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Patent Economics

Joseph Schumpeter was one of the most influential scholars in the 20th century to discuss the economics of innovation. Born in Austria in 1883, Joseph Schumpeter is credited for founding evolutionary economics. His most notable work, Capitalism, Socialism and Democracy (1942) was an essential publication concerning his theories; most notably he predicted the eventual downfall of capitalism at the hands of intellectuals.

Schumpeter argues that capitalism is an evolutionary process, founded on economic change. The cause of this change comes from new consumers' goods, new methods or production, and new forms of innovation. With innovation comes an end to old methods and process, think of how DVDs have replaced VHS tapes or CDs have replaced 8-track tapes. Schumpeter calls this revolution of new inventions replacing old products "Creative Destruction", which according to Schumpeter, is an essential element of the capitalist economy and critical for growth and progress. Without the patent process, the incentives to invent or develop and research new products would be significantly less.

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