I agree with a lot of what you had to say about the markets, but I even more so enjoyed your discussion about Schumpeter’s work on capitalism and creative destruction.

“The market is constantly changing because of new product innovations that continuously improve to better the economy. We have a need to stay ahead, and by doing so, we must work to improve the things we already have, and additionally, create new products that will better the way we function”.

I thought this quote concisely summed up the idea of creative destruction. The concept that new innovation constantly comes in and overtakes older products, essentially making them obsolete. This phenomenon is essential to capitalism because the market is always changing, and entrepreneurs need to constantly innovate to find success. I think the name “creative destruction” is beautiful because it sounds kind of dark, but it also encapsulates the mechanism that drives forward the economy. Competition is a tenant of capitalism and serves to benefit the consumer because entrepreneurs compete to create the best product to sell at a price that gives them a competitive advantage. Consumers get quality products for less money and the entrepreneur who innovates the best will be rewarded with business. All of this is made possible by the free exchange. Without it, competition would not exist, and the market would not experience the same ebbs and flows it currently does, which affords entrepreneurs opportunities to pivot in production and allocate their resources toward something else. Another key component of a successful economy, which you discussed, is specialization and the division of labor. It is impossible for a single person to produce everything they need for themselves in life. When people specialize in making certain goods, productivity and quality goes up and they lays the foundation for a market based on exchange. Now individuals have produced goods that they can exchange in order to consume. In that sense, production always precedes consumption. When individuals become highly specialized and there are many people making the same product, innovation becomes necessary to remain a relevant player in the economy. This goes to show how the market can drive itself forward. Entrepreneurs take cues from the market about what to produce, how to allocate resources, how much to charge for their product, and so much more. The market will then react to what all the entrepreneurs are doing, and it will shift again.