Question

According to Schumpeter, what is the primary agent of economic development? How does economic development relate to competition and “creative destruction”?

Answer 1

The primary agent of economic development:

1. The concept of circular flow.
2. Innovator is the key figure in Schumpeter analysis of the process of development
3. The next component of development according to Schumpeter is the business cycle.

Creative destruction refers to the incessant product and process innovation mechanism by which new production units replace outdated ones. The process of Schumpeterian creative destruction (restructuring) permeates major aspects of macroeconomic performance, not only long-run growth but also economic fluctuations, structural adjustment and the functioning of factor markets. Entrepreneurial entry serves to transform and revitalize industries, thereby enhancing their competitiveness