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"Economic Development Theory" After Reading Composition 1000 words

时间:2019年09月09日 Source: jajshop.com Time: September 9, 2019

Profit comes from innovation-1000 words after reading Economic Development Theory:

After reading Schumpeter's "Theory of Economic Development", while lamenting the author's rigorous logic, he also felt difficult to understand. As for the narrative of economic development theory, I still don't understand many details after reading it through, but the core idea of economic development theory seems easy to understand. I summarize three points to share with you.

1. No profit in a stable market

Trading must be profitable, this is common sense. But economists don't think so. They believe that there is no profit in a fully competitive market. Because competition will increase the cost and decrease the selling price. In the final stable state, the selling price will be equal to the cost, that is, the seller of the goods will share the cost of the means of production such as land rent and wages.

But in reality, profits always exist. When it is necessary to explain here, economics research is just like mathematical research. Often, hypotheses and demonstrations are ideally performed first, and then the conclusions are adjusted according to the actual situation in the application. In reality, there are several factors that cause profit:

The first is insufficient competition. In reality, not everyone can do business. Due to government policies or other man-made reasons, latecomers need to overcome certain barriers to entry (Buffet calls the moat), so the competition is not sufficient, resulting in profitability;

The second reason is unexpected conditions. Take agricultural products as an example. The type and quantity of crops sown by each farmer are based on past experience. However, when an unexpected situation such as a natural disaster occurs, some people will definitely incur losses and some will gain (price increases).

Due to the above circumstances, economic planning cannot always run harmoniously like a machine, which leads to the production of profits. Economists say: Profit is a symbol of imperfection.

利润源自创新——《经济发展理论》读后感1000字.jpg

2. Entrepreneurs are people who bring profits through innovation

Schumpeter defines entrepreneurs as leaders in driving innovation. The function of the entrepreneur is to combine the factors of production. They found new ways of combining production factors in existing markets, which produced products that cost less or meet new needs.

The core of entrepreneurs' ability to generate profits is that they can exceed people's expectations. In a stable market environment, the cost of any factor of production (land, labor) is determined by the selling price of its combined products, so there is no profit in a stable market. When the entrepreneur can combine the factors of production to produce more and better products, these products can be sold at a higher price than the cost price of the factors of production, so profits are generated.

The definition of development is the implementation of a new combination, which includes five cases: 1) new products 2) new production methods 3) new markets 4) new supplies 5) new organizations.

3. Recession is the result of prosperity and the soil for the next round of prosperity

The benefits are not permanent. Entrepreneurs obtain capital through credit, and then after a period of development, they have the ability to make independent profits. At this time, the company begins to transform into a mature enterprise. It is also at this time that competitors have gradually joined in, and the production cost of the enterprise (Including land rent and wages) started to increase, and the price of the product fell due to competition, so that corporate profits slowly began to decrease. At this time, a company from financing and entrepreneurship, scale profits to balance of payments, then they will receive income again. To the challenges of new and innovative companies, if they cannot successfully meet the challenges, they will decline.

This can also explain the alternate development cycle of economic prosperity and recession. When an entrepreneur succeeds, it will lead one entrepreneur after another to try. As more and more companies succeed, the barriers to entry for the entrepreneurs who enter the market will decrease, and financing will be easier. Began to appear in batches, capital began to enter quickly, causing the cost of production materials to rise, all commodity prices to rise, and everyone's income to increase, this is the market boom.

Under the prosperity of the national carnival, in fact, an imbalance has also occurred. First of all, the success of new enterprises means the decline of many old enterprises. The means of production are evacuated from the old enterprises and used for new purposes (prosperity will inevitably lead to loss of business travel). At the same time, the profits of the new enterprises will gradually decrease. The driving force for economic prosperity slowly diminished, the inflection point came, and the market began to decline.

The recession will lead to a new equilibrium position, and the recession has a very positive side. The economic nature of a recession is to spread the fruits of prosperity to the entire economic system through a mechanism that seeks to balance. This balanced market state will provide good soil for new combinations (ie innovation), and the next round of market prosperity will emerge from it. Author: awe-inspiring pieces

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