To ask what is 'valuable' as a generality is an empty question. The nature of value lies within each individual according to their circumstances, i.e. 'My kingdom for a horse.' In Schumpeter and Kuhn we see two very different manifestations of the process of valuation involving a notion of value coming very close to 'necessary'.
In Schumpeterian economic terms, commodities are valuable (capable of market comparison with other valuable entities). That capability drives the circular flow economy. In those terms value is the answer to a two part question. What is valuable? And how valuable is it? Keeping close to home in his analysis, his notion of valuable is a tautology: a commodity is valuable and what is valuable is a commodity. Given the philosophical nature of the question, it is a necessary tautology for an economist. Once an entity has been found valuable, necessary to the point of purchase, then the market answers the second question: how valuable is it in relation to other necessities or to place market function in context, how scarce is it?
In Kuhnian abstract terms, value is a datum that 'means' something, that has a direct connection to a paradigm and a set of rules. It can be a positive value, a predicted result, or a negative value, Kuhn's famous anomaly. Necessity applies in both cases. The discovery of the Higgs boson was a necessity to confirm physics theory. Any other result would have been an anomaly and a necessity to undermine current theory. So, meaningful data are either necessary, valuable, or unnecessary, trivial to use the term scientists use. There is no market in science but the question, how valuable, is left to individual judgment and consensus in the field, a market function without the money valuation. This is why Kuhn is so concerned with incommensurability, being incapable of comparison. Markets routinely value the scarcity of incommensurate commodities in money amounts. Scientists do not so value data and paradigms.
The marketplace of ideas is an old phrase referring to the valuation of paradigms. It is a misnomer. Markets require money, a value calculus allowing relative valuation in a market. Money definitively characterizes the relative scarcity of items like apples and oranges, to use the old illustration. Language, even rigorous language, although a rudimentary value calculus capable of assigning value and comparing data, cannot do that precisely. With language, it is all judgment and consensus.
Money and monetization define the limits of language. That which is beyond the mediating capability of language is properly subject to monetization. Kuhn, with incommensurable, defines that philosophically. He reached the limits of language, of thought. Schumpeter. working within a restricted frame that did not account for money as a value calculus assigning relative scarcity across necessary commodities in a market, consequently and brilliantly recorded interesting economic phenomena, i.e. swarms of entrepreneurs, without quite 'seeing' what he was noticing. He had reached the limits of market analysis without realizing it.
So, these two great minds, approaching the phenomenon of catastrophic change from two radically different directions agree that such events occur regularly, metaphysically in Kuhn's linguistic paradigm shift, economically in Schumpeter's monetary creative destruction. These two universes met in agreement to the existence of a phenomenon across a great divide of language, thought and reality.
Friday, August 25, 2017
Friday, August 11, 2017
The Giants of Disruption: JA Schumpeter, TS Kuhn
The first time that I encountered anything resembling the concept of disruption as used in 'disruptive innovation' [Christensen, 1997] was in the seventies. I was indulging my relentless intellectual curiosity by reading in ancient Greek philosophers on my own and, surrendering to a fit of boredom, was wandering the library aisles when a slim volume's title caught my eye. I read it and it altered my brain. It was Thomas S Kuhn's 'The Structure of Scientific Revolutions' [1962]. My thinking has never been the same since and every book I read after that was interpreted in an analytical frame of paradigm, rules, data, and anomaly.
As I wandered the tangled ways of the life of the mind, led here and there by that demanding need to know, not as an autodidact but as a curious thinking animal, I took up a study of business and economics that would lead to a degree in Operations Management. Of course in the process of acquiring the paradigms and databases of such a degree, the phrase 'creative destruction' was brought to my attention. My Kuhnian mind was immediately taken by the concept and I read Joseph A Schumpeter's 'The Theory of Economic Development' [1934]. The book structured my study of business and economics. It reordered that Kuhnian brain and, once again, my thinking was never the same.
As I continued on my intellectual way, I noticed the both authors' work rested in significant obscurity despite my personal experience of their work losing no power to explain over the years. That is the motivation for this series of blogs of which, this, the first, is a summary before the fact of the rest. The 21st century needs to know these two remarkable minds, one Berkeley, one Harvard, and their brilliant original work. It also needs to recognize the parallels in their theoretical systems and needs to take notice of their significant philosophical differences. That is the secondary purpose of these blogs.
In economic usage, the term 'disrupt' means to unsettle. There is, then, a functioning system in some sort of equilibrium or harmony and a curious unsettling incident which puts the system in disequilibrium. That is all there is to disruption. A 'disruptor', in common usage, deals in disruption, a systems agent provocateur.
The theoretical treatment of disruption requires two elements in order to 'see' disruption for what it is, a ground and a figure. The ground in disruption is an equilibrium state. The figure is a disruption to that equilibrium. In both Schumpeter and Kuhn there is great attention paid to disruption by innovation, the former in business technology, the latter in scientific theory. They both recognize disruptors with Schumpeter going so far as to name them, entrepreneurs.
In Schumpeter's creative destruction model disequilibrium occurs in cycles. The ground to this analytical frame is what has been translated as 'circular flow', an economic engine operating in perfect harmony of supply and demand. As he admits, no such economy exists. It is, like efficient markets, a useful fiction. The figure that emerges against this ground is that of entrepreneurs dealing in innovation and putting the circular flow economy in disequilibrium, swarms of entrepreneurs, as Schumpeter puts it, that occur in regular cycles.
In Kuhn's paradigm shift model, disequilibrium occurs on a necessary basis. When scientific theory cannot explain significant phenomena, there is disequilibrium and, eventually, a new theory or paradigm making new equilibrium possible. The ground to this analytical frame is 'normal science', the paradigm or theory and rules with which we interpret experience. The figure is anomaly, the critical finding that current paradigm or theory cannot explain. It is worth noting that Schumpeter assigns agency to disruption while Kuhn, respecting the brilliant minds of science history of course, does not. It is all problem and solution with him. Kuhn describes a discontinuous narrative of equilibrium, disruption, and metaphysically revolutionary change to a new equilibrium, from one universe to another. Schumpeter describes a continuous narrative of a single universe moving through constant change, driven to equilibrium but unable to achieve it.
From a philosophical point of view, the two are in, Kuhn's famous term, incommensurable (not capable of comparison) universes. They are apples and oranges. Kuhn was an instrumentalist, a theory of knowledge that says we only know what we know of reality through theoretical constructs. For him, when the theory changes, the facts change. It is a solid, pragmatic, and American approach. Schumpeter is an Aristotlean, European economist. There is a knowable fixed universe that only changes in the nuts and bolts of the economic engine. There can be no metaphysical revolution for him.
Can these two brilliant analytical frames be rationalized? Yes and no. One could rewrite Kuhn to conserve Schumpeter's theory as a special case. That would require a psychological model of generational transfer of knowledge and brain plasticity. Kuhn noted such a phenomenon as a lag in adoption but did not develop it. However, such a rewrite would do violence to Schumpeter's philosophical orientation. It would not be the same theory. Kuhn's work is comprehensive of creative destruction but Schumpeter never dreamed of paradigm shift. To say the least.
Blog series on these topics to follow.
As I wandered the tangled ways of the life of the mind, led here and there by that demanding need to know, not as an autodidact but as a curious thinking animal, I took up a study of business and economics that would lead to a degree in Operations Management. Of course in the process of acquiring the paradigms and databases of such a degree, the phrase 'creative destruction' was brought to my attention. My Kuhnian mind was immediately taken by the concept and I read Joseph A Schumpeter's 'The Theory of Economic Development' [1934]. The book structured my study of business and economics. It reordered that Kuhnian brain and, once again, my thinking was never the same.
As I continued on my intellectual way, I noticed the both authors' work rested in significant obscurity despite my personal experience of their work losing no power to explain over the years. That is the motivation for this series of blogs of which, this, the first, is a summary before the fact of the rest. The 21st century needs to know these two remarkable minds, one Berkeley, one Harvard, and their brilliant original work. It also needs to recognize the parallels in their theoretical systems and needs to take notice of their significant philosophical differences. That is the secondary purpose of these blogs.
In economic usage, the term 'disrupt' means to unsettle. There is, then, a functioning system in some sort of equilibrium or harmony and a curious unsettling incident which puts the system in disequilibrium. That is all there is to disruption. A 'disruptor', in common usage, deals in disruption, a systems agent provocateur.
The theoretical treatment of disruption requires two elements in order to 'see' disruption for what it is, a ground and a figure. The ground in disruption is an equilibrium state. The figure is a disruption to that equilibrium. In both Schumpeter and Kuhn there is great attention paid to disruption by innovation, the former in business technology, the latter in scientific theory. They both recognize disruptors with Schumpeter going so far as to name them, entrepreneurs.
In Schumpeter's creative destruction model disequilibrium occurs in cycles. The ground to this analytical frame is what has been translated as 'circular flow', an economic engine operating in perfect harmony of supply and demand. As he admits, no such economy exists. It is, like efficient markets, a useful fiction. The figure that emerges against this ground is that of entrepreneurs dealing in innovation and putting the circular flow economy in disequilibrium, swarms of entrepreneurs, as Schumpeter puts it, that occur in regular cycles.
In Kuhn's paradigm shift model, disequilibrium occurs on a necessary basis. When scientific theory cannot explain significant phenomena, there is disequilibrium and, eventually, a new theory or paradigm making new equilibrium possible. The ground to this analytical frame is 'normal science', the paradigm or theory and rules with which we interpret experience. The figure is anomaly, the critical finding that current paradigm or theory cannot explain. It is worth noting that Schumpeter assigns agency to disruption while Kuhn, respecting the brilliant minds of science history of course, does not. It is all problem and solution with him. Kuhn describes a discontinuous narrative of equilibrium, disruption, and metaphysically revolutionary change to a new equilibrium, from one universe to another. Schumpeter describes a continuous narrative of a single universe moving through constant change, driven to equilibrium but unable to achieve it.
From a philosophical point of view, the two are in, Kuhn's famous term, incommensurable (not capable of comparison) universes. They are apples and oranges. Kuhn was an instrumentalist, a theory of knowledge that says we only know what we know of reality through theoretical constructs. For him, when the theory changes, the facts change. It is a solid, pragmatic, and American approach. Schumpeter is an Aristotlean, European economist. There is a knowable fixed universe that only changes in the nuts and bolts of the economic engine. There can be no metaphysical revolution for him.
Can these two brilliant analytical frames be rationalized? Yes and no. One could rewrite Kuhn to conserve Schumpeter's theory as a special case. That would require a psychological model of generational transfer of knowledge and brain plasticity. Kuhn noted such a phenomenon as a lag in adoption but did not develop it. However, such a rewrite would do violence to Schumpeter's philosophical orientation. It would not be the same theory. Kuhn's work is comprehensive of creative destruction but Schumpeter never dreamed of paradigm shift. To say the least.
Blog series on these topics to follow.
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