road to serfdom, Ronald Reagan, stochastic process, the built environment, the market place

Typically these entities were operated for-profit, with the surplus value produced by workers funneled to owners, managers, and “investors,” third parties who owned “stock” in a company but had lia-bility neither for its debts nor its social consequences. The separation of work from ownership produced a concentration of wealth amongst a tiny elite, who could then purchase more favorable laws and regulations from their host governments. One popular notion about capitalism of the period was that it operated through a process of creative destruc-tion. Ultimately, capitalism was paralyzed in the face of the rapid climate destabilization it drove, destroying itself. carbon-combustion complex The interlinked fossil fuel extraction, refinement, and combustion industries, L e x i c o n o f A r c h A i c T e r m s 55 financiers, and government “regulatory” agencies that enabled and defended destabilization of the world’s climate in the name of employment, growth, and prosperity.


pages: 441 words: 136,954

That Used to Be Us by Thomas L. Friedman, Michael Mandelbaum

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3D printing, Affordable Care Act / Obamacare, Albert Einstein, Amazon Web Services, American Society of Civil Engineers: Report Card, Andy Kessler, Ayatollah Khomeini, bank run, barriers to entry, Berlin Wall, blue-collar work, Bretton Woods, business process, call centre, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, Climatic Research Unit, cloud computing, collective bargaining, corporate social responsibility, creative destruction, Credit Default Swap, crowdsourcing, delayed gratification, energy security, Fall of the Berlin Wall, fear of failure, full employment, Google Earth, illegal immigration, immigration reform, income inequality, Intergovernmental Panel on Climate Change (IPCC), job automation, Kenneth Rogoff, knowledge economy, Lean Startup, low skilled workers, Mark Zuckerberg, market design, mass immigration, more computing power than Apollo, Network effects, obamacare, oil shock, pension reform, Report Card for America’s Infrastructure, rising living standards, Ronald Reagan, Rosa Parks, Saturday Night Live, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Steve Jobs, the scientific method, Thomas L Friedman, too big to fail, University of East Anglia, WikiLeaks

With the Securities Act of 1933, often referred to as the “truth in securities” law, and the re-regulation of the banking system, FDR stabilized the country’s finances, and these measures may well have saved capitalism in the United States. Moreover, with the introduction of the Social Security and unemployment insurance programs in a 1935 Fireside Chat, he founded the American social safety net, which is itself an indirect guarantor of capitalism. The competition that is central to a free-market economy produces losers as well as winners. This process of “creative destruction” so central to capitalism is just that—creative and destructive—and we cannot sustain the destruction without the social safety net that affords some protection to the losers. Without it, they might seek to bring down the very system that has made Americans wealthy. As America enters a necessary debate about how generous unemployment insurance, Social Security, and Medicare should be, it is well to remember that this social safety net ensures the legitimacy and stability of the free-market economy.

In the wake of the crisis, Congress passed and the president signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which imposed new regulations on the financial industry with the goal of making its operations safer. The banking industry, however, did everything it could to weaken that legislation, and the ultimate impact of the reforms remains to be seen. The result, as the Columbia University economist Jagdish Bhagwati observed, was that a financial industry built to finance “creative destruction” (the formation of new companies and industries to replace old ones) ended up promoting “destructive creation” (the buying and selling of financial instruments with little intrinsic value), the collective implosion of which threatened the whole economy. The fact that virtually none of the main culprits in bringing about this huge destruction of wealth has suffered any legal penalties suggests that our regulations need some updating.

For one thing, whatever the pathologies of the American political system, American society retains the characteristics that made the United States exceptional among the countries of the world; the country remains full of people who have not gotten the word. In general, if you were to design a country ideally suited to flourish in the world we are living in, it would look more like the United States than any other. In a world in which individual creativity is becoming ever more important, America supports individual achievement and celebrates the quirky. In a world in which technological change and creative destruction take place at warp speed, requiring maximal economic flexibility, the American economy is as flexible as any on the planet. In a world in which transparent, reliable institutions, and especially the rule of law, are more important than ever for risk-taking and innovation, the United States has an outstanding legal environment. In an age in which even the cleverest inventors and entrepreneurs have to try and fail, sometimes repeatedly, before finding the business equivalent of a mother lode, the American business culture understands that failure is often the necessary condition for success.


pages: 399 words: 155,913

The Right to Earn a Living: Economic Freedom and the Law by Timothy Sandefur

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barriers to entry, big-box store, Cass Sunstein, clean water, collective bargaining, corporate governance, corporate social responsibility, creative destruction, Edward Glaeser, housing crisis, joint-stock company, Joseph Schumpeter, labour mobility, minimum wage unemployment, positional goods, price stability, profit motive, race to the bottom, Ralph Nader, RAND corporation, rent control, Robert Bork, Silicon Valley, The Wealth of Nations by Adam Smith, trade route, transaction costs, Upton Sinclair, urban renewal, wealth creators

It also encourages economic efficiency by removing from the marketplace those producers who are unable or unwilling to compete against more efficient firms. They can choose to go into another business instead or to find a niche market wherein they can specialize. This is admittedly disruptive to the entrepreneurs and workers who work for the less efficient firms and who, when those firms fail, find themselves temporarily unemployed and must obtain new jobs or new skills. This is the process that economist Joseph Schumpeter famously called “creative destruction.” Although these economic readjustments may be difficult for workers, the result will be greater economic efficiency and more wealth for everyone, including those who were formerly unemployed.10 In the 1930s, the creative nature of this dynamism was not widely respected, and intellectuals professing a doctrine of “rational” economic planning by government assailed the basic concepts of supply and demand, claiming that government control over the economy would eliminate the alleged inefficiencies of capitalism, equalize income among citizens, and organize economic activity with precision.11 This planning was generally characterized as “reform” and as a way to protect small-scale producers and family farmers from unfair competition by powerful industries, but the reality was quite different: the new economic planning systems stifled entrepreneurship and innovation and worsened the Great Depression.

Corporations Code §§ 209, 2005(d). 57. Roger Pilon, “Corporations and Rights: On Treating Corporate People Justly,” Georgia Law Review 13 (1979): 1297. 58. Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518 (1819). 59. Charles River Bridge v. Warren Bridge, 36 U.S. (11 Pet.) 420 (1837). 60. Ibid. at 545–46. 61. Ibid. at 548. 62. Ibid. at 549. 63. Ibid. at 552–53. 64. Stanley Kutler, Privilege and Creative Destruction: The Charles River Bridge Case (New York: W. W. Norton, 1978), p. 94. 65. Ibid., pp. 94–95. 66. Ibid., p. 137. 301 Notes for Pages 31–40 67. William H. Page, “Ideological Conflict and the Origins of Antitrust Policy,” Tulane Law Review 66 (1991): 31. 68. Kelo v. New London, 545 U.S. 469 (2005). 69. See, for example, Slaughterhouse Cases, 83 U.S. (16 Wall.) 36, 87–88 (1872) (Field, J., dissenting); and Munn v.

Coryell, 40–41 Cornwell, Jo Ann, 147–48 corporation, evolution, xvi, 17 general incorporation laws, 28–29 monopolistic corporate charters, 27–29 17th and 18th century, 26–29 19th century, 27–31, 48–49 see also monopoly, evolution corporations archaic vision of, 31–37 benefits of, 36–37 corporate charters, 27–31, 70–75 corporate privileges, 33–35 as creatures of the state, 29, 32–33 definition changes, 26–29, 37 Friedman on corporate social responsibility, 35 marriage analogy, 29 as monopolies, 29–31 as “persons,” 34–35 pooled resources, 35, 36 present-day antitrust laws, 50–55 protection from social legislation, 5–6 stakeholder theory and stakeholders, 35–36 see also monopolies Court of Federal Claims, raisin case and, 168–69 Craigmiles v. Giles, 151–53, 159 creative destruction, 126 creative faculty, aspect of humanity, 3 creative works, freedom of expression, 194–95 Crescent City Livestock Landing and Slaughterhouse Company, 42, 73 criminal law maxim (innocent until proven guilty), 130, 274 Curtis, Michael Kent, 288 DaimlerChrysler Corp. v. Cuno, 179–82 dairy industry regulation. see milk production and sales Danaher, John, 226 Danbury Hatters’ Case. see Loewe v.


pages: 462 words: 150,129

The Rational Optimist: How Prosperity Evolves by Matt Ridley

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

23andMe, agricultural Revolution, air freight, back-to-the-land, banking crisis, barriers to entry, Bernie Madoff, British Empire, call centre, carbon footprint, Cesare Marchetti: Marchetti’s constant, charter city, clean water, cloud computing, cognitive dissonance, collateralized debt obligation, colonial exploitation, colonial rule, Corn Laws, creative destruction, credit crunch, David Ricardo: comparative advantage, decarbonisation, dematerialisation, demographic dividend, demographic transition, double entry bookkeeping, Edward Glaeser, en.wikipedia.org, everywhere but in the productivity statistics, falling living standards, feminist movement, financial innovation, Flynn Effect, food miles, Gordon Gekko, greed is good, Hans Rosling, happiness index / gross national happiness, haute cuisine, Hernando de Soto, income inequality, income per capita, Indoor air pollution, informal economy, Intergovernmental Panel on Climate Change (IPCC), invention of agriculture, invisible hand, James Hargreaves, James Watt: steam engine, Jane Jacobs, John Nash: game theory, joint-stock limited liability company, Joseph Schumpeter, Kevin Kelly, knowledge worker, Kula ring, Mark Zuckerberg, meta analysis, meta-analysis, mutually assured destruction, Naomi Klein, Northern Rock, nuclear winter, oil shale / tar sands, out of africa, packet switching, patent troll, Pax Mongolica, Peter Thiel, phenotype, Plutocrats, plutocrats, Ponzi scheme, Productivity paradox, profit motive, purchasing power parity, race to the bottom, Ray Kurzweil, rent-seeking, rising living standards, Silicon Valley, spice trade, spinning jenny, stem cell, Steve Jobs, Steven Pinker, Stewart Brand, supervolcano, technological singularity, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, ultimatum game, upwardly mobile, urban sprawl, Vernor Vinge, Vilfredo Pareto, wage slave, working poor, working-age population, Y2K, Yogi Berra, zero-sum game

It was Joseph Schumpeter who pointed out that the competition which keeps a businessman awake at night is not that from his rivals cutting prices, but that of entrepreneurs making his product obsolete. As Kodak and Fuji slugged it out for dominance in the 35mm film industry in the 1990s, digital photography began to extinguish the entire market for analogue film – as analogue records and analogue video cassettes had gone before. Creative destruction, Schumpeter called it. His point was that there is just as much creation going on as destruction – that the growth of digital photography would create as many jobs in the long run as were lost in analogue, or that the savings pocketed by a Wal-Mart customer are soon spent on other things, leading to the opening of new stores to service those new demands. In America, roughly 15 per cent of jobs are destroyed every year; and roughly 15 per cent created.

Thanks to the internet, each is giving according to his ability to each according to his needs, to a degree that never happened in Marxism. This catallaxy will not go smoothly, or without resistance. Natural and unnatural disasters will still happen. Governments will bail out big corporations and big bureaucracies, hand them special favours such as subsidies or carbon rations and regulate them in such a way as to create barriers to entry, slowing down creative destruction. Chiefs, priests, thieves, financiers, consultants and others will appear on all sides, feeding off the surplus generated by exchange and specialisation, diverting the life-blood of the catallaxy into their own reactionary lives. It happened in the past. Empires bought stability at the price of creating a parasitic court; monotheistic religions bought social cohesion at the price of a parasitic priestly class; nationalism bought power at the expense of a parasitic military; socialism bought equality at the price of a parasitic bureaucracy; capitalism bought efficiency at the price of parasitic financiers.

Abbasids 161, 178 Abelard, Peter 358 aborigines (Australian): division of labour 62, 63, 76; farming 127; technological regress 78–84; trade 90–91, 92 abortion, compulsory 203 Abu Hureyra 127 Acapulco 184 accounting systems 160, 168, 196 Accra 189 Acemoglu, Daron 321 Ache people 61 Acheulean tools 48–9, 50, 275, 373 Achuar people 87 acid rain 280, 281, 304–6, 329, 339 acidification of oceans 280, 340–41 Adams, Henry 289 Aden 177 Adenauer, Konrad 289 Aegean sea 168, 170–71 Afghanistan 14, 208–9, 315, 353 Africa: agriculture 145, 148, 154–5, 326; AIDS epidemic 14, 307–8, 316, 319, 320, 322; colonialism 319–20, 321–2; demographic transition 210, 316, 328; economic growth 315, 326–8, 332, 347; international aid 317–19, 322, 328; lawlessness 293, 320; life expectancy 14, 316, 422; per capita income 14, 315, 317, 320; poverty 314–17, 319–20, 322, 325–6, 327–8; prehistoric 52–5, 65–6, 83, 123, 350; property rights 320, 321, 323–5; trade 187–8, 320, 322–3, 325, 326, 327–8; see also individual countries African-Americans 108 agricultural employment: decline in 42–3; hardships of 13, 219–20, 285–6 agriculture: early development of 122–30, 135–9, 352, 387, 388; fertilisers, development of 135, 139–41, 142, 146, 147, 337; genetically modified (GM) crops 28, 32, 148, 151–6, 283, 358; hybrids, development of 141–2, 146, 153; and trade 123, 126, 127–33, 159, 163–4; and urbanisation 128, 158–9, 163–4, 215; see also farming; food supply Agta people 61–2 aid, international 28, 141, 154, 203, 317–19, 328 AIDS 8, 14, 307–8, 310, 316, 319, 320, 322, 331, 353 AIG (insurance corporation) 115 air conditioning 17 air pollution 304–5 air travel: costs of 24, 37, 252, 253; speed of 253 aircraft 257, 261, 264, 266 Akkadian empire 161, 164–5 Al-Ghazali 357 Al-Khwarizmi, Muhammad ibn Musa 115 Al-Qaeda 296 Albania 187 Alcoa (corporation) 24 Alexander the Great 169, 171 Alexander, Gary 295 Alexandria 171, 175, 270 Algeria 53, 246, 345 alphabet, invention of 166, 396 Alps 122, 178 altruism 93–4, 97 aluminium 24, 213, 237, 303 Alyawarre aborigines 63 Amalfi 178 Amazon (corporation) 21, 259, 261 Amazonia 76, 138, 145, 250–51 amber 71, 92 ambition 45–6, 351 Ames, Bruce 298–9 Amish people 211 ammonia 140, 146 Amsterdam 115–16, 169, 259, 368 Amsterdam Exchange Bank 251 Anabaptists 211 Anatolia 127, 128, 164, 165, 166, 167 Ancoats, Manchester 214 Andaman islands 66–7, 78 Andes 123, 140, 163 Andrew, Deroi Kwesi 189 Angkor Wat 330 Angola 316 animal welfare 104, 145–6 animals: conservation 324, 339; extinctions 17, 43, 64, 68, 69–70, 243, 293, 302, 338–9; humans’ differences from other 1, 2–4, 6, 56, 58, 64 Annan, Kofi 337 Antarctica 334 anti-corporatism 110–111, 114 anti-slavery 104, 105–6, 214 antibiotics 6, 258, 271, 307 antimony 213 ants 75–6, 87–8, 192 apartheid 108 apes 56–7, 59–60, 62, 65, 88; see also chimpanzees; orang-utans ‘apocaholics’ 295, 301 Appalachia 239 Apple (corporation) 260, 261, 268 Aquinas, St Thomas 102 Arabia 66, 159, 176, 179 Arabian Sea 174 Arabs 89, 175, 176–7, 180, 209, 357 Aral Sea 240 Arcadia Biosciences (company) 31–2 Archimedes 256 Arctic Ocean 125, 130, 185, 334, 338–9 Argentina 15, 186, 187 Arikamedu 174 Aristotle 115, 250 Arizona 152, 246, 345 Arkwright, Sir Richard 227 Armenians 89 Arnolfini, Giovanni 179 art: cave paintings 2, 68, 73, 76–7; and commerce 115–16; symbolism in 136; as unique human trait 4 Ashur, Assyria 165 Asimov, Isaac 354 Asoka the Great 172–3 aspirin 258 asset price inflation 24, 30 Assyrian empire 161, 165–6, 167 asteroid impacts, risk of 280, 333 astronomy 221, 270, 357 Athabasca tar sands, Canada 238 Athens 115, 170, 171 Atlantic Monthly 293 Atlantic Ocean 125, 170 Attica 171 Augustus, Roman emperor 174 Augustus the Strong, Elector of Saxony 184–5 Australia: climate 127, 241, 300, 334; prehistoric 66, 67, 69–70, 127; trade 187; see also aborigines (Australian); Tasmania Austria 132 Ausubel, Jesse 239, 346, 409 automobiles see cars axes: copper 123, 131, 132, 136, 271; stone 2, 5, 48–9, 50, 51, 71, 81, 90–91, 92, 118–19, 271 Babylon 21, 161, 166, 240, 254, 289 Bacon, Francis 255 bacteria: cross fertilisation 271; and pest control 151; resistance to antibiotics 6, 258, 271, 307; symbiosis 75 Baghdad 115, 177, 178, 357 Baines, Edward 227 Baird, John Logie 38 baking 124, 130 ‘balance of nature’, belief in 250–51 Balazs, Etienne 183 bald eagles 17, 299 Bali 66 Baltic Sea 71, 128–9, 180, 185 Bamako 326 bananas 92, 126, 149, 154, 392 Bangladesh 204, 210, 426 Banks, Sir Joseph 221 Barigaza (Bharuch) 174 barley 32, 124, 151 barrels 176 bartering vii, 56–60, 65, 84, 91–2, 163, 356 Basalla, George 272 Basra 177 battery farming 104, 145–6 BBC 295 beads 53, 70, 71, 73, 81, 93, 162 beef 186, 224, 308; see also cattle bees, killer 280 Beijing 17 Beinhocker, Eric 112 Bell, Alexander Graham 38 Bengal famine (1943) 141 benzene 257 Berlin 299 Berlin, Sir Isaiah 288 Bernard of Clairvaux, St 358 Berners-Lee, Sir Tim 38, 273 Berra, Yogi 354 Besant, Annie 208 Bhutan 25–6 Bible 138, 168, 396 bicycles 248–9, 263, 269–70 bin Laden, Osama 110 biofuels 149, 236, 238, 239, 240–43, 246, 300, 339, 343, 344, 346, 393 Bird, Isabella 197–8 birds: effects of pollution on 17, 299; killed by wind turbines 239, 409; nests 51; sexual differences 64; songbirds 55; see also individual species bireme galleys 167 Birmingham 223 birth control see contraception birth rates: declining 204–212; and food supply 192, 208–9; and industrialisation 202; measurement of 205, 403; population control policies 202–4, 208; pre-industrial societies 135, 137; and television 234; and wealth 200–201, 204, 205–6, 209, 211, 212; see also population growth Black Death 181, 195–6, 197, 380 Black Sea 71, 128, 129, 170, 176, 180 blogging 257 Blombos Cave, South Africa 53, 83 blood circulation, discovery of 258 Blunt, John 29 boat-building 167, 168, 177; see also canoes; ship-building Boers 321, 322 Bohemia 222 Bolivia 315, 324 Bolsheviks 324 Borlaug, Norman 142–3, 146 Borneo 339 Bosch, Carl 140, 412 Botswana 15, 316, 320–22, 326 Bottger, Johann Friedrich 184–5 Boudreaux, Don 21, 214 Boulton, Matthew 221, 256, 413–14 bows and arrows 43, 62, 70, 82, 137, 251, 274 Boxgrove hominids 48, 50 Boyer, Stanley 222, 405 Boyle, Robert 256 Bradlaugh, Charles 208 brain size 3–4, 48–9, 51, 55 Bramah, Joseph 221 Branc, Slovakia 136 Brand, Stewart 154, 189, 205 Brando, Marlon 110 brass 223 Brazil 38, 87, 123, 190, 240, 242, 315, 358 bread 38, 124, 140, 158, 224, 286, 392 bridges, suspension 283 Brin, Sergey 221, 405 Britain: affluence 12, 16, 224–5, 236, 296–7; birth rates 195, 200–201, 206, 208, 227; British exceptionalism 200–202, 221–2; climate change policy 330–31; consumer prices 24, 224–5, 227, 228; copyright system 267; enclosure acts 226, 323, 406; energy use 22, 231–2, 232–3, 342–3, 368, 430; ‘glorious revolution’ (1688) 223; income equality 18–19, 218; industrial revolution 201–2, 216–17, 220–32, 255–6, 258–9; life expectancy 15, 17–18; National Food Service 268; National Health Service 111, 261; parliamentary reform 107; per capita income 16, 218, 227, 285, 404–5; productivity 112; property rights 223, 226, 323–4; state benefits 16; tariffs 185–6, 186–7, 223; see also England; Scotland; Wales British Empire 161, 322 bronze 164, 168, 177 Brosnan, Sarah 59 Brown, Lester 147–8, 281–2, 300–301 Brown, Louise 306 Bruges 179 Brunel, Sir Marc 221 Buddhism 2, 172, 357 Buddle, John 412 Buffett, Warren 106, 268 Bulgaria 320 Burkina Faso 154 Burma 66, 67, 209, 335 Bush, George W. 161 Butler, Eamonn 105, 249 Byblos 167 Byzantium 176, 177, 179 cabbages 298 ‘Caesarism’ 289 Cairo 323 Calcutta 190, 315 Calico Act (1722) 226 Califano, Joseph 202–3 California: agriculture 150; Chumash people 62, 92–3; development of credit card 251, 254; Mojave Desert 69; Silicon Valley 221–2, 224, 257, 258, 259, 268 Cambodia 14, 315 camels 135, 176–7 camera pills 270–71 Cameroon 57 Campania 174, 175 Canaanites 166, 396 Canada 141, 169, 202, 238, 304, 305 Canal du Midi 251 cancer 14, 18, 293, 297–9, 302, 308, 329 Cannae, battle of 170 canning 186, 258 canoes 66, 67, 79, 82 capitalism 23–4, 101–4, 110, 115, 133, 214, 258–62, 291–2, 311; see also corporations; markets ‘Captain Swing’ 283 capuchin monkeys 96–7, 375 Caral, Peru 162–3 carbon dioxide emissions 340–47; absorption of 217; and agriculture 130, 337–8; and biofuels 242; costs of 331; and economic growth 315, 332; and fossil fuels 237, 315; and local sourcing of goods 41–2; taxes 346, 356 Cardwell’s Law 411 Caribbean see West Indies Carnegie, Andrew 23 Carney, Thomas 173 carnivorism 51, 60, 62, 68–9, 147, 156, 241, 376 carrots 153, 156 cars: biofuel for 240, 241; costs of 24, 252; efficiency of 252; future production 282, 355; hybrid 245; invention of 189, 270, 271; pollution from 17, 242; sport-utility vehicles 45 The Rational Optimist 424 Carson, Rachel 152, 297–8 Carter, Jimmy 238 Carthage 169, 170, 173 Cartwright, Edmund 221, 263 Castro, Fidel 187 Catalhoyuk 127 catallaxy 56, 355–9 Catholicism 105, 208, 306 cattle 122, 132, 145, 147, 148, 150, 197, 321, 336; see also beef Caucasus 237 cave paintings 2, 68, 73, 76–7 Cavendish, Henry 221 cement 283 central heating 16, 37 cereals 124–5, 125–6, 130–31, 143–4, 146–7, 158, 163; global harvests 121 Champlain, Samuel 138–9 charcoal 131, 216, 229, 230, 346 charitable giving 92, 105, 106, 295, 318–19, 356 Charles V: king of Spain 30–31; Holy Roman Emperor 184 Charles, Prince of Wales 291, 332 Chauvet Cave, France 2, 68, 73, 76–7 Chernobyl 283, 308, 345, 421 Chicago World Fair (1893) 346 chickens 122–3, 145–6, 147, 148, 408 chickpeas 125 Childe, Gordon 162 children: child labour 104, 188, 218, 220, 292; child molestation 104; childcare 2, 62–3; childhood diseases 310; mortality rates 14, 15, 16, 208–9, 284 Chile 187 chimpanzees 2, 3, 4, 6, 29, 59–60, 87, 88, 97 China: agriculture 123, 126, 148, 152, 220; birth rate 15, 200–201; coal supplies 229–30; Cultural Revolution 14, 201; diet 241; economic growth and industrialisation 17, 109, 180–81, 187, 201, 219, 220, 281–2, 300, 322, 324–5, 328, 358; economic and technological regression 180, 181–2, 193, 229–30, 255, 321, 357–8; energy use 245; income equality 19; innovations 181, 251; life expectancy 15; Longshan culture 397; Maoism 16, 187, 296, 311; Ming empire 117, 181–4, 260, 311; per capita income 15, 180; prehistoric 68, 123, 126; serfdom 181–2; Shang dynasty 166; Song dynasty 180–81; trade 172, 174–5, 177, 179, 183–4, 187, 225, 228 chlorine 296 cholera 40, 310 Chomsky, Noam 291 Christianity 172, 357, 358, 396; see also Catholicism; Church of England; monasteries Christmas 134 Chumash people 62, 92–3 Church of England 194 Churchill, Sir Winston 288 Cicero 173 Cilicia 173 Cisco Systems (corporation) 268 Cistercians 215 civil rights movement 108, 109 Clairvaux Abbey 215 Clark, Colin 146, 227 Clark, Gregory 193, 201, 401, 404 Clarke, Arthur C. 354 climate change 328–47, 426–30; costs of mitigation measures 330–32, 333, 338, 342–4; death rates associated with 335–7; and ecological dynamism 250, 329–30, 335, 339; and economic growth 315, 331–3, 341–3, 347; effects on ecosystems 338–41; and food supply 337–8; and fossil fuels 243, 314, 342, 346, 426; historic 194, 195, 329, 334, 426–7; pessimism about 280, 281, 314–15, 328–9; prehistoric 54, 65, 125, 127, 130, 160, 329, 334, 339, 340, 352; scepticism about 111, 329–30, 426; solutions to 8, 315, 345–7 Clinton, Bill 341 Clippinger, John 99 cloth trade 75, 159, 160, 165, 172, 177, 180, 194, 196, 225, 225–9, 232 clothes: Britain 224, 225, 227; early homo sapiens 71, 73; Inuits 64; metal age 122; Tasmanian natives 78 clothing prices 20, 34, 37, 40, 227, 228 ‘Club of Rome’ 302–3 coal: and economic take-off 201, 202, 213, 214, 216–17; and generation of electricity 233, 237, 239, 240, 304, 344; and industrialisation 229–33, 236, 407; prices 230, 232, 237; supplies 302–3 coal mining 132, 230–31, 237, 239, 257, 343 Coalbrookdale 407 Cobb, Kelly 35 Coca-Cola (corporation) 111, 263 coffee 298–9, 392 Cohen, Mark 135 Cold War 299 collective intelligence 5, 38–9, 46, 56, 83, 350–52, 355–6 Collier, Paul 315, 316–17 colonialism 160, 161, 187, 321–2; see also imperialism Colorado 324 Columbus, Christopher 91, 184 combine harvesters 158, 392 combined-cycle turbines 244, 410 commerce see trade Commoner, Barry 402 communism 106, 336 Compaq (corporation) 259 computer games 273, 292 computers 2, 3, 5, 211, 252, 260, 261, 263–4, 268, 282; computing power costs 24; information storage capacities 276; silicon chips 245, 263, 267–8; software 99, 257, 272–3, 304, 356; Y2K bug 280, 290, 341; see also internet Confucius 2, 181 Congo 14–15, 28, 307, 316 Congreve, Sir William 221 Connelly, Matthew 204 conservation, nature 324, 339; see also wilderness land, expansion of conservatism 109 Constantinople 175, 177 consumer spending, average 39–40 containerisation 113, 253, 386 continental drift 274 contraception 208, 210; coerced 203–4 Cook, Captain James 91 cooking 4, 29, 38, 50, 51, 52, 55, 60–61, 64, 163, 337 copper 122, 123, 131–2, 160, 162, 164, 165, 168, 213, 223, 302, 303 copyright 264, 266–7, 326 coral reefs 250, 339–40, 429–30 Cordoba 177 corn laws 185–6 Cornwall 132 corporations 110–116, 355; research and development budgets 260, 262, 269 Cosmides, Leda 57 Costa Rica 338 cotton 37, 108, 149, 151–2, 162, 163, 171, 172, 202, 225–9, 230, 407; calico 225–6, 232; spinning and weaving 184, 214, 217, 219–20, 227–8, 232, 256, 258, 263, 283 Coughlin, Father Charles 109 Craigslist (website) 273, 356 Crapper, Thomas 38 Crathis river 171 creationists 358 creative destruction 114, 356 credit cards 251, 254 credit crunch (2008) 8–10, 28–9, 31, 100, 102, 316, 355, 399, 411 Cree Indians 62 Crete 167, 169 Crichton, Michael 254 Crick, Francis 412 crime: cyber-crime 99–100, 357; falling rates 106, 201; false convictions 19–20; homicide 14, 20, 85, 88, 106, 118, 201; illegal drugs 106, 186; pessimism about 288, 293 Crimea 171 crocodiles, deaths by 40 Crompton, Samuel 227 Crookes, Sir William 140, 141 cruelty 104, 106, 138–9, 146 crusades 358 Cuba 187, 299 ‘curse of resources’ 31, 320 cyber-crime 99–100, 357 Cyprus 132, 148, 167, 168 Cyrus the Great 169 Dalkon Shield (contraceptive device) 203 Dalton, John 221 Damascus 127 Damerham, Wiltshire 194 Danube, River 128, 132 Darby, Abraham 407 Darfur 302, 353 Dark Ages 164, 175–6, 215 Darwin, Charles 77, 81, 91–2, 105, 116, 350, 415 Darwin, Erasmus 256 Darwinism 5 Davy, Sir Humphry 221, 412 Dawkins, Richard 5, 51 DDT (pesticide) 297–8, 299 de Geer, Louis 184 de Soto, Hernando 323, 324, 325 de Waal, Frans 88 Dean, James 110 decimal system 173, 178 deer 32–3, 122 deflation 24 Defoe, Daniel 224 deforestation, predictions of 304–5, 339 Delhi 189 Dell (corporation) 268 Dell, Michael 264 demographic transition 206–212, 316, 328, 402 Denmark 200, 344, 366; National Academy of Sciences 280 Dennett, Dan 350 dentistry 45 depression (psychological) 8, 156 depressions (economic) 3, 31, 32, 186–7, 192, 289; see also economic crashes deserts, expanding 28, 280 Detroit 315, 355 Dhaka 189 diabetes 156, 274, 306 Diamond, Jared 293–4, 380 diamonds 320, 322 Dickens, Charles 220 Diesel, Rudolf 146 Digital Equipment Corporation 260, 282 digital photography 114, 386 Dimawe, battle of (1852) 321 Diocletian, Roman emperor 175, 184 Diodorus 169 diprotodons 69 discount merchandising 112–14 division of labour: Adam Smith on vii, 80; and catallaxy 56; and fragmented government 172; in insects 75–6, 87–8; and population growth 211; by sex 61–5, 136, 376; and specialisation 7, 33, 38, 46, 61, 76–7, 175; among strangers and enemies 87–9; and trust 100; and urbanisation 164 DNA: forensic use 20; gene transfer 153 dogs 43, 56, 61, 84, 125 Doll, Richard 298 Dolphin, HMS 169 dolphins 3, 87 Domesday Book 215 Doriot, Georges 261 ‘dot-communism’ 356 Dover Castle 197 droughts: modern 241, 300, 334; prehistoric 54, 65, 334 drug crime 106, 186 DuPont (corporation) 31 dyes 167, 225, 257, 263 dynamos 217, 233–4, 271–2, 289 dysentery 157, 353 eagles 17, 239, 299, 409 East India Company 225, 226 Easter Island 380 Easterbrook, Greg 294, 300, 370 Easterlin, Richard 26 Easterly, William 318, 411 eBay (corporation) 21, 99, 100, 114, 115 Ebla, Syria 164 Ebola virus 307 economic booms 9, 29, 216 economic crashes 7–8, 9, 193; credit crunch (2008) 8–10, 28–9, 31, 100, 102, 316, 355, 399, 411; see also depressions (economic) ecosystems, dynamism of 250–51, 303, 410 Ecuador 87 Edinburgh Review 285 Edison, Thomas 234, 246, 272, 412 education: Africa 320; Japan 16; measuring value of 117; and population control 209, 210; universal access 106, 235; women and 209, 210 Edwards, Robert 306 Eemian interglacial period 52–3 Egypt: ancient 161, 166, 167, 170, 171, 192, 193, 197, 270, 334; Mamluk 182; modern 142, 154, 192, 301, 323; prehistoric 44, 45, 125, 126; Roman 174, 175, 178 Ehrenreich, Barbara 291 Ehrlich, Anne 203, 301–2 Ehrlich, Paul 143, 190, 203, 207, 301–2, 303 electric motors 271–2, 283 electricity 233–5, 236, 237, 245–6, 337, 343–4; costs 23; dynamos 217, 233–4, 271–2, 289 elephants 51, 54, 69, 303, 321 Eliot, T.S. 289 email 292 emigration 199–200, 202; see also migrations empathy 94–8 empires, trading 160–61; see also imperialism enclosure acts 226, 323, 406 endocrine disruptors 293 Engels, Friedrich 107–8, 136 England: agriculture 194–6, 215; infant mortality 284; law 118; life expectancy 13, 284; medieval population 194–7; per capita income 196; scientific revolution 255–7; trade 75, 89, 104, 106, 118, 169, 194; see also Britain Enron (corporation) 29, 111, 385 Erie, Lake 17 Erie Canal 139, 283 ethanol 240–42, 300 Ethiopia 14, 316, 319; prehistoric 52, 53, 129 eugenics 288, 329 Euphrates river 127, 158, 161, 167, 177 evolution, biological 5, 6, 7, 49–50, 55–6, 75, 271, 350 Ewald, Paul 309 exchange: etiquette and ritual of 133–4; and innovation 71–2, 76, 119, 167–8, 251, 269–74; and pre-industrial economies 133–4; and property rights 324–5; and rule of law 116, 117–18; and sexual division of labour 65; and specialisation 7, 10, 33, 35, 37–8, 46, 56, 58, 75, 90, 132–3, 350–52, 355, 358–9; and trust 98–100, 103, 104; as unique human trait 56–60; and virtue 100–104; see also bartering; markets; trade executions 104 extinctions 17, 43, 64, 68, 69–70, 243, 293, 302, 338–9 Exxon (corporation) 111, 115 eye colour 129 Ezekiel 167, 168 Facebook (website) 262, 268, 356 factories 160, 214, 218, 219–20, 221, 223, 256, 258–9, 284–5 falcons 299 family formation 195, 209–210, 211, 227 famines: modern 141, 143, 154, 199, 203, 302; pessimism about 280, 281, 284, 290, 300–302, 314; pre-industrial 45, 139, 195, 197 Faraday, Michael 271–2 Fargione, Joseph 242 farming: battery 104, 145–6; free-range 146, 308; intensive 143–9; organic 147, 149–52, 393; slash-and-burn 87, 129, 130; subsidies 188, 328; subsistence 87, 138, 175–6, 189, 192, 199–200; see also agriculture; food supply fascism 289 Fauchart, Emmanuelle 264 fax machines 252 Feering, Essex 195 Fehr, Ernst 94–6 female emancipation 107, 108–9, 209 feminism 109 Ferguson, Adam 1 Ferguson, Niall 85 Fermat’s Last Theorem 275 fermenting 130, 241 Ferranti, Sebastian de 234 Fertile Crescent 126, 251 fertilisation, in-vitro 306 fertilisers 32, 129, 135, 139–41, 142, 143, 145, 146, 147, 148, 149–50, 152, 155, 200, 337 Fibonacci 178 figs 125, 129 filariasis 310 Finland 15, 35, 261 fire, invention of 4, 50, 51, 52, 60, 274 First World War 289, 309 fish, sex-change 280, 293 fish farming 148, 155 fishing 62, 63–4, 71, 78–9, 81–2, 125, 127, 129, 136, 159, 162, 163, 327 Fishman, Charles 113 Flanders 179, 181, 194 flight, powered 257, 261, 264, 266 Flinders Island 81, 84 floods 128, 250, 329, 331, 334, 335, 426 Florence 89, 103, 115, 178 flowers, cut 42, 327, 328 flu, pandemic 28, 145–6, 308–310 Flynn, James 19 Fontaine, Hippolyte 233–4 food aid 28, 141, 154, 203 food miles 41–2, 353, 392; see also local sourcing food preservation 139, 145, 258 food prices 20, 22, 23, 34, 39, 40, 42, 240, 241, 300 food processing 29–30, 60–61, 145; see also baking; cooking food retailing 36, 112, 148, 268; see also supermarkets food sharing 56, 59–60, 64 food supply: and biofuels 240–41, 243, 300; and climate change 337–8; and industrialisation 139, 201–2; pessimism about 280, 281, 284, 290, 300–302; and population growth 139, 141, 143–4, 146–7, 192, 206, 208–9, 300–302 Ford, Ford Maddox 188 Ford, Henry 24, 114, 189, 271 Forester, Jay 303 forests, fears of depletion 304–5, 339 fossil fuels: and ecology 237, 240, 304, 315, 342–3, 345–6; fertilisers 143, 150, 155, 237; and industrialisation 214, 216–17, 229–33, 352; and labour saving 236–7; and productivity 244–5; supplies 216–17, 229–30, 237–8, 245, 302–3; see also charcoal; coal; gas, natural; oil; peat Fourier analysis 283 FOXP2 (gene) 55, 375 fragmentation, political 170–73, 180–81, 184, 185 France: capital markets 259; famine 197; infant mortality 16; population growth 206, 208; revolution 324; trade 184, 186, 222 Franco, Francisco 186 Frank, Robert 95–6 Franken, Al 291 Franklin, Benjamin 107, 256 Franks 176 Fray Bentos 186 free choice 27–8, 107–110, 291–2 free-range farming 146, 308 French Revolution 324 Friedel, Robert 224 Friedman, Milton 111 Friend, Sir Richard 257 Friends of the Earth 154, 155 Fry, Art 261 Fuji (corporation) 114, 386 Fujian, China 89, 183 fur trade 169, 180 futurology 354–5 Gadir (Cadiz) 168–9, 170 Gaelic language 129 Galbraith, J.K. 16 Galdikas, Birute 60 Galilee, Sea of 124 Galileo 115 Gandhi, Indira 203, 204 Gandhi, Sanjay 203–4 Ganges, River 147, 172 gas, natural 235, 236, 237, 240, 302, 303, 337 Gates, Bill 106, 264, 268 GDP per capita (world), increases in 11, 349 Genentech (corporation) 259, 405 General Electric Company 261, 264 General Motors (corporation) 115 generosity 86–7, 94–5 genetic research 54, 151, 265, 306–7, 310, 356, 358 genetically modified (GM) crops 28, 32, 148, 151–6, 283, 358 Genghis Khan 182 Genoa 89, 169, 178, 180 genome sequencing 265 geothermal power 246, 344 Germany: Great Depression (1930s) 31; industrialisation 202; infant mortality 16; Nazism 109, 289; population growth 202; predicted deforestation 304, 305; prehistoric 70, 138; trade 179–80, 187; see also West Germany Ghana 187, 189, 316, 326 Gibraltar, Strait of 180 gift giving 87, 92, 133, 134 Gilbert, Daniel 4 Gilgamesh, King 159 Ginsberg, Allen 110 Gintis, Herb 86 Gladstone, William 237 Glaeser, Edward 190 Glasgow 315 glass 166, 174–5, 177, 259 glass fibre 303 Global Humanitarian Forum 337 global warming see climate change globalisation 290, 358 ‘glorious revolution’ (1688) 223 GM (genetically modified) crops 28, 148, 151–6, 283, 358 goats 122, 126, 144, 145, 197, 320 Goethe, Johann von 104 Goklany, Indur 143–4, 341, 426 gold 165, 177, 303 golden eagles 239, 409 golden toads 338 Goldsmith, Edward 291 Google (corporation) 21, 100, 114, 259, 260, 268, 355 Gore, Al 233, 291 Goths 175 Gott, Richard 294 Gramme, Zénobe Théophile 233–4 Grantham, George 401 gravity, discovery of 258 Gray, John 285, 291 Great Barrier Reef 250 Greece: ancient 115, 128, 161, 170–71, 173–4; modern 186 greenhouse gases 152, 155, 242, 329; see also carbon dioxide emissions Greenland: ice cap 125, 130, 313, 334, 339, 426; Inuits 61; Norse 380 Greenpeace 154, 155, 281, 385 Grottes des Pigeons, Morocco 53 Groves, Leslie 412 Growth is Good for the Poor (World Bank study) 317 guano 139–40, 302 Guatemala 209 Gujarat 162, 174 Gujaratis 89 Gustavus Adolphus, King of Sweden 184 Gutenberg, Johann 184, 253 Guth, Werner 86 habeas corpus 358 Haber, Fritz 140, 412 Hadza people 61, 63, 87 Haiti 14, 301, 315 Halaf people 130 Hall, Charles Martin 24 Halley, Edmond 256 HANPP (human appropriation of net primary productivity) number 144–5 Hanseatic merchants 89, 179–80, 196 Hansen, James 426 hanta virus 307 happiness 25–8, 191 Harappa, Indus valley 161–2 Hardin, Garrett 203 harems 136 Hargreaves, James 227, 256 Harlem, Holland 215–16 Harper’s Weekly 23 Harvey, William 256 hay 214–15, 216, 239, 408–9 Hayek, Friedrich 5, 19, 38, 56, 250, 280, 355 heart disease 18, 156, 295 ‘hedonic treadmill’ 27 height, average human 16, 18 Heller, Michael 265–6 Hellespont 128, 170 Henrich, Joe 77, 377 Henry II, King of England 118 Henry, Joseph 271, 272 Henry, William 221 Heraclitus 251 herbicides 145, 152, 153–4 herding 130–31 Hero of Alexandria 270 Herschel, Sir William 221 Hesiod 292 Hippel, Eric von 273 hippies 26, 110, 175 Hiroshima 283 Hitler, Adolf 16, 184, 296 Hittites 166, 167 HIV/AIDS 8, 14, 307–8, 310, 316, 319, 320, 322, 331, 353 Hiwi people 61 Hobbes, Thomas 96 Hock, Dee 254 Hohle Fels, Germany 70 Holdren, John 203, 207, 311 Holland: agriculture 153; golden age 185, 201, 215–16, 223; horticulture 42; industrialisation 215–16, 226; innovations 264; trade 31, 89, 104, 106, 185, 223, 328 Holy Roman Empire 178, 265–6 Homer 2, 102, 168 Homestead Act (1862) 323 homicide 14, 20, 85, 88, 106, 118, 201 Homo erectus 49, 68, 71, 373 Homo heidelbergensis 49, 50–52, 373 Homo sapiens, emergence of 52–3 Hong Kong 31, 83, 158, 169, 187, 219, 328 Hongwu, Chinese emperor 183 Hood, Leroy 222, 405 Hooke, Robert 256 horses 48, 68, 69, 129, 140, 197, 215, 282, 408–9; shoes and harnesses 176, 215 housing costs 20, 25, 34, 39–40, 234, 368 Hoxha, Enver 187 Hrdy, Sarah 88 Huber, Peter 244, 344 Hueper, Wilhelm 297 Huguenots 184 Huia (birds) 64 human sacrifice 104 Hume, David 96, 103, 104, 170 humour 2 Hunan 177 Hungary 222 Huns 175 hunter-gatherers: consumption and production patterns 29–30, 123; division of labour 61–5, 76, 136; famines 45, 139; limitations of band size 77; modern societies 66–7, 76, 77–8, 80, 87, 135–6, 136–7; nomadism 130; nostalgia for life of 43–5, 135, 137; permanent settlements 128; processing of food 29, 38, 61; technological regress 78–84; trade 72, 77–8, 81, 92–3, 123, 136–7; violence and warfare 27, 44–5, 136, 137 hunting 61–4, 68–70, 125–6, 130, 339 Huron Indians 138–9 hurricanes 329, 335, 337 Hurst, Blake 152 Hutterites 211 Huxley, Aldous 289, 354 hydroelectric power 236, 239, 343, 344, 409 hyenas 43, 50, 54 IBM (corporation) 260, 261, 282 Ibn Khaldun 182 ice ages 52, 127, 329, 335, 340, 388 ice caps 125, 130, 313, 314, 334, 338–9, 426 Iceland 324 Ichaboe island 140 ‘idea-agora’ 262 imitation 4, 5, 6, 50, 77, 80 imperialism 104, 162, 164, 166, 172, 182, 319–20, 357; see also colonialism in-vitro fertilisation 306 income, per capita: and economic freedom 117; equality 18–19, 218–19; increases in 14, 15, 16–17, 218–19, 285, 331–2 India: agriculture 126, 129, 141, 142–3, 147, 151–2, 156, 301; British rule 160; caste system 173; economic growth 187, 358; energy use 245; income equality 19; infant mortality 16; innovations 172–3, 251; Mauryan empire 172–3, 201, 357; mobile phone use 327; population growth 202, 203–4; prehistoric 66, 126, 129; trade 174–5, 175, 179, 186–7, 225, 228, 232; urbanisation 189 Indian Ocean 174, 175 Indonesia 66, 87, 89, 177 Indus river 167 Indus valley civilisation 161–2, 164 industrialisation: and capital investment 258–9; and end of slavery 197, 214; and food production 139, 201–2; and fossil fuels 214, 216–17, 229–33, 352; and innovation 38, 220–24, 227–8; and living standards 217–20, 226–7, 258; pessimistic views of 42, 102–3, 217–18, 284–5; and productivity 227–8, 230–31, 232, 235–6, 244–5; and science 255–8; and trade 224–6; and urbanisation 188, 226–7 infant mortality 14, 15, 16, 208–9, 284 inflation 24, 30, 169, 289 influenza see flu, pandemic Ingleheart, Ronald 27 innovation: and capital investment 258–62, 269; and exchange 71–2, 76, 119, 167–8, 251, 269–74; and government spending programmes 267–9; increasing returns of 248–55, 274–7, 346, 354, 358–9; and industrialisation 38, 220–24, 227–8; and intellectual property 262–7, 269; limitlessness 374–7; and population growth 252; and productivity 227–8; and science 255–8, 412; and specialisation 56, 71–2, 73–4, 76–7, 119, 251; and trade 168, 171 insect-resistant crops 154–5 insecticides 151–2 insects 75–6, 87–8 insulin 156, 274 Intel (corporation) 263, 268 intellectual property 262–7; see also copyright; patents intensive farming 143–9 Intergovernmental Panel on Climate Change (IPCC) 330, 331, 332, 333–4, 338, 342, 347, 425, 426, 427, 428 internal combustion engine 140, 146, 244 International Planned Parenthood Foundation 203 internet: access to 253, 268; blogging 257; and charitable giving 318–19, 356; cyber-crime 99–100, 357; development of 263, 268, 270, 356; email 292; free exchange 105, 272–3, 356; packet switching 263; problem-solving applications 261–2; search engines 245, 256, 267; shopping 37, 99, 107, 261; social networking websites 262, 268, 356; speed of 252, 253; trust among users 99–100, 356; World Wide Web 273, 356 Inuits 44, 61, 64, 126 IPCC (Intergovernmental Panel on Climate Change) 330, 331, 332, 333–4, 338, 342, 347, 349, 425, 426, 427, 428 IQ levels 19 Iran 162 Iraq 31, 158, 161 Ireland 24, 129, 199, 227 iron 166, 167, 169, 181, 184, 223, 229, 230, 302, 407 irradiated food 150–51 irrigation 136, 147–8, 159, 161, 163, 198, 242, 281 Isaac, Glyn 64 Isaiah 102, 168 Islam 176, 357, 358 Israel 53, 69, 124, 148 Israelites 168 Italy: birth rate 208; city states 178–9, 181, 196; fascism 289; Greek settlements 170–71, 173–4; infant mortality 15; innovations 196, 251; mercantilism 89, 103, 178–9, 180, 196; prehistoric 69 ivory 70, 71, 73, 167 Jacob, François 7 Jacobs, Jane 128 Jamaica 149 James II, King 223 Japan: agriculture 197–8; birth rates 212; dictatorship 109; economic development 103, 322, 332; economic and technological regression 193, 197–9, 202; education 16; happiness 27; industrialisation 219; life expectancy 17, 31; trade 31, 183, 184, 187, 197 Jarawa tribe 67 Java 187 jealousy 2, 351 Jebel Sahaba cemeteries, Egypt 44, 45 Jefferson, Thomas 247, 249, 269 Jenner, Edward 221 Jensen, Robert 327 Jericho 127, 138 Jevons, Stanley 213, 237, 245 Jews 89, 108, 177–8, 184 Jigme Singye Wangchuck, King of Bhutan 25–6 Jobs, Steve 221, 264, 405 John, King of England 118 Johnson, Lyndon 202–3 Jones, Rhys 79 Jordan 148, 167 Jordan river 127 Joyce, James 289 justice 19–20, 116, 320, 358 Kalahari desert 44, 61, 76 Kalkadoon aborigines 91 Kanesh, Anatolia 165 Kangaroo Island 81 kangaroos 62, 63, 69–70, 84, 127 Kant, Immanuel 96 Kaplan, Robert 293 Kay, John 184, 227 Kazakhstan 206 Kealey, Terence 172, 255, 411 Kelly, Kevin 356 Kelvin, William Thomson, 1st Baron 412 Kenya 42, 87, 155, 209, 316, 326, 336, 353 Kerala 327 Kerouac, Jack 110 Khoisan people 54, 61, 62, 67, 116, 321 Kim Il Sung 187 King, Gregory 218 Kingdon, Jonathan 67 Kinneret, Lake 124 Klasies River 83 Klein, Naomi 291 Kleiner Perkins Caufield & Byers (venture capitalists) 259 knowledge, increasing returns of 248–50, 274–7 Kodak (corporation) 114, 386 Kohler, Hans-Peter 212 Korea 184, 197, 300; see also North Korea; South Korea Kuhn, Steven 64, 69 kula (exchange system) 134 !


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The Great Escape: Health, Wealth, and the Origins of Inequality by Angus Deaton

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Admiral Zheng, agricultural Revolution, Branko Milanovic, BRICs, British Empire, call centre, clean water, colonial exploitation, Columbian Exchange, creative destruction, declining real wages, Downton Abbey, end world poverty, financial innovation, germ theory of disease, Gini coefficient, illegal immigration, income inequality, invention of agriculture, invisible hand, John Snow's cholera map, knowledge economy, Louis Pasteur, low skilled workers, new economy, purchasing power parity, randomized controlled trial, rent-seeking, rising living standards, Ronald Reagan, Simon Kuznets, Steve Jobs, Steven Pinker, structural adjustment programs, The Spirit Level, too big to fail, trade route, very high income, War on Poverty

A good example is the discovery of oral rehydration therapy in the refugee camps of Bangladesh in the 1970s; millions of children suffering from diarrhea have been saved from dehydration and possible death by a cheap and easily made remedy. But it works the other way too. Powerful interests have much to lose from new inventions and new ways of doing things. Economists think of eras of innovation as powering up waves of “creative destruction.” New methods sweep away old methods, destroying the lives and livelihoods of those who were dependent on the old order. Globalization today has hurt many such groups; importing cheaper goods from abroad is like a new way of making them, and woe betide those who earned their livings making such goods at home. Some of those who would lose out, or who fear that they might be hurt, are politically powerful and can outlaw or slow down the new ideas.

Yet growth is faltering in the rich world. Growth in each recent decade has been lower than in the previous one. Almost everywhere, the faltering of growth has come with expansions of inequality. In the case of the United States, current extremes of income and wealth have not been seen for more than a hundred years. Great concentrations of wealth can undermine democracy and growth, stifling the creative destruction that makes growth possible. Such inequality encourages the previous escapees to block the escape routes behind them. Mancur Olson predicted that rich countries would decline like this, undermined by the rent seeking of an ever-growing number of focused interest groups pursuing their own self-interest at the expense of an uncoordinated majority.2 Slower growth makes distributional conflict inevitable, because the only way forward for me is at your expense.

See taxes India: birth attendants in, 99; child malnutrition in, 102; child mortality in, 114–15, 115f, 116, 117; diets in, 163; economic growth in, 44, 114, 115f, 116, 235, 236–38, 254; education in, 105, 329; foreign aid received by, 277–78, 279, 296, 302; foreign investment in, 277–78; government regulations, 212–13; health care system of, 123, 124–25; health perceptions in, 122; heights in, 161, 162–64; income inequality in, 258, 259; incomes in, 27; life expectancies in, 25–26, 163; middle class of, 254; population growth in, 240; poverty in, 102, 240, 247, 253–55; poverty line in, 223, 248, 254–55, 256–57; poverty reduction in, 44, 46, 247, 250, 253–55; sterilization programs in, 243; women’s heights in, 160 Industrial Revolution, 4, 5, 9–10, 94–95, 97–98, 100 inequality: economic growth and, 4–6, 41–42, 168, 327; global, 4–5, 42, 44; importance of, 11; origins of, 4–6; progress and, xiii, 1, 4–6, 10–11; racial, 67. See also health inequalities; income inequalities infant mortality. See child mortality infectious diseases. See diseases; HIV/AIDS; smallpox; tuberculosis influenza epidemic, xi, 61–62, 63 innovation: creative destruction, 10; economic growth and, 173–74; inventions, 9–11; scientific, 99, 100, 326; technological change, 191–93, 194–95, 327–28. See also medical innovations institutions: effects of foreign aid on, 298–99, 305; legal and political, 234, 242–43, 294, 295–96 investment, 173, 277–78, 280, 288 Isma’il Pasha, 297 Italy, life expectancies in, 87–88, 88f Japan: economic growth in, 49, 237; foreign aid of, 274, 275; life expectancies in, 33, 36, 129, 154; smoking rates in, 133; wellbeing in, 51 Jayachandran, Seema, 322 Jenner, Edward, 84 Jobs, Steve, 208, 214 Johansson, Sheila Ryan, 86 Johnson, Lyndon, 302, 305 Johnson, Simon, 216 Johnson administration, 182 Jones, Eric, 215 Kanbur, Ravi, 300–301, 315 Kant, Immanuel, 84 Katz, Lawrence F., 191 Kenya: commodity exports of, 286; corruption in, 302; foreign aid received by, 296, 301, 302; incomes in, 20, 284 Koch, Robert, 96, 99 Kravis, Irving, 222 Kremer, Michael, 322 Krueger, Alan B., 197 Kuznets, Simon, 203 labor markets: education and, 191–93, 202; globalization impacts on, 194–96, 257; minimum wages, 196–98; service jobs, 195–96; skilled workers, 191–93; unemployment, 176; wages in, 9–10, 191, 194–95, 257; women in, 176, 195–96, 201 labor unions, decline of, 198 Lam, David, 244–45 Layard, Richard, 29 Leeuwenhoek, Anthony van, 99 leisure, 175–76 Lesotho, 304–5 Liberia, 43 life, value of, 64 life evaluation measures: generational differences in, 51; incomes and, 17–22, 18f, 21f, 28, 48–51; surveys of, 17–22, 29, 47–49, 51 life expectancies: at age 15, 89–90, 90f; at age 50, 128–29, 128f, 135, 143; of aristocrats, 82–83, 82f; at birth, 24–26, 60, 62, 89–90, 90f, 128; in Britain, 67, 70, 81–83, 82f, 87–90, 88f, 90f, 94–95; calculating, 62, 73; in cities, 94; in Enlightenment, 81–83; by gender, 60–61, 61f, 65–66, 135; global differences in, 25–26, 88–89, 107–8, 107f, 152–55, 153f; incomes and, 26–28, 29–38, 30f, 34f, 37f, 41; as measure of inequality, 154–55; as measure of wellbeing, 60, 64–65, 328; period measures, 63, 70; in poor countries, 25; in prehistory, 77, 79, 80; racial differences, 66–67; in rich countries, 67–68; in Sweden, 67–68, 70; in United States, 24–25, 27, 35, 60–62, 61f, 63, 65–67, 135; upper limits of, 33, 148–49 life expectancy increases: in Britain, 83, 89; child mortality reductions and, 64, 65, 103; factors in, 41, 103–7, 127–28, 129–40, 142–43; in future, 63, 148–49; gender differences in, 60–61, 61f, 135; global, 152–55, 153f; income growth and, 41, 105–7; in poor countries, 101–4, 107, 107f, 108, 109; public health improvements and, 94, 95–96; in rich countries, 6–7, 87–88, 88f, 107–8, 107f, 127–30, 128f; in United States, 24–25, 60–62, 65 life satisfaction.


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How Will Capitalism End? by Wolfgang Streeck

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accounting loophole / creative accounting, Airbnb, basic income, Ben Bernanke: helicopter money, Bretton Woods, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, Clayton Christensen, collective bargaining, conceptual framework, corporate governance, creative destruction, credit crunch, David Brooks, David Graeber, debt deflation, deglobalization, deindustrialization, en.wikipedia.org, eurozone crisis, failed state, financial deregulation, financial innovation, first-past-the-post, fixed income, full employment, Gini coefficient, global reserve currency, Google Glasses, haute cuisine, income inequality, information asymmetry, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, labour mobility, late capitalism, liberal capitalism, market bubble, means of production, moral hazard, North Sea oil, offshore financial centre, open borders, pension reform, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, post-industrial society, private sector deleveraging, profit maximization, profit motive, quantitative easing, reserve currency, rising living standards, Robert Gordon, savings glut, secular stagnation, shareholder value, sharing economy, sovereign wealth fund, The Future of Employment, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Uber for X, upwardly mobile, Vilfredo Pareto, winner-take-all economy, Wolfgang Streeck

While disruption has traditionally been associated with unanticipated, destructive and even violent discontinuity – with disaster for those affected by it – it is now to stand for radical economic and social innovation, and indeed the only innovation left to make a difference, as it attacks and destroys in particular firms and markets that operate to everybody’s satisfaction.62 Innovation that is not in this sense disruptive is not innovative enough as it respects too much of the old and may even be concerned, or politically constrained, not to cause too many casualties. It is therefore doomed to be overtaken in the competitive struggles of the contemporary marketplace, where it is not enough for something to work if something else promises higher profits. Disruption may be considered the neoliberal version of ‘creative destruction’: more ruthless, more out-of-the-blue, and less willing to take prisoners or accept delay in order to be ‘socially compatible’. While for those at the receiving end disruptive innovation can be catastrophic, regrettably they have to be sacrificed as collateral damage on the Darwinian battlefield of global capitalism. Resilience is the other term on the rise, having recently been imported into social science and policy from bacteriology, engineering and psychology.63 In the political economy literature the term is, confusingly at first glance, used both for the capacities of individuals and groups to withstand the onslaught of neoliberalism,64 and for the ability of neoliberalism as a social order, or disorder, to persist in spite of its theoretical poverty and practical failure to prevent or repair its own collapse in 2008.65 While the two meanings may seem to be opposed to each other, this may not necessarily be so, as the practices that make it possible for individuals to survive under neoliberalism may also help neoliberalism itself to survive.

In this important respect, comparative political economy resembles standard economic theory, in particular the so-called ‘new institutional economics’.44 The guiding idea the two share is that it is stability of institutions over time that matters, to be explained in terms of equilibrium in the service of economic performance. In contrast, I suggest to conceive of capitalism, past as well as present, ‘liberal’ just as ‘coordinated’, as of a political economy in permanent disequilibrium caused by continuous innovation and pervasive political conflict over the relationship between social and economic justice; over frictions between collective obligations to protect individuals from the fallout of ‘creative destruction’, and individual obligations to adjust to economic change; and over the moral limits, if any, to the individual pursuit of economic advantage. As the current crisis forcefully reminds us, it is both theoretically and empirically far more instructive for the study of contemporary capitalism to focus, not on stability, but on uncertainty, risk, fragility, precariousness and the generally transitory and never quite pacified nature of social and political settlements in capitalist societies.

The concept of capitalism, outdated as some may have thought it was, has the important advantage that it reminds us of the fact that the political regulation of economic life in contemporary modern societies is always precarious as it is typically condemned to limping behind the dynamic expansion of commercialized market relations. Speaking of capitalism, that is to say, protects us from forgetting that capitalist land-grabbing permanently imparts Schumpeterian creative destruction, not just on established ‘economic’ practice, but also on social structures and institutions, in particular by replacing the conservatism of social obligations with the voluntarism of free contractual exchange, regardless of the collective consequences.24 As I have shown empirically for the German case,25 the decline of postwar pacified capitalism must primarily be attributed to endogenous subversion and erosion of an institutional framework that had become suboptimal for capital accumulation, rather than, as Block suggests, to the frivolous fancies of neoliberal economists and misled politicians.


pages: 494 words: 132,975

Keynes Hayek: The Clash That Defined Modern Economics by Nicholas Wapshott

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airport security, banking crisis, Bretton Woods, British Empire, collective bargaining, complexity theory, creative destruction, cuban missile crisis, Francis Fukuyama: the end of history, full employment, Gordon Gekko, greed is good, Gunnar Myrdal, if you build it, they will come, Isaac Newton, Joseph Schumpeter, liquidationism / Banker’s doctrine / the Treasury view, means of production, Mont Pelerin Society, mortgage debt, New Journalism, Northern Rock, Paul Samuelson, Philip Mirowski, price mechanism, pushing on a string, road to serfdom, Robert Bork, Ronald Reagan, Simon Kuznets, The Chicago School, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Malthus, trickle-down economics, War on Poverty, Yom Kippur War

America faced an existential threat, and as in the 1930s, a failure to act was considered so foolhardly it was barely contemplated. At the height of the crisis there were few in the short run who countered this resurgence of Keynesianism, even fewer who with a straight face promoted the Hayekian solution, to let the market find its own level. The view of Austrian-American political philosopher Joseph Schumpeter that the free market must from time to time endure a period of “creative destruction” was not allowed to be put to the test. Having so markedly been proved wrong, the widely held assumption that the free market always righted itself over time was not given a second chance. Few have tried to plot the dire consequences that would accompany the collapse of the economy: how many made unemployed; how many deprived of their homes; how many declared bankrupt; how many businesses shuttered.

Between 1945 and 1947 he was chief economist to Clement Attlee’s Labour government. 8 Quoted in Marjorie Shepherd Turner, Joan Robinson and the Americans (M. E. Sharpe, Armonk, N.Y., 1989), p. 51. 9 Ibid., p. 62. 10 Collected Writings, vol. 13: General Theory and After, Part 1, p. 339. 11 Joseph Alois Schumpeter (1883–1950), Czech-born Austrian economist and political scientist who studied under Böhm-Bawerk and whose theories of “creative destruction” in economics complemented the Austrian School’s notions. He fled Nazism for America in 1932, finding safe haven at Harvard. 12 Kahn, Making of Keynes’ General Theory, p. 170. 13 Letter from Keynes to Pigou, quoted in Charles H. Hession, John Maynard Keynes (Macmillan, New York, 1984), p. 263. 14 Joseph Alois Schumpeter and Elizabeth Boody Schumpeter, History of Economic Analysis (Oxford University Press, Oxford, U.K., 1954), p. 1118.

., 204, 230, 292–93 Constitution of Liberty, The (Hayek), 218–23, 290 consumer credits, 77 consumer prices, 41, 49–50, 54–55, 76–77, 81, 117–18, 143–44, 184–87, 189, 191, 224, 229–30, 267–68 consumption, 81–82, 119–20, 127, 131, 143–44, 184–87, 191 contractions, monetary, 217, 248–49 “Contract with America,” 272–74, 278, 293 corporations, 145, 233, 262, 264, 267–68, 275, 293 corporatist states, 145, 293 corruption, 159, 250, 277, 278 Council of Economic Advisers, 229, 231–32, 236, 242, 244, 278 “creative destruction,” 294 Credit-Ansalt Bank, 83 credit derivatives, 275 credit policies, 25, 43, 55, 79, 84–85, 100, 117–18, 136–37, 142, 160, 188, 279, 280–81 Crimean War, 11 Cromwell, Oliver, 140 Croome, H. M., 139, 140 Cuban Missile Crisis, 237 currencies: —Bretton Woods agreement on, 56, 193, 198, 243, 255 —devaluation of, 159–60, 243 —dollar as basis of, 31–32, 37–40, 56, 159–60 —exchange rates for, 22, 26–27 —fixed-price, 23, 37–40, 55–56 —floating price of, 37, 38–39, 56 —gold standard for, 22–23, 25, 26–27, 28, 37–40, 55–56, 72, 73, 85–87, 94, 136–37, 159–60, 193, 243 —international regulation of, 55–56, 193, 243, 255, 282–83 —Keynes’s views on, 22–23, 31–32, 37–40, 55–56, 82, 85–86, 136–37, 159–60, 193 —markets for, 22, 26–27, 52 —printing of, 22, 25, 131, 136, 149–50 —stability of, 136–37 —unemployment rate and, 31–32, 38–40, 56, 85–87 —value of, 26–27 Currie, Lauchlin, 165–66, 170 Curtin, John, 227–28 Czechoslovakia, 9, 17, 18 Czech Republic, 266 Daily Herald (London), 86 “Danaid jar,” 127 Darwin, Charles, 35, 43, 132 Darwinism, 35, 43 Davenport, John, 221 Dawson, Geoffrey, 133 debt: —banking policies on, 31–33, 41, 84 —interest on, 74 —national, 12, 84, 85, 86, 135, 154–55, 165, 224, 237, 241–42, 259, 264–65, 272–75, 276, 282–83 —personal, 144, 278–80 —war, 4–5, 8–14, 21–22, 31–32, 84, 155–57, 206 Defense Department, U.S., 232 “deferred pay,” 191–92 deficit financing, 86, 135, 154–55, 163, 165, 233, 234–35, 237, 240, 241–42, 243, 245, 264–65, 267, 274–75, 277–78, 283 deflation, 24–25, 32, 37, 39, 111–12, 135–36, 141–42, 188–89, 276, 277 DeLay, Tom, 273, 274 democracy, 9, 37, 151, 189, 193, 196–97, 202, 204–5, 219–23, 252, 266, 288–89, 291–93 democratic egalitarians, 35 Democratic Party, 235, 237, 244, 271, 275, 283, 293, 320n Denmark, 289 Dennison, Stanley, 248 depressions, economic, 54–55, 77–78, 79, 228, 230, 233, 287–88, see also Great Depression devaluation, currency, 159–60, 243 Diaghilev, Sergei, 53 “Dilemma of Thrift, The” (Foster and Catchings), 48–50 Dillon, C.


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