Editor, The New York Times
To the Editor:
Bravo for Roger Cohen's explanation that market economies work by creating new firms, new products, new processes – and that these creations are both the source of our prosperity and that they require that old firms, old products, and old processes be allowed to die ("Pan Am Dies, America Lives," Dec. 18).
The still-unmatched explanation of this capitalist process was penned in 1942 by Joseph Schumpeter. He is worth quoting: "Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary." It propels us forward by unleashing a "perennial gale of creative destruction."
To those who would prevent these adjustments in order to avoid their short-term pains – to those who insist that even temporary unemployment of resources is economically unacceptable – Schumpeter replied wisely: "A system – any system, economic or other – that at every given point of time fully utilizes its possibilities to the best advantage may yet in the long run be inferior to a system that does so at no given point in time, because the latter's failure to do so may be a condition for the level or speed of long run performance."*
Donald J. Boudreaux
* Joseph A. Schumpeter, Capitalism, Socialism, and Democracy (New York: Harper, 1942), pp. 82-83.
Don Boudreaux is the Chairman of the Department of Economics at George Mason University and a Business & Media Institute adviser.