In a cover feature dubbed “The Best Investment Advice of All Time,” the latest Forbes magazine plugs a number of important economic lessons, including Joseph Schumpeter‘s most famous pronouncement.
Schumpeter’s great insight–which he termed “creative destruction”–was that economic innovation is fueled by entrepreneurs who discover better ways of doing things (the creative part), and their success leads to the collapse of old companies and methods (the destruction). Autos replaced horse-drawn buggies; word processors supplanted typewriters; the Internet killed print ads. The trick is to be on the right side of history.
Left unexplored in the Forbes blurb is the harmful role government can play in propping up the old companies and methods that should go away. If government officials avoid trying to choose economic winners and losers through targeted tax incentives and other special giveaways, creative destruction is bound to occur, leading to benefits for the entire economy.
