A Brief Summary of a Summary of Joseph A Schumpeter.

A summary of Joseph Schumpeter's creative destruction piece through the understanding of Robert Wolfson.

1) Schumpeter used a micro dynamic approach to understand how markets function. He draws from Austrian thinkers and is categorized as neoclassical.
2) There are two ways supply and demand occur, A) "roundaboutness" and B) "increased roundaboutness". Both are used to describe a business cycle. The increased business cycle incorporates in capital that entrepreneurs use to innovate.  The normal roundaboutness/bus cycle is where π=0 and there is no need for capitalists who lend capital to entrepreneurs because Mr=mc and no new products, processes, or innovations are being generated.
3) In Schumpeter's model, capitalists only lend capital for interest and entrepreneurs risk nothing but can fail or succeed based on their ideas.
4)From this roundaboutness basic ideas of short term gains but long-term stability despite the constant flux of prices and output takes shape. Interest and credit are consequences of potential and realized profits in the initial stage of the market for an innovation.
5) Through a similar concept of self interest, after the first innovator generates profits, a swarm of secondary innovators occurs which increases output and decreases price. This is the invisible hand correcting out of equilibrium markets. 6)This second swarm is less profitable and capitalists back less profitable innovators and eventually the market shifts into a recession moving away from expansion.
7) The second wave is a direct result of the first wave. The recession that follows kills off inefficient companies and in Schumpeter's opinion is beneficial for the economy by leaving the fittest in business but back at the equilibrium Mr=mc stage.
8) Schumpeter's views on capital as only a means to store resources in the present to future, lack of a government role, and view that recessions and innovation are both good leaves him open to considerable criticism.
This was an informative reading that shows early neoclassical thinking. Philosophy and economics marched hand in hand for much of its early beginnings. More intro econ microeconomic courses would benefit from reading the underlying philosophy and early concepts.