Chapter 15 (EOC)

Can layoffs be a sign that an economy is healthy?

Economist Joseph Schumpeter coined the phrase "creative destruction" to describe dynamic competition among businesses which will lead to the introduction of superior products and technologies.  Examples include the following:  the automobile replaces the horse and buggy, the supermarket replaces the mom and pop grocery store, and Wal-Mart and Target growing while firms like Kmart and Woolworth are in decline. 

By construction, "creative destruction" leads to job losses in certain industries and job gains in others.  The job losses not only are painful but very visible.  Many countries in Europe have laws that make it more difficult for businesses to lay off workers.  In addition, these countries also have mandatory benefits, including vacation, sick leave, maternity leave. 

Should the U.S. have these type of regulations as well or should we not interfere with the market?

For an interesting movie clip on creative destruction, see Danny Devito speak as "Larry the Liquidator" from the 1991 movie "Other People's Money."

Please go to the You Tube and copy and paste this link:( Blackboard is not supporting You Tube Videos any more).

http://www.youtube.com/watch?v=MfL7STmWZ1c