While the consumer benefits from the new products and improved production processes due to creative destruction, the major downside to creative destruction is technological unemployment. However, policies adopted by government and by workers can increase the upside and reduce the downside. Governments can enable entrepreneurial innovation by allowing the labor market to be flexible. A government safety net is also considered. However, workers can become more resilient in attitude and frugal in spending in order to cope with technological unemployment, and can invest in more diversified and enduring human capital. The family can also provide a private safety net. The process of creative destruction is not a zero-sum game.
Arthur Diamond. 2014. “The Creative Destruction of Labor Policy.” Libertarian Papers. 6 (2): 107-134. ONLINE AT: libertarianpapers.org. THIS ARTICLE IS subject to a Creative Commons Attribution 3.0 License (creativecommons.org/licenses).