Joseph Schumpeter

Joseph Schumpeter

Born: 1883. Died: 1950.


A product of the waning years of the Austro-Hungarian Empire, Joseph A. Schumpeter exemplified that heritage. Although a student of Eugen von Böhm-Bawerk and Friedrich von Wieser, Schumpeter was never really a footsoldier of the Austrian School.

After a quick doctorate at Vienna, Schumpeter roamed about as something of a footloose lawyer until he rejoined academia in 1909. It was while he was teaching at Czernowitz (now in the Ukraine) that he wrote his Theory of Economic Development (1911), where he first outlined his famous theory of entrepreneurship. He argued those daring spirits, entrepreneurs, created technical and financial innovations in the face of competition and falling profits - and that it was these spurts of activity which generated (irregular) economic growth.

His second book (1914) he finished while at Graz when World War I broke out - which Schumpeter opposed. After the war, Schumpeter joined the German Socialization Committee in Berlin - which then was composed of several Marxian scholars (such as Hilferding and Kautsky) and the Kiel School economists (such as Lowe and Lederer).

In 1919, Schumpeter became the Austrian Minister of Finance - unfortuantely, presiding over the hyperinflation of the period, and thus was dismissed later that year. After a brief teaching stint at Graz, Schumpeter migrated in 1921 to the private sector and became the president of a small Viennese banking house. However, his bank collapsed in 1924. He drifted once again back into academia - taking up a teaching position at Bonn in 1925.

In 1932, Schumpeter took up a position at Harvard, succeeding the Marshallian F.W. Taussig. He was joined by Alvin Hansen, Wassily Leontief, Richard Goodwin, Paul Sweezy, John Kenneth Galbraith and fellow Austrian, Gottfried Haberler. Schumpeter ruled Harvard during the period of the "depression generation" of the 1930s and 1940s - when Paul Samuelson, James Tobin, Tsuru, Heilbroner, Henri Bergson, Metzler, etc. were his students.

Although excelling as a teacher above everything, Joseph Schumpeter nonetheless completed three more books while at Harvard: his didactic Business Cycles (1939), his popular Capitalism, Socialism and Democracy (1942) - in which he famously predicted the downfall of capitalism in the hands of intellectuals - and his encyclopedic, History of Economic Analysis (1954). In the first two, he expanded upon his theory of entrepreneurship and theory of growth into a wider theory of the development of capitalism, integrating it into a business cycle theory and a theory socio-economic evolution.

Schumpeter's legacy is difficult to assess. Although an enthusiast of Leon Walras and the Lausanne School, he contributed little to it beyond praise. Although he had contributed to the Methodenstreit against the German Historicists and on behalf of Menger, the other Austrians had long written him off as one of the faithful - and his old Marxian comrades of Berlin and Vienna certainly did not regard this man with conservative instincts as a fellow traveler.

Like Frank Knight, Schumpeter remains unclassifiable in our schema. Consequently, we give him the honor of founding "evolutionary" economics, given his concern with economic change brought about by the interaction between individuals and the economy as a whole, a concern with socio-economic history and institutions, but not enough to overshadow his search for an inherently theoretical explanation for the development of capitalism.

Major Books of Joseph Schumpeter

- Business Cycles: A theoretical, historical and statistical analysis of the Capitalist process, 1939
- Business Cycles and Socialism and Democracy
- Capitalism, Socialism and Democracy, 1942
- Capitalism, in Encyclopaedia Britannica, 1946
- Capitalism in the Postwar World, in Postwar Economic Problems, 1943
- The Crisis of the Tax State, 1918
- Das Deutsche Finanzproblem, 1928
- Depressions: Can we learn from past experience?, in Economics of the Recovery Program, 1934
- Economic Doctrine and Method: An Historical Sketch, 1914
- Economics and Sociology of Capitalism, 1991
- Essays on Economic Topics, 1951
- History of Economic Analysis, edited by Elisabeth Boody Schumpeter, 1954
- Imperialism and Social Classes, 1951 (reprints of 1919, 1927)
- Rudimentary Mathematics for Economists and Statisticians, with W.L. Crum, 1946
- Ten Great Economists: From Marx to Keynes, 1951
- Theorie der wirtschaftlichen Entwicklung (The Theory of Economic Development: An Inquiry Into Profits, Capital, Credit, Interest and the Business Cycle, 1934) 1911
- Vergangenkeit und Zukunft der Sozialwissenschaft, 1915
- Das Wesen und Hauptinhalt der Theoretischen Nationalökonomie (The Nature and Essence of Theoretical Economics), 1908
- Wie Studiert man Sozialwissenschaft, (How to Study Social Science, Society, 2003), 1910

Major Articles of Joseph Schumpeter

- 1906, Über die mathematische Methode der theoretischen Ökonomie, ZfVSV
- 1907, Das Rentenprinzip in der Verteilungslehre, Schmollers Jahrbuch
- 1909, On the Concept of Social Value, QJE
- 1910, Marie Esprit Leon Walras, ZfVSV
- 1910, Über das Wesen der Wirtschaftskrisen, ZfVSV
- 1914, Das wissenschaftliche Lebenswerk Eugen von Böhm-Bawerks, ZfVSV
- 1919, The Sociology of Imperialism, Archiv für Sozialwissenschaft und Sozialpolitik
- 1921, Carl Menger, ZfVS
- 1927, The Explanation of the Business Cycle, Economica
- 1927, Social Classes in an Ethnically Homogeneous Environment, Archiv für Sozialwissenschaft und Sozialpolitik
- 1928, The Instability of Capitalism, EJ
- 1931, The Present World Depression: A Tentative Diagnosis, AER
- 1933, The Common Sense of Econometrics, Econometrica
- 1934, The Nature and Necessity of a Price System, Economic Reconstruction
- 1935, The Analysis of Economic Change, REStat
- 1940, The Influence of Protective Tariffs on the Industrial Development of the United States, Proceedings of AAPS
- 1941, Frank William Taussig, QJE
- 1946, John Maynard Keynes, AER
- 1946, The Future of Private Enterprise in the Face of Modern Socialistic Tendencies, Comment sauvegarder l'entreprise privée
- 1946, The Decade of the Twenties, AER
- 1947, The Creative Response in Economic History, JEH
- 1947, Theoretical Problems of Economic Growth, JEH
- 1948, There is Still Time to Stop Inflation, Nation's Business
- 1949, Science and Ideology, AER
- 1949, Vilfredo Pareto, QJE
- 1949, Economic Theory and Entrepreneurial History, Change and the Entrepreneur
- 1949, The Communist Manifesto in Sociology and Economics, JPE
- 1949, English Economists and the State-Managed Economy, JPE
- 1949, The Historical Approach to the Analysis of Business Cycles, NBER Conference on Business Cycle Research
- 1950, Wesley Clair Mitchell, QJE
- 1950, March into Socialism, AER
- 1983, American Institutions and Economic Progress, Zeitschrift fur die gesamte Staatswissenschaft
- 1984, The Meaning of Rationality in the Social Sciences, Zeitschrift fur die gesamte Staatswissenschaft
- 1991, Money and Currency, Social Research


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