Monday 11 October 2010

Schumpeter and the meaning of creative destruction


Joseph Schumpeter - 1883-1950 - was a political scientist and (whisper it not) economist, who coined the phrase Creative Destruction.

This seems a useful idea to me - what I get from it (not necessarily what Schumpeter meant) is that institutions are not reformed, they are replaced.

Of course institutions change - but who knows whether this is improvement or degeneration? How can one balance the advantages and the disadvantages, over the short versus long term - how can these be quantified and mathematically summed?

But sometimes institutions are replaced - the horse and cart was replaced by the motor car, the player piano was replaced by the gramophone, and so on.


This came to mind in relation to medicine and doctors - the 'doctor' is a relatively recent, late 1800s, idea - i.e. the idea that there was a unified medical profession sharing a common education and qualification process.

Before doctors (in Britain) there were high status physicians (gentlemen with university degrees) who did not touch the patients (maybe felt the pulse) - sometimes did not even see the patient - and who wrote prescriptions. They were classically educated, learned, wrote papers and books, mixed in the highest circles... But there were not many of them outside of the capital cities and their major satellites.

Apothecaries who were middle class, apprenticed, and made up prescriptions and sometimes treated patients on the basis of speaking with them and visiting them (but not examining them).

Druggists who were upper working class retailers and medicine wholesalers (these were the forerunners of modern pharmacists).

Surgeons who also treated the skin (including dermatology and venereal disease), and who were middle class apprenticed craftsmen. (skilled manual laborers).

And a multitude of gentry (including priests) who treated the lower orders, and midwives (working class, semi-skilled - not formally apprenticed), and healers, cunning men, wise women and so on.

From the late 1700s there were a few high status 'man midwives' the first of which was William Hunter (from Glasgow) who had a degree, and became *enormously* wealthy delivering the babies of the upper classes (I seem to recall his fee was 100 guineas - 1.05 Pounds Sterling - per 'confinement'; at a time when the average wage was much less than a guinea a week).  This began to bring Obstetrics into medicine.

Physicians, surgeons, man midwives and apothecaries were unified as doctors in the medical profession as it evolved (changed) in the late 19th century.


But medicine is now, again, falling apart - due to sheer size, as much as anything. There is a continual reduction in the skill, status, average pay, and so on.

The mess that is medical education is not reformable - although it does undergo continual change.

At some point, therefore, we will see 'Creative Destruction' and doctors will be replaced. Not the whole set of functions now done by doctors, but some of them, will in future be done by some other kind of profession or job - and that aspect of being a doctor will wither away to an insignificant level.


Same with universities and colleges - higher education. The situation is so big as to be unreformable - at some point they (or some big section of their activity) will be replaced.


One point I take from Schumpeter is that we waste too much time on schemes of reform - do they ever work, I wonder?

We would be better thinking how to start something new and different, with which to replace what is not working.



dearieme said...

"The situation is so big as to be unreformable": Dissolution of the Monasteries.

Though there's half a dozen I'd like to see survive.

Bruce Charlton said...

Dissolution of the Monasteries.

A prime example of how one person's reform/ improvement/ Creative-Destruction' is another person's corruption/ catastrophic decline/ Mindless-Destruction - something I only appreciated from reading the before-versus-after comparison in EK Chambers biography of Thomas More.

I think the comparison is flawed by the fact that the most of Monasteries functions were not replaced - for a long time England simply had much less education, fewer hospitals, less skilled and beautiful music, arts & crafts - and so on.

So it was mostly just plain old 'Destruction' minus the Creative.

Mike Kenny said...

Interesting post! I notice that it seems what was high status in the past, having a doctor, became a common thing, perhaps as people engaged in immitation of their social betters, so to speak. Usually I think of creative destruction as a good thing, cars replacing horses, but it seems that what could be destroyed might be the more practical in favor of an immitation the conspicuous consumption of the wealthy, going to college and getting a not very practical degree being maybe an example.

Bruce Charlton said...
This comment has been removed by the author.
Bruce Charlton said...

@ Mike Kenny - yes. I suppose I'm saying that Creative destruction needn't be Creative - or that one person's 'creative' is another person's 'corruptive'.

But the idea that economies might (under some circumstances) increase efficiency by replacement of institutions rather than reform of institutions, seems probably correct.

BTW As you might have guessed, I got the idea to blog on Schumpeter from the funny photo linked on your blog:

I read a big biography of Schumpeter a couple of years ago (before 2008 - when I was still illusioned, and avidly reading economics).

And (after I stopped giggling) I realized I had not yet shared my thoughts on the topic with blog-readers!

xlbrl said...

Schumpeter was good because his focus was upon people and not mathematical theories. He was a rare bird, a conservative sociologist, which might also describe Adam Smith.

It was Schumpeter who observed that as a supreme if unintended compliment, the enemies of the system of private enterprise thought it wise to appropriate its label.

In a capitalist society, a thing is not eliminated because it has failed, but because another thing has superseded it. The best run and most successful businesses are precisely the ones that are least able to change when change becomes necessary.

In government, none of this evolutionary unpleasantness is an option. Therein lies the problem: it is the things that fail which get the largest increase in funding.

Mike Kenny said...

Oh, glad to hear that post jogged your memory! :) Yes, that Schumpeter picture is great!