Thinkers & Ideas The Power of Creative Destruction with Philippe Aghion
Jun 12, 2021
Philippe Aghion, a prominent economist and professor at the London School of Economics, joins host Philipp Carlsson-Szlezak for an insightful discussion. They explore how COVID revealed flaws in various capitalist models, highlighting the need for a balance between innovation and social protection. Aghion advocates for merging the innovative US ecosystems with the inclusive social policies of Scandinavian countries. He also delves into the impact of monopolies on innovation and emphasizes the importance of adaptive policies tailored to local conditions.
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Taxi Driver's Health Cost
- A French taxi driver sold his house to pay for his wife's cancer treatment because health insurance lacked job continuity.
- Aghion contrasts that with France and Denmark where losing a job doesn't force such drastic sacrifices.
Creative Destruction Drives Growth
- Schumpeterian models place innovation and creative destruction at the center of long-run growth.
- Aghion and Howitt built formal models showing entrepreneurial driven innovation sustains growth beyond capital accumulation.
Incumbents Can Stifle Future Innovation
- Successful incumbent firms can later suppress innovation, mirroring Schumpeter's pessimism.
- Aghion sees this in big tech: initial productivity gains then discouraged future innovation.
