Don’t Let Innovators Block Innovation

If your great idea is profitable, you might not support the next great idea. Creative destruction is vital for societies to keep innovating and growing.

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It seems at first counterintuitive that the people behind a big innovation might be the cause of future stagnation. However, there are incentives to block new ideas and continued growth, as older ideas can still be profitable. Economist Philippe Aghion, senior fellow at the Canadian Institute for Advanced Research and professor at Collège de France, believes this is the reason why the social elevator is broken.

Aghion is working on a new model for growth called Schumpeterian Growth Theory, based on ideas from Joseph Schumpeter, known for his work on innovation and economic progress. He is trying to understand what drives innovation, and also what blocks it, and how societies can better strive for continued growth and success.

This new model looks for causes of stalled progress. Aghion explains, “there’s always this contradiction that I want to bring new ideas because I want to have glory, or because I want to make a profit out of it. Once I make that profit, of course I don’t like the idea that there’ll be new ideas replacing my own ideas. That’s the whole dilemma.”

To counter this, societies need to stand behind the idea of creative destruction. Lifelong access to education and training, social mobility, and barring people from blocking subsequent innovations are all key ingredients to keep new ideas flowing. He cites Scandinavian countries as being exemplars of this social structure.

“The big problem is to say I want to reconcile growth, with social mobility. And if fact, they go together. You see, whatever is good to educate everybody and rebounds, makes the creative destruction work better, and therefore generates more innovation based growth,” says Aghion. “I think there is a virtuous circle there.”

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Professor Philippe Aghion is the Robert C. Waggoner Professor of Economics at Harvard University, and a fellow of the Econometric Society and of the American Academy of Arts and Sciences. His research focuses on the economics of growth. With Peter Howitt, he pioneered the so-called Schumpeterian Growth paradigm which was subsequently used to analyze the design of growth policies and the role of the state in the growth process. Much of this work is summarized in their joint books Endogenous Growth Theory (MIT Press, 1998) and The Economics of Growth (MIT Press, 2009), in his book with Rachel Griffith on Competition and Growth (MIT Press, 2006), and more recently in Repenser l’Etat (Seuil, 2011). In 2001, Philippe Aghion received the Yrjo Jahnsson Award of the best European economist under age 45.