There are a couple notable observations. The first, a rather simple definition of creative destruction, is made by Stanford professor Art Carden:
It is the process of change whereby new ways of doing things replace old ways of doing things.
Change doesn’t come without a human cost. The demand for ice delivery men evaporated with the invention of the refrigerator. The guys who drove horse buggies had to find different work when the automobile became an economically feasible product for the masses. As Alan Greenspan once noted:
The problem with creative destruction is that it is destruction and there is a very considerable amount of turmoil that goes on in the process.
This human cost is outweighed, however, by the fact that people are able to save money and create other economic opportunities with those savings. Economist Joseph A. Schumpeter once put it as follows:
[A thriving economy is] incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.”
Often policy makers, with the best intentions, attempt to mitigate the turmoil but actually exacerbate the problem for those in turmoil and hamper growth opportunities.