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Joseph Schumpeter
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Joseph Schumpeter and John Maynard Keynes were two of the most admired economists of their time. Both men were born in 1883; Schumpeter died four years after his rival, in 1950. Both changed the way a generation thought. Why, then, did Keynes give his name to an influential school of economics, while Schumpeter, though still admired, is little read?
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According to the Austrian economist, Joseph Schumpeter, technological change was a major determinant of industrial change. Schumpeter believed that the economic cycles in capitalistic economies, are the result of rule changing innovations. Innovation is a two headed beast: the introduction of revolutionary products and services by successful entrepreneurs is the fundamental force driving sustained long-term economic growth, but destroys the power of established institutions and organisations in the short term. Schumpeter argued that an industry's economic structure changes from within. He named the process of industrial transformation through radical innovation as creative destruction:
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Joseph Schumpeter sees the process of “creative destruction” as the essential dynamic of capitalism. Entrepreneurs turn the market upside-down with their innovations, forcing the adoption of new patterns of production and consumption. Schumpeter, in contrast to the orthodox neoclassical economists, has little use for the idealizations of “perfect competition,” or for the putative rationality of the free market. He ridicules the notion of market equilibrium, and sees little value in the efficiency that results when firms selling similar products compete on the basis of price, performance, and marginal advantage. Schumpeter prefers monopolies and oligopolies, with their ability to realize economies of scale, to standardize production, and to take advantage of their control of the market in order to nurture innovations that might not be immediately profitable.
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In 1939, Joseph Schumpeter, the Austrian-born economist who moved to America, published a two-volume work, "Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process." In it he argued that long waves stemmed from innovation. A modern example could be `Just in Time' which appears to have first been used in the car industry before spreading throughout manufacturing. The work ... incorporated Kondratieff's findings and helped publicise them. However, Kuznets, whose own work is mentioned above, was critical of such an explanation and was not convinced by the Schumpeter argument for cycles.
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Austrian-American economist and social theorist Joseph Schumpeter was born in Triesch, Moravia (now in the Czech Republic), and educated at Vienna University. He began practicing law in Vienna in 1907, and, after winning recognition as an economic theorist, he taught economics for various periods at the universities of Vienna, Gernowitz (now Chernivtsi, Ukraine), Graz, and Bonn after 1909. After visiting the United States as an exchange professor at Columbia University in 1913 and at Harvard University in 1927 and 1931, he received a permanent faculty appointment at Harvard in 1932.
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Joseph Schumpeter's work has long been regarded as a seminal contribution to entrepreneurship theory. However, relatively little attention has been given to exploring the sociological implications of his insights. This article examines Schumpeter's early writings on the entrepreneur and focuses on the apparent contradiction between his understanding of the inhibitory effect of social control and the entrepreneur's strength of will. This tension is resolved by recourse to contemporary social theory of interaction and emotion. A synthesis of these works produces two hypothetical modes of entrepreneurial action. These are elaborated and their implications for the understanding of entrepreneurship discussed.
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Joseph Schumpeter