Schumpeter_Theory.pptx BEED 2a in entrepreneurial mind

Schumpeter_Theory.pptx BEED 2a in entrepreneurial mind

1. Schumpeter’s Theory of Economic Development Presented by: [Your Name] Date: [Insert Date] Institution: [Insert Institution]

2. Introduction • Joseph Schumpeter (1883-1950) was an Austrian economist. • His book, 'The Theory of Economic Development' (1911), introduced a dynamic view of economic growth. • Emphasized entrepreneurship and innovation as key drivers of progress. • His theory challenges classical views on gradual economic growth.

3. The Stationary Economy (Circular Flow Model) • A stationary economy is in equilibrium with no progress. • Features: - Perfect competition (equal opportunities for businesses). - No innovation, no profits, no economic growth. - Follows a circular flow (production and consumption repeat yearly). - Stability exists, but no development occurs.

4. The Role of the Entrepreneur • Entrepreneurs are agents of change who break economic stagnation. • They introduce 'new combinations' leading to growth: - New products - New production methods - New markets - New raw materials - New business structures

5. Creative Destruction • Process where new innovations replace outdated industries. • Leads to growth of new businesses, decline of old ones. • Examples: - Netflix replaced DVD rentals (Blockbuster). - Smartphones replaced landlines. - Uber disrupted the taxi industry. - E-commerce weakened traditional retail stores.

6. Business Cycles and Economic Growth • Economic development occurs in cycles: 1. Innovation Phase – New technology or products introduced. 2. Boom Phase – Business expansion, investments, job growth. 3. Recession Phase – Old industries decline, job losses. 4. Recovery Phase – Economy stabilizes with new businesses. • This cycle repeats over time, driving transformation.

7. Schumpeter vs. Classical Theories Classical View: - Gradual, smooth growth - Market equilibrium is key - Government policies drive progress - Focus on capital accumulation and labor Schumpeter’s View: - Growth happens in disruptive cycles - Innovation destroys equilibrium - Entrepreneurs drive progress - Focus on technological advances

8. Relevance in the Modern Economy • Schumpeter’s ideas remain relevant today: - Startup culture drives innovation (e.g., Tesla, Amazon). - Digital transformation revolutionizes industries (AI, blockchain). - Businesses must innovate to survive (e.g., Kodak's decline). - Governments promote entrepreneurship for economic growth.

9. Criticism of Schumpeter’s Theory • Overemphasis on entrepreneurs; government and institutions also play roles. • Business cycles can be unpredictable; not all innovations lead to booms. • Can cause instability; creative destruction results in job losses. • Some industries, like agriculture, do not experience radical innovation.

10. Conclusion • Entrepreneurs and innovation drive economic progress. • Creative Destruction ensures continuous transformation. • Business cycles are natural in economic expansion/contraction. • Schumpeter’s theory remains relevant in today’s global economy.

11. Thank You! Questions and Discussion References: - Schumpeter, J.A. (1911). 'The Theory of Economic Development'. - Schumpeter, J.A. (1939). 'Business Cycles'. - Schumpeter, J.A. (1942). 'Capitalism, Socialism, and Democracy'.