Joseph Schumpeter

Joseph Schumpeter

Overview
Joseph Alois Schumpeter (8 February 1883 – 8 January 1950) was an Austrian-Hungarian-American economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...

 and political scientist. He popularized the term "creative destruction
Creative destruction
Creative destruction is a term originally derived from Marxist economic theory which refers to the linked processes of the accumulation and annihilation of wealth under capitalism. These processes were first described in The Communist Manifesto and were expanded in Marx's Grundrisse and "Volume...

" in economics.

Born in Třešť
Trešt
Třešť is a town in the Vysočina Region of the Czech Republic, which was founded around the turn of the 13th century. It has around 6,000 inhabitants....

, Moravia
Moravia
Moravia is a historical region in Central Europe in the east of the Czech Republic, and one of the former Czech lands, together with Bohemia and Silesia. It takes its name from the Morava River which rises in the northwest of the region...

 (now Czech Republic, then part of Austria-Hungary
Austria-Hungary
Austria-Hungary , more formally known as the Kingdoms and Lands Represented in the Imperial Council and the Lands of the Holy Hungarian Crown of Saint Stephen, was a constitutional monarchic union between the crowns of the Austrian Empire and the Kingdom of Hungary in...

) in 1883 to Catholic
Catholic
The word catholic comes from the Greek phrase , meaning "on the whole," "according to the whole" or "in general", and is a combination of the Greek words meaning "about" and meaning "whole"...

 ethnic German
Ethnic German
Ethnic Germans historically also ), also collectively referred to as the German diaspora, refers to people who are of German ethnicity. Many are not born in Europe or in the modern-day state of Germany or hold German citizenship...

 parents. His father owned a factory, but he died when Joseph was only four years old. In 1893, Joseph and his mother moved to Vienna
Vienna
Vienna is the capital and largest city of the Republic of Austria and one of the nine states of Austria. Vienna is Austria's primary city, with a population of about 1.723 million , and is by far the largest city in Austria, as well as its cultural, economic, and political centre...

.

Schumpeter began his career studying law at the University of Vienna
University of Vienna
The University of Vienna is a public university located in Vienna, Austria. It was founded by Duke Rudolph IV in 1365 and is the oldest university in the German-speaking world...

 under the Austrian
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...

 capital theorist Eugen von Böhm-Bawerk
Eugen von Böhm-Bawerk
Eugen Ritter von Böhm-Bawerk was an Austrian economist who made important contributions to the development of the Austrian School of economics.-Biography:...

, taking his PhD
PHD
PHD may refer to:*Ph.D., a doctorate of philosophy*Ph.D. , a 1980s British group*PHD finger, a protein sequence*PHD Mountain Software, an outdoor clothing and equipment company*PhD Docbook renderer, an XML renderer...

 in 1906.
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Quotations

Innovation is the market introduction of a technical or organisational novelty, not just its invention. (Theorie der wirtschaftlichen Entwicklung, 1911)

Encyclopedia
Joseph Alois Schumpeter (8 February 1883 – 8 January 1950) was an Austrian-Hungarian-American economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...

 and political scientist. He popularized the term "creative destruction
Creative destruction
Creative destruction is a term originally derived from Marxist economic theory which refers to the linked processes of the accumulation and annihilation of wealth under capitalism. These processes were first described in The Communist Manifesto and were expanded in Marx's Grundrisse and "Volume...

" in economics.

Life


Born in Třešť
Trešt
Třešť is a town in the Vysočina Region of the Czech Republic, which was founded around the turn of the 13th century. It has around 6,000 inhabitants....

, Moravia
Moravia
Moravia is a historical region in Central Europe in the east of the Czech Republic, and one of the former Czech lands, together with Bohemia and Silesia. It takes its name from the Morava River which rises in the northwest of the region...

 (now Czech Republic, then part of Austria-Hungary
Austria-Hungary
Austria-Hungary , more formally known as the Kingdoms and Lands Represented in the Imperial Council and the Lands of the Holy Hungarian Crown of Saint Stephen, was a constitutional monarchic union between the crowns of the Austrian Empire and the Kingdom of Hungary in...

) in 1883 to Catholic
Catholic
The word catholic comes from the Greek phrase , meaning "on the whole," "according to the whole" or "in general", and is a combination of the Greek words meaning "about" and meaning "whole"...

 ethnic German
Ethnic German
Ethnic Germans historically also ), also collectively referred to as the German diaspora, refers to people who are of German ethnicity. Many are not born in Europe or in the modern-day state of Germany or hold German citizenship...

 parents. His father owned a factory, but he died when Joseph was only four years old. In 1893, Joseph and his mother moved to Vienna
Vienna
Vienna is the capital and largest city of the Republic of Austria and one of the nine states of Austria. Vienna is Austria's primary city, with a population of about 1.723 million , and is by far the largest city in Austria, as well as its cultural, economic, and political centre...

.

Schumpeter began his career studying law at the University of Vienna
University of Vienna
The University of Vienna is a public university located in Vienna, Austria. It was founded by Duke Rudolph IV in 1365 and is the oldest university in the German-speaking world...

 under the Austrian
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...

 capital theorist Eugen von Böhm-Bawerk
Eugen von Böhm-Bawerk
Eugen Ritter von Böhm-Bawerk was an Austrian economist who made important contributions to the development of the Austrian School of economics.-Biography:...

, taking his PhD
PHD
PHD may refer to:*Ph.D., a doctorate of philosophy*Ph.D. , a 1980s British group*PHD finger, a protein sequence*PHD Mountain Software, an outdoor clothing and equipment company*PhD Docbook renderer, an XML renderer...

 in 1906. In 1909, after some study trips, he became a professor of economics and government at the University of Czernowitz
Chernivtsi University
The Chernivtsi National University is the leading Ukrainian institution for higher education in northern Bukovina, in Chernivtsi, a city in southwest Ukraine....

. In 1911 he joined the University of Graz
University of Graz
The University of Graz , a university located in Graz, Austria, is the second-largest and second-oldest university in Austria....

, where he remained until World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...

. In 1919, he served briefly as the Austrian Minister of Finance, with some success, and in 1920-1924, as president of the private Biedermann Bank. That bank, along with a great part of that regional economy, collapsed in 1924 leaving Schumpeter bankrupt.

From 1925-1932, he held a chair at the University of Bonn
University of Bonn
The University of Bonn is a public research university located in Bonn, Germany. Founded in its present form in 1818, as the linear successor of earlier academic institutions, the University of Bonn is today one of the leading universities in Germany. The University of Bonn offers a large number...

, Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...

. He lectured at Harvard in 1927-1928 and 1930. In 1931 he was a visiting professor at The Tokyo College of Commerce. In 1932 he moved to the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

, in 1939 he became an US citizen. Schumpeter had a highly conservative political attitude. In the beginning of WWII, the FBI investigated him for pro-Nazi leanings, but no evidence was found that he had any sympathies for Nazism.

During his Harvard years he was not generally considered a good classroom teacher, but he acquired a school of loyal followers . His prestige among colleagues was likewise not very high because his views seemed outdated and not in tune with the then-fashionable Keynesianism. This period of his life was characterized by hard work but little recognition of his core ideas.

Although Schumpeter encouraged some young mathematical economists
Mathematical economics
Mathematical economics is the application of mathematical methods to represent economic theories and analyze problems posed in economics. It allows formulation and derivation of key relationships in a theory with clarity, generality, rigor, and simplicity...

 and was even the president of the Econometric Society
Econometric Society
The Econometric Society is an international society for the advancement of economic theory in its relation with statistics and mathematics. It was founded on December 29, 1930 at the Stalton Hotel in Cleveland, Ohio....

 (1940–41), Schumpeter was not a mathematician, but rather an economist, and tried instead to integrate sociological
Sociology
Sociology is the study of society. It is a social science—a term with which it is sometimes synonymous—which uses various methods of empirical investigation and critical analysis to develop a body of knowledge about human social activity...

 understanding into his economic theories. From current thought it has been argued that Schumpeter's ideas on business cycle
Business cycle
The term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...

s and economic development
Economic development
Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area...

 could not be captured in the mathematics of his day - they need the language of non-linear dynamical systems to be partially formalized.

Schumpeter claimed that he had set himself three goals in life: to be the greatest economist in the world, to be the best horseman in all of Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...

 and the greatest lover in all of Vienna
Vienna
Vienna is the capital and largest city of the Republic of Austria and one of the nine states of Austria. Vienna is Austria's primary city, with a population of about 1.723 million , and is by far the largest city in Austria, as well as its cultural, economic, and political centre...

. He said he had reached two of his goals, but he never said which two. Although, he is reported to have said that there were too many fine horsemen in Austria for him to succeed in all his aspirations!

He died in his home in Taconic, Connecticut, at the age of 66, on the night of 7 January 1950.

Most important work



According to Christopher Freeman
Christopher Freeman
Christopher Freeman was an English economist, the founder and first director of Science and Technology Policy Research at the University of Sussex, and one of the most eminent modern Kondratiev wave and business cycle theorists...

 (2009), a scholar who devoted much time researching Schumpeter's work: "the central point of his whole life work [is]: that capitalism can only be understood as an evolutionary process of continuous innovation and 'creative destruction' [This] is still not taken into the bosom of mainstream theory, although many now pay lip service to it."

History of Economic Analysis


Schumpeter's scholarship is apparent in his posthumous History of Economic Analysis, although some of his judgments seem idiosyncratic and sometimes cavalier. For instance, Schumpeter thought that the greatest 18th century economist was Turgot
Anne Robert Jacques Turgot, Baron de Laune
Anne-Robert-Jacques Turgot, Baron de Laune , often referred to as Turgot, was a French economist and statesman. Turgot was a student of Francois Quesnay and as such belonged to the Physiocratic school of economic thought...

, not Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...

, as many consider, and he considered Léon Walras
Léon Walras
Marie-Esprit-Léon Walras was a French mathematical economist associated with the creation of the general equilibrium theory.-Life and career:...

 to be the "greatest of all economists", beside whom other economists' theories were "like inadequate attempts to catch some particular aspects of Walrasian truth". Schumpeter criticized John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

 and David Ricardo
David Ricardo
David Ricardo was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. He was also a member of Parliament, businessman, financier and speculator,...

 for the "Ricardian vice." According to Schumpeter, Ricardo and Keynes reasoned in terms of abstract models, where they would freeze all but a few variables. Then they could argue that one caused the other in a simple monotonic fashion. This led to the belief that one could easily deduce policy conclusions directly from a highly abstract theoretical model.

Business cycles


Schumpeter's relationships with the ideas of other economists were quite complex in his most important contributions to economic analysis - the theory of business cycles and development. Following neither Walras nor Keynes, Schumpeter starts in The Theory of Economic Development with a treatise of circular flow which, excluding any innovations and innovative activities, leads to a stationary state. The stationary state is, according to Schumpeter, described by Walrasian equilibrium. The hero of his story is the entrepreneur
Entrepreneur
An entrepreneur is an owner or manager of a business enterprise who makes money through risk and initiative.The term was originally a loanword from French and was first defined by the Irish-French economist Richard Cantillon. Entrepreneur in English is a term applied to a person who is willing to...

.

The entrepreneur disturbs this equilibrium and is the prime cause of economic development, which proceeds in cyclic fashion along several time scales. In fashioning this theory connecting innovations, cycles, and development, Schumpeter kept alive the Russian Nikolai Kondratiev's
Nikolai Kondratiev
Nikolai Dmitriyevich Kondratiev , Russian: Николай Дмитриевич Кондратьев , was a Russian economist, who was a proponent of the New Economic Policy in the Soviet Union....

 ideas on 50-year cycles, Kondratiev wave
Kondratiev wave
Kondratiev waves are described as sinusoidal-like cycles in the modern capitalist world economy...

s.

Schumpeter suggested a model in which the four main cycles, Kondratiev
Kondratiev wave
Kondratiev waves are described as sinusoidal-like cycles in the modern capitalist world economy...

 (54 years), Kuznets (18 years), Juglar
Clement Juglar
Clément Juglar was a French doctor and statistician.-Juglar Cycles:He was one of the first to develop an economic theory of business cycles. He identified the 7-11 year fixed investment cycle that is now associated with his name...

 (9 years) and Kitchin
Kitchin cycle
Kitchin cycle is a short business cycle of about 40 months discovered in the 1920s by Joseph Kitchin.This cycle is believed to be accounted for by time lags in information movements affecting the decision making of commercial firms. Firms react to the improvement of commercial situation through the...

 (about 4 years) can be added together to form a composite waveform
Waveform
Waveform means the shape and form of a signal such as a wave moving in a physical medium or an abstract representation.In many cases the medium in which the wave is being propagated does not permit a direct visual image of the form. In these cases, the term 'waveform' refers to the shape of a graph...

. Actually there was considerable professional rivalry between Schumpeter and Kuznets. The wave form suggested here did not include the Kuznets Cycle
Kuznets swing
Kuznets swing is a claimed medium-range economic wave with a period of 15–25 years found in 1930 by Simon Kuznets. Kuznets connected these waves with demographic processes, in particular with immigrant inflows/outflows and the changes in construction intensity that they caused, that is why he...

 simply because Schumpeter did not recognize it as a valid cycle. See "Business Cycle
Business cycle
The term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...

" for further information. A Kondratiev wave could consist of three lower degree Kuznets waves. Each Kuznets wave could, itself, be made up of two Juglar waves. Similarly two (or three) Kitchin waves could form a higher degree Juglar wave. If each of these were in phase, more importantly if the downward arc of each was simultaneous so that the nadir
Nadir
The nadir is the direction pointing directly below a particular location; that is, it is one of two vertical directions at a specified location, orthogonal to a horizontal flat surface there. Since the concept of being below is itself somewhat vague, scientists define the nadir in more rigorous...

 of each was coincident it would explain disastrous slumps and consequent depressions. As far as the segmentation of the Kondratiev Wave, Schumpeter never proposed such a fixed model. He saw these cycles varying in time - although in a tight time frame by coincidence - and for each to serve a specific purpose.

Schumpeter and Keynesianism


Unlike Keynes, in Schumpeter's theory, Walrasian equilibrium is not adequate to capture the key mechanisms of economic development. Schumpeter also thought that the institution enabling the entrepreneur to purchase the resources needed to realize his or her vision was a well-developed capitalist
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...

 financial system, including a whole range of institutions for granting credit
Credit (education)
A course credit is a unit that gives weighting to the value, level or time requirements of an academic course taken at a school or other educational institution.- United States :...

. One could divide economists among (1) those who emphasized "real" analysis and regarded money as merely a "veil" and (2) those who thought monetary institutions are important and money could be a separate driving force. Both Schumpeter and Keynes were among the latter.

Schumpeter and capitalism's demise


Schumpeter's most popular book in English is probably Capitalism, Socialism and Democracy
Capitalism, Socialism and Democracy
Capitalism, Socialism and Democracy is the most famous book by Joseph Schumpeter in which he deals with capitalism, socialism and creative destruction...

. This book opens with a treatment of Karl Marx
Karl Marx
Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...

.
While he is sympathetic to Marx's theory that capitalism will collapse and will be replaced by socialism
Socialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...

, Schumpeter concludes that this will not come about in the way Marx predicted. To describe it he borrowed the phrase "creative destruction
Creative destruction
Creative destruction is a term originally derived from Marxist economic theory which refers to the linked processes of the accumulation and annihilation of wealth under capitalism. These processes were first described in The Communist Manifesto and were expanded in Marx's Grundrisse and "Volume...

", and made it famous by using it to describe a process in which the old ways of doing things are endogenously
Endogeneity (economics)
In an econometric model, a parameter or variable is said to be endogenous when there is a correlation between the parameter or variable and the error term. Endogeneity can arise as a result of measurement error, autoregression with autocorrelated errors, simultaneity, omitted variables, and sample...

 destroyed and replaced by new ways.

Schumpeter's theory is that the success of capitalism will lead to a form of corporatism
Corporatism
Corporatism, also known as corporativism, is a system of economic, political, or social organization that involves association of the people of society into corporate groups, such as agricultural, business, ethnic, labor, military, patronage, or scientific affiliations, on the basis of common...

 and a fostering of values hostile to capitalism, especially among intellectuals. The intellectual and social climate needed to allow entrepreneurship
Entrepreneurship
Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response...

 to thrive will not exist in advanced capitalism; it will be replaced by socialism in some form. There will not be a revolution, but merely a trend in parliament
Parliament
A parliament is a legislature, especially in those countries whose system of government is based on the Westminster system modeled after that of the United Kingdom. The name is derived from the French , the action of parler : a parlement is a discussion. The term came to mean a meeting at which...

s to elect social democratic parties of one stripe or another. He argued that capitalism's collapse from within will come about as democratic majorities vote for restrictions upon entrepreneurship that will burden and destroy the capitalist structure, but also emphasizes non-political, evolutionary processes in society where "liberal capitalism" was evolving into democratic socialism because of the growth of workers' self-management, industrial democracy
Industrial democracy
Industrial democracy is an arrangement which involves workers making decisions, sharing responsibility and authority in the workplace. While in participative management organizational designs workers are listened to and take part in the decision-making process, in organizations employing industrial...

 and regulatory institutions. Schumpeter emphasizes throughout this book that he is analyzing trends, not engaging in political advocacy. In his vision, the intellectual class will play an important role in capitalism's demise. The term "intellectuals" denotes a class of persons in a position to develop critiques of societal matters for which they are not directly responsible and able to stand up for the interests of strata to which they themselves do not belong. One of the great advantages of capitalism, he argues, is that as compared with pre-capitalist periods, when education was a privilege of the few, more and more people acquire (higher) education. The availability of fulfilling work is, however, limited, and this lack, coupled with the experience of unemployment, produces discontent. The intellectual class is then able to organize protest and develop critical ideas.

Schumpeter and democratic theory


In the same book, Schumpeter expounded a theory of democracy
Democracy
Democracy is generally defined as a form of government in which all adult citizens have an equal say in the decisions that affect their lives. Ideally, this includes equal participation in the proposal, development and passage of legislation into law...

 which sought to challenge what he called the "classical doctrine". He disputed the idea that democracy was a process by which the electorate identified the common good, and politicians carried this out for them. He argued this was unrealistic, and that people's ignorance and superficiality meant that in fact they were largely manipulated by politicians, who set the agenda. This made a 'rule by the people' concept both unlikely and undesirable. Instead he advocated a minimalist model, much influenced by Max Weber
Max Weber
Karl Emil Maximilian "Max" Weber was a German sociologist and political economist who profoundly influenced social theory, social research, and the discipline of sociology itself...

, whereby democracy is the mechanism for competition between leaders, much like a market structure. Although periodic votes by the general public legitimize governments and keep them accountable, the policy program is very much seen as their own and not that of the people, and the participatory role for individuals is usually severely limited.

Schumpeter and entrepreneurship


The research of entrepreneurship
Entrepreneurship
Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response...

 owes much to his contributions. He was probably the first scholar to develop its theories.
He gave two theories, sometimes called Mark I and Mark II. In the first one, the early one, Schumpeter argued that the innovation and technological change of a nation comes from the entrepreneurs, or wild spirits. He coined the word Unternehmergeist, German for entrepreneur-spirit. He believed that these individuals are the ones who make things work in the economy of the country. In Mark II, expanded as professor at Harvard, he asserted that the actors that drive innovation and the economy are big companies which have the resources and capital to invest in research and development. Both arguments might be complementary today.

Schumpeter and innovation


Schumpeter identified innovation as the critical dimension of economic change. He argued that economic change revolves around innovation, entrepreneurial activities, and market power. He sought to prove that innovation-originated market power could provide better results than the invisible hand and price competition. He argues that technological innovation often creates temporary monopolies, allowing abnormal profits that would soon be competed away by rivals and imitators. He said that these temporary monopolies were necessary to provide the incentive necessary for firms to develop new products and processes.

Schumpeter and the gold standard


Joseph Schumpeter recognized the implication of a gold monetary standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...

 compared to a fiat monetary standard. In History of Economic Analysis he stated the following:

His legacy


For some time after his death, Schumpeter's views were most influential among various heterodox economists
Heterodox economics
"Heterodox economics" refers to approaches or to schools of economic thought that are considered outside of "mainstream economics". Mainstream economists sometimes assert that it has little or no influence on the vast majority of academic economists in the English speaking world. "Mainstream...

, especially European, who were interested in industrial organization, evolutionary theory
Evolution
Evolution is any change across successive generations in the heritable characteristics of biological populations. Evolutionary processes give rise to diversity at every level of biological organisation, including species, individual organisms and molecules such as DNA and proteins.Life on Earth...

, and economic development, and who tended to be on the other end of the political spectrum from Schumpeter and were also often influenced by Keynes, Karl Marx, and Thorstein Veblen
Thorstein Veblen
Thorstein Bunde Veblen, born Torsten Bunde Veblen was an American economist and sociologist, and a leader of the so-called institutional economics movement...

. Robert Heilbroner
Robert Heilbroner
Robert L. Heilbroner was an American economist and historian of economic thought. The author of some twenty books, Heilbroner was best known for The Worldly Philosophers , a survey of the lives and contributions of famous economists, notably Adam Smith, Karl Marx, and John Maynard...

 was one of Schumpeter's most renowned pupils, who wrote extensively about him in The Worldly Philosophers
The Worldly Philosophers
The Worldly Philosophers: The Lives, Times and Ideas of the Great Economic Thinkers is a book by Robert L. Heilbroner. The book was written in 1953 and has sold more than four million copies through seven editions...

. In the journal Monthly Review
Monthly Review
Monthly Review is an independent Marxist journal published 11 times per year in New York City.-History:The publication was founded by Harvard University economics instructor Paul Sweezy, who became the first editor...

John Bellamy Foster wrote of that journal's founder Paul Sweezy
Paul Sweezy
Paul Marlor Sweezy was a Marxist economist, political activist, publisher, and founding editor of the long-running magazine Monthly Review...

, one of the leading Marxist economists in the United States and a graduate assistant of Schumpeter's at Harvard, that Schumpeter "played a formative role in his development as a thinker". Other outstanding students of Schumpeter's include the economists Nicholas Georgescu-Roegen
Nicholas Georgescu-Roegen
Nicholas Georgescu-Roegen, born Nicolae Georgescu was a Romanian mathematician, statistician and economist, best known for his 1971 magnum opus The Entropy Law and the Economic Process, which situated the view that the second law of thermodynamics, i.e., that usable "free energy" tends to disperse...

 and Hyman Minsky
Hyman Minsky
Hyman Philip Minsky was an American economist and professor of economics at Washington University in St. Louis. His research attempted to provide an understanding and explanation of the characteristics of financial crises...

 and former chairman of the Federal Reserve, Alan Greenspan
Alan Greenspan
Alan Greenspan is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor and provides consulting for firms through his company, Greenspan Associates LLC...

. Robert Solow
Robert Solow
Robert Merton Solow is an American economist particularly known for his work on the theory of economic growth that culminated in the exogenous growth model named after him...

, Nobel Prize in Economics, was his student at Harvard, and he expanded on Schumpeter's theory.

Today, Schumpeter has a following outside of standard textbook economics, in areas such as in economic policy, management studies, industrial policy, and the study of innovation
Innovation
Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...

. Schumpeter was probably the first scholar to develop theories about entrepreneurship
Entrepreneurship
Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response...

. For instance, the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...

's innovation program, and its main development plan, the Lisbon Strategy
Lisbon Strategy
The Lisbon Strategy, also known as the Lisbon Agenda or Lisbon Process, was an action and development plan devised in 2000, for the economy of the European Union between 2000 and 2010....

, are influenced by Schumpeter. The International Joseph A. Schumpeter Society
International Joseph A. Schumpeter Society
The International Joseph A. Schumpeter Society is an economics association aimed at furthering research in the spirit of Joseph Schumpeter....

 awards the Schumpeter Prize.

The Schumpeter School of Business and Economics
Business school
A business school is a university-level institution that confers degrees in Business Administration. It teaches topics such as accounting, administration, economics, entrepreneurship, finance, information systems, marketing, organizational behavior, public relations, strategy, human resource...

 opened in October 2008 at the University of Wuppertal
University of Wuppertal
The University of Wuppertal is a German scientific institution, located in Wuppertal, North Rhine-Westphalia.The university, the full German name of which is Bergische Universität Wuppertal , was formed in 1972 and is located in the city of Wuppertal, within the state of North Rhine-Westphalia,...

. According to University President Professor Lambert T. Koch, “Schumpeter will not only be the name of the Faculty of Management and Economics, but this is also a research and teaching programme related to Joseph A. Schumpeter."

On 17 September 2009, The Economist
The Economist
The Economist is an English-language weekly news and international affairs publication owned by The Economist Newspaper Ltd. and edited in offices in the City of Westminster, London, England. Continuous publication began under founder James Wilson in September 1843...

 inaugurated a column on business and management named "Schumpeter." The publication has a history of naming columns after significant figures or symbols in the covered field, including naming its British affairs column after former editor Walter Bagehot
Walter Bagehot
Walter Bagehot was an English businessman, essayist, and journalist who wrote extensively about literature, government, and economic affairs.-Early years:...

 and its European affairs column after Charlemagne
Charlemagne
Charlemagne was King of the Franks from 768 and Emperor of the Romans from 800 to his death in 814. He expanded the Frankish kingdom into an empire that incorporated much of Western and Central Europe. During his reign, he conquered Italy and was crowned by Pope Leo III on 25 December 800...

. The initial Schumpeter column praised him as a "champion of innovation and entrepreneurship" whose writing showed an understanding of the benefits and dangers of business that proved far ahead of its time.

Major works

  • "Über die mathematische Methode der theoretischen Ökonomie", 1906, ZfVSV.
  • "Das Rentenprinzip in der Verteilungslehre", 1907, Schmollers Jahrbuch.
  • Wesen und Hauptinhalt der theoretischen Nationalökonomie (transl. The Nature and Essence of Theoretical Economics), 1908.
  • "Methodological Individualism", 1908,
  • "On the Concept of Social Value", 1909, QJE.
  • Wie studiert man Sozialwissenschaft, 1910 (transl. by J.Z. Muller, "How to Study Social Science", Society, 2003).
  • "Marie Esprit Leon Walras", 1910, ZfVSV.
  • "Über das Wesen der Wirtschaftskrisen", 1910, ZfVSV.
  • Theorie der wirtschaftlichen Entwicklung (transl. 1934, The Theory of Economic Development: An inquiry into profits, capital, credit, interest and the business cycle) 1911.
  • Economic Doctrine and Method: An historical sketch, 1914.
  • "Das wissenschaftliche Lebenswerk Eugen von Böhm-Bawerks", 1914, ZfVSV.
  • Vergangenkeit und Zukunft der Sozialwissenschaft, 1915.
  • The Crisis of the Tax State, 1918.
  • "The Sociology of Imperialisms", 1919, Archiv für Sozialwissenschaft und Sozialpolitik
  • "Max Weber's Work", 1920, Der österreichische Volkswirt.
  • "Carl Menger", 1921, ZfVS.
  • "The Explanation of the Business Cycle", 1927, Economica.
  • "Social Classes in an Ethnically Homogeneous Environment", 1927, Archiv für Sozialwissenschaft und Sozialpolitik.
  • "The Instability of Capitalism", 1928, EJ.
  • Das deutsche Finanzproblem, 1928.
  • "Mitchell's Business Cycles", 1930, QJE.
  • "The Present World Depression: A tentative diagnosis", 1931, AER.
  • "The Common Sense of Econometrics", 1933, Econometrica.
  • "Depressions: Can we learn from past experience?", 1934, in Economics of the Recovery Program
  • "The Nature and Necessity of a Price System", 1934, Economic Reconstruction.
  • "Review of Robinson's Economics of Imperfect Competition", 1934, JPE.
  • "The Analysis of Economic Change", 1935, REStat.
  • "Professor Taussig on Wages and Capital", 1936, Explorations in Economics.
  • "Review of Keynes's General Theory", 1936, JASA.
  • Business Cycles: A theoretical, historical and statistical analysis of the Capitalist process, 1939.
  • "The Influence of Protective Tariffs on the Industrial Development of the United States", 1940, Proceedings of AAPS.
  • "Alfred Marshall's Principles: A semi-centennial appraisal", 1941, AER.
  • "Frank William Taussig", 1941, QJE.
  • Capitalism, Socialism and Democracy
    Capitalism, Socialism and Democracy
    Capitalism, Socialism and Democracy is the most famous book by Joseph Schumpeter in which he deals with capitalism, socialism and creative destruction...

    , 1942.
  • "Capitalism in the Postwar World", 1943, Postwar Economic Problems.
  • "John Maynard Keynes", 1946, AER.
  • "The Future of Private Enterprise in the Face of Modern Socialistic Tendencies", 1946, Comment sauvegarder l'entreprise privée
  • Rudimentary Mathematics for Economists and Statisticians, with W.L .Crum, 1946.
  • "Capitalism", 1946, Encyclopædia Britannica.
  • "The Decade of the Twenties", 1946, AER.
  • "The Creative Response in Economic History", 1947, JEH.
  • "Theoretical Problems of Economic Growth", 1947, JEH.
  • "Irving Fisher's Econometrics", 1948, Econometrica.
  • "There is Still Time to Stop Inflation", 1948, Nation's Business.
  • "Science and Ideology", 1949, AER.
  • "Vilfredo Pareto", 1949, QJE.
  • "Economic Theory and Entrepreneurial History", 1949, Change and the Entrepreneur.
  • "The Communist Manifesto in Sociology and Economics", 1949, JPE.
  • "English Economists and the State-Managed Economy", 1949, JPE.
  • "The Historical Approach to the Analysis of Business Cycles", 1949, NBER Conference on Business Cycle Research.
  • "Wesley Clair Mitchell", 1950, QJE.
  • "March into Socialism", 1950, AER.
  • Ten Great Economists: From Marx to Keynes, 1951.
  • Imperialism and Social Classes, 1951 (reprints of 1919, 1927)
  • Essays on Economic Topics, 1951.
  • "Review of the Troops", 1951, QJE.
  • History of Economic Analysis, (published posthumously, ed. Elisabeth Boody Schumpeter), 1954.
  • "American Institutions and Economic Progress", 1983, Zeitschrift fur die gesamte Staatswissenschaft
  • "The Meaning of Rationality in the Social Sciences", 1984, Zeitschrift fur die gesamte Staatswissenschaft
  • "Money and Currency", 1991, Social Research.
  • Economics and Sociology of Capitalism, 1991.

See also

  • List of Austrians
  • Austrian School of economics
    Austrian School
    The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...

     (Schumpeter was not a member of the movement)
  • List of Austrian scientists
  • Social innovation
    Social innovation
    Social innovation refers to new strategies, concepts, ideas and organizations that meet social needs of all kinds - from working conditions and education to community development and health - and that extend and strengthen civil society....

  • Creative destruction
    Creative destruction
    Creative destruction is a term originally derived from Marxist economic theory which refers to the linked processes of the accumulation and annihilation of wealth under capitalism. These processes were first described in The Communist Manifesto and were expanded in Marx's Grundrisse and "Volume...

  • Capitalism
    Capitalism
    Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...

  • Socialism
    Socialism
    Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...

  • Innovation
    Innovation
    Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...

  • Schumpeterian rent
    Schumpeterian rent
    Schumpeterian rents are earned by innovators and occur during the period of time between the introduction of an innovation and its successful diffusion. It is expected that successful innovations, in time, will be imitated, but until that occurs, the innovator will earn Schumpeterian rents. This...


Further reading

  • Cheung, Edward "Baby Boomers, Generation X and Social Cycles" "The latest findings on Schumpeter's Creative Destruction."
  • Robbins, L. C., 1955, "Schumpeter's History of Economic Analysis," Quarterly Journal of Economics 69: 1-22.
  • Muller, Jerry Z., 2002. The Mind and the Market: Capitalism in Western Thought. Anchor Books.
  • Groenewegen, Peter, 2003. Classics and Moderns in Economics: Essays on Nineteenth And Twentieth Century Economic Thought: Vol. 2. Routledge. Chpt. 22, pp 203+.

External links



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