Efficiency and Creative Destruction

See ‘The Origins of Efficiency’ Review: Rise of the Machines by Mark P. Mills, who is the executive director of the National Center on Energy Analytic. He reviewed the Brian Potter’s book The Origins of Efficiency. This reminded me of the my recent posts on creative destruction and this year's Nobel Prize. More on that after these excerpts:

"all things have a production process involving materials, actions, procedures, people and, of course, technology—whether to clean a house, run a restaurant or build a Cadillac. Efficiency comes from a choreography of tweaks among all those factors, not from any single invention or technique."

[The book] "dissects a variety of examples, including the early production of nails, books, lightbulbs and cars. We learn, for example, that there’s far more to the penicillin story than the casual history of Alexander Fleming’s eureka moment. The eventual explosion in production capacity—fabricating millions of doses rather than trivial quantities for only a handful of people—emerged from years of hard-won efficiency improvements made by people other than Fleming. Mr. Potter chronicles the array of ideas, techniques and experiments, originated by the unsung heroes of production efficiency, that saved so many lives through antibiotic abundance."

"all efficiency gains emerge from changes in five basic features: the inputs, the design of the process or product, the pursuit of reliably repeatable processes, the nature of how people or machines do things, and the role of volume (scale). How these features combine to improve efficiency depends on human ingenuity, imagination, tenacity and that elusive thing called “tacit knowledge” that comes from experience."

"As Andy Grove, the visionary leader of Intel, wrote some 15 years ago, society benefits from an invention only because of those who “work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter.”"

This sounds like where Schumpeter says creative destruction "incessantly revolutionizes the economic structure".  Constant change.

Creative Destruction

See Creative Destruction by Richard Alm and W. Michael Cox. Excerpt:

"Joseph Schumpeter
(1883–1950) coined the seemingly paradoxical term “creative destruction,” and generations of economists have adopted it as a shorthand description of the free market’s messy way of delivering progress. In Capitalism, Socialism, and Democracy (1942), the Austrian economist wrote:

The opening up of new markets, foreign or domestic, and the organizational development from the craft shop to such concerns as U.S. Steel illustrate the same process of industrial mutation—if I may use that biological term—that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. (p. 83)

Although Schumpeter devoted a mere six-page chapter to “The Process of Creative Destruction,” in which he described capitalism as “the perennial gale of creative destruction,” it has become the centerpiece for modern thinking on how economies evolve."

But also see this link which suggests that the idea goes back even before Schumpeter to other scholars: Creative Destruction in Economics: Nietzsche, Sombart, Schumpeter by Hugo Reinert and Erik S. Reinert.

"Abstract

This paper argues that the idea of ‘creative destruction’ enters the social sciences by way of Friedrich Nietzsche. The term itself is first used by German economist Werner Sombart, who openly acknowledges the influence of Nietzsche on his own economic theory. The roots of creative destruction are traced back to Indian philosophy, from where the idea entered the German literary and philosophical tradition. Understanding the origins and evolution of this key concept in evolutionary economics helps clarifying the contrasts between today’s standard mainstream economics and the Schumpeterian and evolutionary alternative."

Related posts:

Creative Destruction in a Nutshell (2025) (firm exit rates and job destruction rates are positively correlated with growth in labor productivity)

The Power of Creative Destruction (That is the title of a book co-authored by Philippe Aghion, one of this this year's winners of the Nobel Prize in economics) (2025)

Marginal Revolution has great posts on this year's winners of the Nobel Prize in economics (Philippe Aghion, Peter Howitt and Joel Mokyr): This is a prize for economic growth & creative destruction (2025)