GALLUP: Current Life Satisfaction is Significantly Higher in Places with a High Job Turnover Rate

by Angus Deaton, Ph.D., Philippe Aghion, Ph.D., and Alexandra Roulet, Ph.D.

Innovations, new ways of doing things, and new technologies are at the heart of economic growth, which has brought great benefits to mankind. But when entrepreneurs introduce these innovations, there are losers as well as winners. This is the process Joseph Schumpeter called "creative destruction," in which old methods and the livelihoods and profits that go with them are often "destroyed" by new upstarts.

We see this all around us. One recent example is the taxi industry, where the new technologies of smartphones and GPS devices have brought a whole new way of connecting cabs with their potential riders -- the most famous being Uber.

New entrants -- often entrepreneurs from other industries -- introduce these technologies, which may threaten and even destroy the incumbents' businesses, whose owners and employees may lose their livelihoods and their capital. Taxi medallions in New York City have seen substantial losses in value; in London, "the Knowledge" of every street and alley, which every trainee cab driver must spend years learning, has been made obsolete by cheap GPS devices.

This destruction is bad for the current taxi industry but good for consumers, who benefit from the new superior technology and from lower prices. And it creates new jobs. In the end, we all benefit from economic growth, but -- as the saying goes -- it is hard to make an omelet without breaking eggs.

Our analysis of Gallup-Healthways Well-Being Index data shows that looking across American cities, the broken eggs are typically more than made up for by the prospects of a brighter future. Citizens understand the short-term problems associated with creative destruction, and look ahead to the future benefits.

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