The American economy has been in the forefront of what Joseph Schumpeter, the renowned Harvard professor, called “creative destruction,” the continuous scrapping of old technologies to make way for the new.
Standards of living rise because the depreciation and other cash flows of industries employing older, increasingly obsolescent, technologies are marshaled, along with new savings, to finance the production of capital assets that almost always embody cutting-edge technologies. Workers migrate with the capital. This is the process by which wealth is created, incremental step by incremental step.