Schumpeter discourse

Fri, 22 Apr 1994 14:04:03 EDT

Not as lengthy as -some- of the anthro-l mail......
Schumpeter was Austrian born (1883) and prolific in his
writings both apologizing and criticizing the economic
system of capitalism. At the age of 27, his first book on
economic development became a standard for study of the
process of economic growth. At 30, he published a history
of economics. He had academic chairs at Bonn and Harvard.
Apparently he was quite a character because he once told his
students that "depressions, far from being unmitigated
social evils, were actually in the nature of a good cold
douche for the economic system." He thought cold showers
were good for overheated economies. Later monumental works
include books on business cycles, and capitalism, socialism
and democracy. His last book was in published in 1954, but
he had died in 1950, with the book unfinished. I suppose people at
Harvard finished it for him.

He scoffed at those who fussed over every
sign of trouble in the economy, but himself forecast the
demise of capitalism. Capitalism would collapse from its
own success. Units would be gross (larger than large),
divorced from the owners (shareholders) and non-resposive to
the needs of the society (consumers) and probably taken over
or over-regulated by the state.

S. thought the driving forces for capitalism were the
"knights in armour" daring to implement new ideas, to
experiment, to expand, and willing to risk their fortunes on
those new techniques. But capitalism would fall prey to
intellectualists and the knights would be replaced by
managers. As a manager, large steady incomes and security
of position becomes more important than love of risk and
boundless wealth (or poverty). He wrote a lot about
business cycles, economic cycles, interest rates,
entreprenuers, returns to risk and management (profits to
socialists), bankers and credit, and the organization of it
all. (That's why I don't think he said economics was "only"
the study of the firm and the entreprenuer.)

He was a contemporary of Keynes (1930s) and had a view of
the economic world that was in contrast to Keynes. S.
thought depressions were good for the economy, inevitable
and that new innovation(s) would start the cycle back up to
a new prosperity. K. view (became) was that the Depression
was pathological and businesses couldn't get out of it on
their own without help from the government/money policy. I
am in a building with 300 other economists and no one I talked to
had a book on their shelves by Schumpeter, most did not know who
he was, but everyone knows about Keynes and probably took
whole classes learning the Keynesian view. However unknown
he is, most of the economists here use ideas that were first
articulated by Schumpeter because we deal with technology
and its applications to the economics of businesses.

I do have a degree in anthroplogy and I first encountered S.
because I was interested in how culture (mostly technology,
but also social/religious/etc) was transferred and
incorporated. I was particularly interested in the
transition from hunter/gather to agricultural food
production. That's how I ended up in agricultural
economics. Anyway, Schumpeter is famous for his integration
of the ways people and machines produce things in accordance
with production opportunities. He focused on the
organization of the combination of factors of production in
a capitalist system. He wrote on innovation and it is he we
have to thank for the "s" curve of innovation-- a new idea
is at first slow to catch on, then as success is shown by
the first adopters everyone begins to jump on the band wagon
to a point where either everyone has the technique and it no
longer gives anyone an advantage over others or another
innovation comes along at which time the early adopters jump
ahead of everyone again. (sorry for the run-on sentence).
For a system to be dynamic, innovation must have its rewards
and he argued convincingly (IMHO) for entrepreneurial
profit. But it is the very nature of innovation that brings
about the cycles of boom and bust in the capitalist system.
While most of his work was on the capitalist system, he also
wrote that innovation could occur in religion (a new god),
politics (a constitution), and social relationships (in-
laws, out-laws). Innovation was something that
fundamentally changed things so that there was no going back
and it could happen within any of the constructs of human

Well that's probably enough for this list. I could expound
on his economic theories more off-list. Read more about it:
Joseph Schumpter: History of Economic Analysis, The Theory
of Economic Development, Business Cycles and several other
articles on entrepreneurs that you can find by searching

Janet P.