biographies
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Joseph Schumpeter
This profile deals with Joseph Schumpeter, the Austro-American
economist famous for the notion of 'creative destruction'.
It covers -
Schumpeter,
like Veblen, is a writer whose
work is perhaps more often quoted - or misquoted - as
actually read and who is plundered for isolated insights
about innovation, entrepreneurship
and the corporation
rather than offering a persuasive, coherent theory about
economic cycles.
Academic fashion has seen his reputation wax and wane:
he is currently undergoing a major revival in the specialist
and popular press as a thinker of economic turbulence
and as a fascinating character, someone with the appearance
of Erich von Stroheim (or Nosferatu) who bridged fin
de siècle Vienna and late 1940s Harvard. Daniel
Bell described him as that rarest
of creatures: an economist with a tragic sense of life.
life
Joseph Alois Schumpeter (1883-1950) was born in Triesch
in what is now the Czech Republic; his father and grandfather
were local textile entrepreneurs. The family moved to
Vienna after the death of his father in 1887. His mother
re-married a retired aristocratic military officer in
1893, with Schumpeter studying at the elite Theresianum
academy before entering Vienna University (School of Law
& Political Science) in 1901, where fellow students
included von Mises, Bauer and Hilferding.
His first publications appeared in 1905, influenced by
Eugen von Böhm-Bawerk; in the following year he gained
a Juris Doctor in Law degree. In 1907, after seminars
at the University of Berlin and London School of Economics,
he married Gladys Seaven (later claimed to be 12 years
his senior) and began work in Egypt as an employee of
an Italian law. His first book, Das Wesen und der
Hauptinhalt der Nationaloekonomie, appeared in 1908.
Schumpeter left Egypt in poor health, gaining his Habilitation
(licence to lecture) at the University of Vienna in 1908
and in 1909 becoming the youngest Private Docent. Later
that year he was appointed as Professor at the University
of Czernovitz, becoming the youngest professor in Austria.
In 1911 his Die Theorie der Wirschaftlichen Entwicklung
(later translated as The Theory of Economic Development:
An Inquiry into Profits, Capital, Credit, Interest and
the Business Cycle) appeared. It gained attention
for argument that ongoing development of capitalism was
attributable to waves of entrepreneurial activity and
that structural change rather than equilibrium was the
"central problem of economics". Schumpeter was
appointed as Professor of Political Economics at the University
of Graz in 1912, serving as visiting Professor at Columbia
University in New York in 1913. Prior to the outbreak
of war in 1914 his history of economic theory, Epochen
der Dogmen- and Methodengeschichte, appeared.
Schumpeter preserved himself from the horrors of the Eastern
Front, serving as an adviser to the emperor in 1916-17.
Following the disintegration of the Austro-Hungarian empire
he served as a member of the Sozialisierungskommission
in Germany with Rudolf Hilferding and Karl Kautsky during
1919, becoming Secretary of State for Finance in the Austrian
Republic but being sacked in November of that year amid
hyperinflation and broader economic collapse. He received
a banking licence in lieu of a pension.
1920 saw him back in Graz as an academic. In 1921, following
a student boycott, he left Graz as founder and chief executive
of the Biedermann private bank, which collapsed in 1924.
(Schumpeter took responsibility and endeavoured during
the following 11 years to make amends.) In 1925 he was
appointed as a professor at the University of Bonn, teaching
economic theory. He married Anna Reisinger (with whom
he'd been in love and had financially supported since
he met her as a child) in 1925; the following year saw
the death of his wife, baby son and mother. He was a visiting
Professor at Harvard University in 1927 and 1928, lecturing
at Hitosubashi University Japan in 1929 but failing to
gain a chair at Berlin in 1931.
In 1932 he was appointed a professor at Harvard in succession
to Frank Taussig, where he taught Wassily Leontief, Paul
Samuelson and John Kenneth Galbraith among others. Galbraith
later described him as "the most sophisticated conservative
of this century". His third marriage, to Elizabeth
Boody, took place in 1937. 1939 saw publication of his
two volume Business Cycles: A Theoretical, Historical
and Statistical Analysis of the Capitalist Process,
overshadowed by Keynes' General Theory. Schumpeter's
wave theory was tartly dismissed by Paul Samuelson as
"Pythagorean moonshine" but elements of the
book remain of interest for exploration of what he called
'railroadisation' in the growth of large corporations.
In 1942 he released the more popular Capitalism, Socialism
and Democracy, at once praising large corporations
as the engines of economic growth and warning that a Gramscian
new class of government bureaucrats (wearing New Deal
clothes or otherwise) might lead to the triumph of socialism.
It featured praise of capitalism as 'creative destruction'
-
creative
destruction is the essential fact about capitalism.
Stabilized capitalism is a contradiction in terms.
The
remainder of the decade being occupied with teaching -
a hoped-for position with von Neumann at the Institute
for Advanced Studies at Princeton failed to eventuate
- and writing, particularly preparation of the encyclopaedic
History of Economic Analysis. The latter moved
beyond arid econometric thinking to embrace notions of
a "principle of indeterminacy". The responses
of specific individuals to changing circumstances could
not be wholly anticipated; insights offered by sociologists
or business historians such as Chandler
might be as useful as the work of mathematicians.
Schumpeter was President of the Econometric Society in
1940-41, was President of the American Economic
Association in 1948 and was to have been President of
the International Economic Association in 1950.
Like contemporaries Lewis Namier and Max Weber
he struggled with personal demons. Schumpeter's writing
demonstrates an increasing pessimism; his teaching was
marked by an impatience with those who lacked his perspectives
or merely didn't treat the man with the respect that he
thought he deserved. Proteges such as Peter Drucker have
asserted that "almost everybody laughed" at
Schumpeter's warnings in the 1940s and that he was a bold
visionary. In fact he was in step with contemporary criticism
of the New Deal.
He has become famous for his public persona - recurrent
quips that he aspired to be the "greatest horseman,
lover, and economist" in the Austro-Hungarian empire
(he admitted that it was not going well with the horses),
a duel with the university librarian over restrictions
on lending privileges, an intellectual's suspicion of
intellectuals, affectations such as teaching classes while
wearing jodhpurs, suggestions that he suffered from manic-depression.
Although noted for recognition of the costs of entrepreneurial
destruction, he was ambivalent about the impact of cultural
values.
In proclaiming that
the
capitalist achievement does not typically consist in
providing more silk stockings for queens, but in bringing
them within the reach of factory girls in return for
steadily decreasing amounts of effort
he
echoed Weber in recognising that the cost of stockings
for all might be alienation for the factory girls and
loss quality.
The eclectic nature of much of his writing features a
wariness about 'mature' or 'managerial' capitalism that
may disconcert some of his fans, expecting unqualified
praise of laissez-faire rather than endorsement of AT&T,
and scholars who have identified inconsistencies in enthusiasm
for large-scale entreprises pre-1900 and anxiety about
armies of flannel suits in the 1940s.
He increasingly suggested that in economies dominated
by large enterprises the entrepreneurial function had
been usurped by planning departments in government agencies
and corporations, replacing individual entrepreneurs.
Rationalisation of innovation, investment, production
and distribution would result in a bureaucratised economic
planning, with capitalism "preparing its own downfall"
through inflation - a vision influenced by Schumpeter's
vicissitures in the 1920s - and facilitating replacement
by "socialism".
Epigone Peter Drucker, in Modern Prophets: Schumpeter
and Keynes? (1983), echoed that warning, criticising
bureaucrats,
intellectuals, professors, lawyers, journalists, all
of them beneficiaries of capitalism's economic fruits
and, in fact, parasitical on them, and yet all of them
opposed to the ethos of wealth production, of saving,
and of allocating resources to economic productivity
before
concluding that "capitalism would be destroyed by
the very
democracy it had helped to create and made possible".
Others might conclude that the relationship between democracy,
capitalism and innovation is somewhat more complicated.
biographies
The major biographical study is Prophet of Innovation:
Joseph Schumpeter and Creative Destruction (Cambridge:
The Belknap Press 2007) by Thomas McCraw.
Other accounts include Schumpeter: A Biography
(Princeton: Princeton Uni Press 1991) by Richard Swedberg,
Opening Doors: The Life and Work of Joseph Schumpeter
(New Brunswick: Transaction 1991) by Robert Allen,
Joseph Alois Schumpeter: The Public Life of a Private
Man (Princeton: Princeton Uni Press 1994) by Wolfgang
Stopler and Joseph Schumpeter: Scholar, Teacher, Politician
(New Haven: Yale Uni Press 1991) by Eduard März.
Paul Samuelson offered 'Reflections on the Schumpeter
I Knew Well' in 13 Journal of Evolutionary Economics
5 (Dec 2003); another tribute is provided by Peter Drucker
in Adventures of a Bystander (New York: Harper
& Row 1978).
Discussions of his works and significance include Yuichi
Shionoya's Schumpeter & the Idea of Social
Science (Cambridge: Cambridge Uni Press 1997), Nathan
Rosenberg's Schumpeter & the Endogeneity of Technology:
Some American Perspectives (London: Routledge 2000),
Schumpeter and the History of Ideas (Ann Arbor:
Uni of Michigan Press 1994) edited by Yuichi Shionoya
& Mark Perlman, Schumpeter and the Political Economy
of Change (New York: Praeger 1991) by David McKee,
J A Schumpeter: Critical Assessments (London:
Routledge 1991) edited by John Wood and the concise Between
Marginalism and Marxism: The Economic Sociology of J A
Schumpeter (New York: St Martin's 1992) by Tom Bottomore.
His influence is evident in works such as Drucker's The
End of Economic Man: The Origins of Totalitarianism
(New York: Day 1939) and The New Society: The Anatomy
of Industrial Order (New York: Harper & Row 1950)
and Creative Destruction: Business Survival Strategies
in the Global Internet Economy (Cambridge: MIT Press
2001) edited by Lee McKnight, Paul Vaaler & Raul Katz.
writings
Schumpeter's major monographs are arguably -
The
Theory of Economic Development: An Inquiry into Profits,
Capital, Credit, Interest, and the Business Cycle
(Cambridge: Harvard Uni Press 1934), first published
as Theorie der wirtschaftlichen Entwicklung: Eine
Untersuchung über Unternehmergewinn, Kapital, Kredit,
Zins, und den Konjunturzyklus (Leipzig: Duncker
& Humblot 1911)
Business Cycles: A Theoretical, Historical and Statistical
Analysis of the Capitalist Process (New York: McGraw-Hill
1939) 2 vols
Capitalism, Socialism and Democracy (New York:
Harper & Row 1942)
Other
items include -
The
Nature and Essence of Theoretical Economics (1908)
Economic Doctrine and Method: An Historical Sketch
(London: Allen & Unwin 19514) first published as
Epochen der Dogmen- und Methodengeschichte
(Tübingen: Mohr 1914)
The Crisis of the Tax State (1918)
Rudimentary Mathematics for Economists and Statisticians
(New York: McGraw Hill 1946) with W. L. Crum
History of Economic Analysis (London: Allen
& Unwin 1954)
Collections
include -
Essays
of J.A. Schumpeter (Cambridge: Addison-Wesley 1951)
edited by R.V. Clemence
Imperialism and Social Classes (Oxford: Blackwell
1951) edited by Paul Sweezy
Economic Doctrine and Method: An Historical Sketch
(New York: Oxford Uni Press 1954)
Economics and Sociology of Capitalism (Princeton:
Princeton Uni Press 1991).
English-language
papers and articles include -
'Rudolph
Auspitz' in Economic Journal XVI (June 1906),
309-311
'J. B. Clark: Essentials of Economic Theory as Applied
to Modern Problems of Industry and Public Policy' in
Zeitschrift für Volkswirtschaft, Sozialpolitik
und Verwaltung 17 (1908), 653-659
'On the Concept of Social Value' in Quarterly Journal
of Economics Vol XXIII (Febr 1909), 213-32
'G.F. Knapp' in Economic Journal XXXVI (Sept
1926), 512-14
'Friedrich v. Wieser' in Economic Journal XXXVII
(June 1927), 328-30
'The Explanation of the Business Cycle' in Economica
VII (Dec 1927), pp 286-311
'The Instability of Capitalism' in Economic Journal
XXXVIII (Sept 1928), 361-68
'International Cartels and their Relation to World trade'
in America as a Creditor Nation (New York:
1928) edited by Parker Moon
'The 'Crisis' in Economics - Fifty Years Ago'
in
Journal of Economic Literature 20 (1930), 1049-1059
'Mitchell's Business Cycles' in Quarterly Journal
of Economics XLV (November 1930), 150-72
'The Present World Depression' in American Economic
Review XLV (Supplement, Mar 1931), 179-83
'A German View: Depression and Franco-German Economic
Relations' in Lloyds Bank Ltd Monthly Review,
March 1932, 14-35
'The Common Sense of Econometrics' in Econometrica
I (Jan 1933), 5-12
'Joan Robinson, The Economics of Imperfect Competition'
in Journal of Political Economy 42 (1934),
249-57
'Depressions' in The Theory of the Recovery Program
(New York: McGraw-Hill ), pp 3-21
'The Analysis of Economic Change' in Review of Economic
Statistics XVII (May 1935), 2-10
'The Analysis of Economic Change' in Review of Economic
Statistics XVII (May 1935), 2-10
'A Theorist's Comment on the Current Business Cycle'
in Journal of the American Statistical Association
XXX (Supplement, March 1935), 167-68
'Professor Taussig on Wages and Capital' in Explorations
in Economics: Notes and Essays Contributed in Honor
of F.W. Taussig (New York: McGraw-Hill 1936), 213-222
'The Influence of Protective Tariffs on the Industrial
Development of the United States' in Proceedings
of Academy of Political Science XIX (May 1940),
2-7
'Frank William Taussig' in Quarterly Journal of
Economics LV (May 1941), 337-63 (with A.H. Cole
and E.S. Mason)
'Alfred Marshall's Principles: A Semi-Centennial Appraisal'
in American Economic Review XXXI (June 1941),
236-48
'Capitalism in the Postwar World' in Postwar Economic
Problems (New York: McGraw-Hill 1943) edited by
Seymour Harris, 113-126.
'The Decade of the Twenties' in American Economic
Review XXXVI (May 1946), 1-10
'John Maynard Keynes: 1883-1946' in American Economic
Review XXXVI (Sept 1946), 495-518
'Keynes and Statistics' in Review of Economic Statistics,
Vol. XXVIII (November 1946), 194-96
'Keynes, the Economist' in The New Economies: Keynes
Influence on Theory and Public Policy (New York:
Knopf 1947) edited by Seymour Harris, 73-101
'The Creative Response in Economic History' in Journal
of Economic History VII (Nov 1947), 149-159
'Theoretical Problems of Economic Growth' in Journal
of Economic History VII (Nov 1947), 1-9
'There is Still Time to Stop Inflation' in Nation's
Business XXXVI (June 1948), 33-35
'Irving Fischer's Econometrics' in Econometrica
XVI (July 1948), pp 219-31
'English Economists and the State-Managed Economy' in
Journal of Political Economy (Oct 1949), 371-382
'Science and Ideology' in American Economic Review
XXXIX (Mar 1949), 345-59
'Vilfredo Pareto (1948-1920)' in Quarterly Journal
of Economics (May 1949), 147-73
'The Communist Manifesto in Sociology and Economics'
in Journal of Political Economy LVII (June
1949), 199-212
'The Historical Approach to the Analysis of Business
Cycles' in Universities-National Bureau Conference
on Business Cycle Research (New York, November
1949)
'Wesley Clair Mitchell (1874-1948)' in Quarterly
Journal of Economics LXIV (Feb 1950), 139-55
'March into Socialism' in American Economic Review
XL (May 1950), 446-56
Items
in encyclopaedias and other collections include -
'Capitalism'
in Encyclopedia Britannica, 1946, Vol. IV,
801-7
'Allyn Abbott Young' in Encyclopedia of Social Sciences
XV, 514-15
'Rudolph Auspitz' in Encyclopedia of Social Sciences
II, 317
'Eugen v. Bohm-Bawerk' in Encyclopedia of Social
Sciences II, 618
'Depressions'
in The Economics of the Recovery Program XVII
(New York: McGraw-Hill ), 3-21
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