Re-examining Schumpeter’s Legacy: Creative Destruction as Competition, Innovation and Capitalism

Abstract

This article argues that the predominant interpretations of Schumpeter in competition law and economics are inaccurate. The aim of the article is to qualify some of the ossified narratives around Schumpeter’s legacy. To identify these misinterpretations, the article first provides an overview of the concept of creative destruction and Schumpeter’s account of ‘monopolistic practices’ as they were developed in Capitalism, Socialism and Democracy, Schumpeter’s most famous work to date (Section 2). It then lays out the prevalent competition law and economics accounts of Schumpeter (Section 3). This section focuses on the so-called ‘Schumpeterian thesis’, i.e., the proposition that big business or monopoly is more advantageous to innovation, which is attributed to Schumpeter. It shows how the so-called Schumpeterian thesis is connected to Schumpeter’s creative destruction in the literature. It also surveys various ‘Schumpeterian’ proposals of antitrust analysis built on creative destruction. The following Section 4 sets out the misinterpretations surrounding Schumpeter by contrasting the previous two sections, and by laying out Schumpeter’s thinking and scholarship in general. It details Schumpeter’s views on the concepts of monopoly and perfect competition, on the economic theories and policies of his day, his vision of the entrepreneur as the force behind creative destruction and his theory of entrepreneurial decline – all almost entirely missing from the popular works on Schumpeter in competition law and economics. Section 5 concludes.