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Joseph Schumpeter
Joseph Schumpeter
Joseph Schumpeter
Born February 8, 1883(1883-02-08)
Triesch, Moravia, Austria-Hungary
Died January 8, 1950 (aged 66)
Taconic, Connecticut, U.S.
Fields Economics
Institutions Harvard University 1932-50
University of Bonn 1925-32
Biedermann Bank 1921-24
University of Graz 1912-14
University of Czernowitz 1909-11
Alma mater University of Vienna
Doctoral advisor Eugen von Böhm-Bawerk
Doctoral students James Tobin
John Burr Williams
Mentored:
Abram Bergson
Nicholas Georgescu-Roegen
Robert Heilbroner
Known for Business cycles
Economic development
Entrepreneurship
Evolutionary economics

Joseph Alois Schumpeter (February 8, 1883 – January 8, 1950) was an economist and political scientist born in Moravia (present-day Czech Republic). Events 421 - Constantius III becomes co- Emperor of the Western Roman Empire. Year 1883 ( MDCCCLXXXIII) was a Common year starting on Monday (link will display the full calendar of the Gregorian calendar (or a Common Třešť (ˈtr̝̊ɛʃc Triesch originally Triesch, is a town in the Vysočina Region of the Czech Republic, which was founded around the turn of the Moravia (Morava; Morawy Moravie Moravia is a historical region in central Europe in the east of the Czech Republic, one of the former Czech lands. Events 871 - Battle of Ashdown - Ethelred of Wessex defeats a Danish invasion army Year 1950 ( MCML) was a Common year starting on Sunday (link will display the full calendar of the Gregorian calendar. Connecticut ( is a state located in the New England region of the northeastern United States of America. The United States of America —commonly referred to as the Economics is the social science that studies the production distribution, and consumption of goods and services. The University of Bonn ( German: Rheinische Friedrich-Wilhelms-Universität Bonn) is a public research university located in Bonn, Germany The University of Graz ( German, Karl-Franzens-Universität Graz) a University located in Graz, Austria, is the second-largest The Chernivtsi University (current full name Yuriy Fedkovych Chernivtsi National University) is the leading Ukrainian institution for higher education in Northern Bukovina Alma mater is Latin for "nourishing mother" It was used in Ancient Rome as a title for the mother Goddess, and in Medieval The University of Vienna (Universität Wien is a Public university located in Vienna, Austria. A doctorate is an Academic degree that indicates the highest level of academic achievement Eugen Ritter von Böhm-Bawerk ( February 12, 1851 in Brno &ndash August 27, 1914 in Vienna) was an Austrian James Tobin ( March 5, 1918 March 11, 2002) was an American Economist. John Burr Williams (1899 - 1989 one of the first Economists to view stock prices as determined by “ intrinsic value ” is recognised as a founder and developer Abram Bergson ( April 21, 1914, New York City - April 23, 2003) born Abram Burk was an American Economist. Nicholas Georgescu-Roegen, born Nicolae Georgescu ( Constanţa, Romania, 4 February 1906 &ndash Nashville, Tennessee Robert Heilbroner ( March 24, 1919 &ndash January 4, 2005) was an American Economist and historian of economic thought The term business cycle or economic cycle refers to the fluctuations of economic activity during its long term growth trend Economic development is the development of economic wealth of countries or regions for the well-being of their inhabitants Entrepreneurship is the practice of starting new Organizations or revitalizing mature Organizations particularly new Businesses generally in response to identified Evolutionary economics is a relatively new economic and diverse school of thought that is inspired by evolutionary Biology. Events 421 - Constantius III becomes co- Emperor of the Western Roman Empire. Year 1883 ( MDCCCLXXXIII) was a Common year starting on Monday (link will display the full calendar of the Gregorian calendar (or a Common Events 871 - Battle of Ashdown - Ethelred of Wessex defeats a Danish invasion army Year 1950 ( MCML) was a Common year starting on Sunday (link will display the full calendar of the Gregorian calendar. An economist is an expert in the Social science of Economics. This is a list of notable political scientists See the List of political theorists for those who study politics without using the Scientific method. Moravia (Morava; Morawy Moravie Moravia is a historical region in central Europe in the east of the Czech Republic, one of the former Czech lands. The Czech Republic ( ˈt͡ʃɛskaː ˈrɛpuˌblɪka short form in Česko ˈt͡ʃɛskɔ also called Czechia, His economic theory of entrepreneurism would prove influential in the latter 20th century. An entrepreneur is a person who has possession over a company enterprise, or Venture, and assumes significant accountability for the inherent risks and the outcome

Contents

Life

Born in Triesch, Moravia (then part of Austria-Hungary, now Třešť in the Czech Republic), Schumpeter was a brilliant student praised by his teachers. Třešť (ˈtr̝̊ɛʃc Triesch originally Triesch, is a town in the Vysočina Region of the Czech Republic, which was founded around the turn of the Moravia (Morava; Morawy Moravie Moravia is a historical region in central Europe in the east of the Czech Republic, one of the former Czech lands. Třešť (ˈtr̝̊ɛʃc Triesch originally Triesch, is a town in the Vysočina Region of the Czech Republic, which was founded around the turn of the The Czech Republic ( ˈt͡ʃɛskaː ˈrɛpuˌblɪka short form in Česko ˈt͡ʃɛskɔ also called Czechia, He began his career studying law at the University of Vienna under the Austrian capital theorist Eugen von Böhm-Bawerk, taking his PhD in 1906. The University of Vienna (Universität Wien is a Public university located in Vienna, Austria. The Austrian School, also known as the “ Vienna School ” or the “ Psychological School ” is a heterodox school of economics that advocates Eugen Ritter von Böhm-Bawerk ( February 12, 1851 in Brno &ndash August 27, 1914 in Vienna) was an Austrian "PhD" redirects here for other uses see PhD (disambiguation. In 1909, after some study trips, he became a professor of economics and government at the University of Czernowitz. The Chernivtsi University (current full name Yuriy Fedkovych Chernivtsi National University) is the leading Ukrainian institution for higher education in Northern Bukovina In 1911 he joined the University of Graz, where he remained until World War I. The University of Graz ( German, Karl-Franzens-Universität Graz) a University located in Graz, Austria, is the second-largest World War I (abbreviated WWI; also known as the First World War, the Great War, and the War to End All In 1919-1920, he served as the Austrian Minister of Finance, with some success, and in 1920-1924, as President of the private Biederman Bank. That bank collapsed in 1924 leaving Schumpeter bankrupt.

From 1925-1932, he held a chair at the University of Bonn, Germany. The University of Bonn ( German: Rheinische Friedrich-Wilhelms-Universität Bonn) is a public research university located in Bonn, Germany Germany, officially the Federal Republic of Germany ( ˈbʊndəsʁepuˌbliːk ˈdɔʏtʃlant is a Country in Central Europe. With the rise of Nazism in central Europe, he moved to Harvard where he had lectured in 1927-1928 and 1930. Nazism, which was a short name for National Socialism (Nationalsozialismus refers primarily to the Ideology and practices of the National Socialist German He would teach there from 1932 until his death in 1950. Year 1932 ( MCMXXXII) was a Leap year starting on Friday of the Gregorian calendar. Year 1950 ( MCML) was a Common year starting on Sunday (link will display the full calendar of the Gregorian calendar. 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 synch with the then-fashionable Keynesianism. In Economics Keynesian economics (ˈkeɪnziən also Keynesianism and Keynesian Theory) is based on the ideas of twentieth-century British economist This period of his life was characterized by hard work but little recognition of his core ideas.

Although Schumpeter encouraged some young mathematical economists and was even the president of the Econometric Society (1940-41), Schumpeter was not a mathematician but rather an economist and tried instead to integrate sociological understanding into his economic theories. Mathematical economics refers to the application of Mathematical methods to represent economic theories and analyze problems posed in Economics. The Econometric Society an International Society for the Advancement of Economic Theory in its Relation with Statistics and Mathematics was founded on December 29, 1930 Sociology (from Latin: socius "companion" and the suffix -ology "the study of" from Greek λόγος lógos "knowledge" From current thought it has been argued that Schumpeter's ideas on business cycles and economic development could not be captured in the mathematics of his day - they need the language of non-linear dynamical systems to be partially formalized. The term business cycle or economic cycle refers to the fluctuations of economic activity during its long term growth trend Economic development is the development of economic wealth of countries or regions for the well-being of their inhabitants Dynamical systems theory is an area of Applied mathematics used to describe the behavior of complex Dynamical systems usually by employing Differential

Most important work

The history of economic analysis

Schumpeter's vast erudition is apparent in his posthumous History of Economic Analysis, although some of his judgments seem quite idiosyncratic and sometimes cavalier. For instance, Schumpeter thought that the greatest 18th century economist was Turgot, not Adam Smith, as many consider. The 18th century lasted from 1701 to 1800 in the Gregorian calendar, in accordance with the Anno Domini / Common Era numbering system Anne-Robert-Jacques Turgot Baron de Laune, often referred to as Turgot ( 10 May 1727 &ndash 18 March 1781) was a French Adam Smith ( baptised 16 June 1723 – 17 July 1790) was a Scottish moral philosopher and a pioneer of Political economy. Schumpeter criticized John Maynard Keynes and David Ricardo for the "Ricardian vice. John Maynard Keynes 1st Baron Keynes CB (ˈkeɪnz "cains" (5 June 1883 &ndash 21 April 1946 was a British Economist whose ideas David Ricardo (18 April 1772 &ndash 11 September 1823 was an English political economist, often credited with systematizing economics and was one of the most influential " 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. The term business cycle or economic cycle refers to the fluctuations of economic activity during its long term growth trend Following neither Walras nor Keynes, Schumpeter starts in The Theory of Economic Development[1] with a treatise of circular flow which, excluding any innovations and innovative activities, leads to a stationary state. In Economics, the term circular flow of income or circular flow refers to a simple economic model which describes the reciprocal circulation of income between producers The stationary state is, according to Schumpeter, described by Walrasian equilibrium. General equilibrium theory is a branch of theoretical Microeconomics. The hero of his story, though, is, in fine Austrian fashion, the entrepreneur. An entrepreneur is a person who has possession over a company enterprise, or Venture, and assumes significant accountability for the inherent risks and the outcome

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 ideas on 50-year cycles, Kondratiev waves. Nikolai Dmitriyevich Kondratiev, Russian: Николай Дмитриевич Кондратьев ( 4 March 1892 - 17 September 1938 Also widely written as Kondratieff. In Heterodox economics, Kondratiev waves —also called Grand supercycles surges long waves or K-waves—are

Schumpeter suggested a model in which the four main cycles, Kondratiev(54 years), Kuznets (18 years), Juglar (9 years) and Kitchin (about 4 years) can be added together to form a composite waveform. (Actually there was considerable professional rivalry between Schumpeter and Kuznets. The wave form suggested here did not include the Kuznets Cycle simply because Schumpeter did not recognize it as a valid cycle. See "Business Cycle" for confirmation. The term business cycle or economic cycle refers to the fluctuations of economic activity during its long term growth trend ) 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 of each was coincident it would explain disastrous slumps and consequent depressions. (as far as the segmentation of the Kondratyev 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

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 financial system, including a whole range of institutions for granting credit. Capitalism is the Economic system in which the Means of production are owned by private Persons and operated for Profit and where A credit is a unit that gives weighting to the value level or time requirements of an academic course. 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. Nevertheless, Schumpeter, who was a classical liberal, rejected Keynesianism. Classical liberalism (also known as traditional liberalism, Laissez-faire liberalism, Market liberalism or in much of the world In Economics Keynesian economics (ˈkeɪnziən also Keynesianism and Keynesian Theory) is based on the ideas of twentieth-century British economist

Schumpeter and capitalism's demise

Schumpeter's most popular book in English is probably Capitalism, Socialism and Democracy. This book opens with a treatment of Karl Marx. On the surface level, this piece seems to support socialism. Schumpeter's reasoning was that an overt defense of capitalism would prompt the book only to be read by those who already supported capitalism. Therefore, he believed that he must masquerade as a supporter of socialism to entice the young socialist to read his work. In the end, he hoped to awaken self-recognition in the reader to the flaws of socialism. [2] Whilst he is sympathetic to Marx's theory that capitalism will collapse and it will indeed be replaced by socialism, Schumpeter concludes that this will not come about in the way Marx predicted. Socialism refers to a broad set of economic theories of social organization advocating state or collective ownership and administration of the Means of production and distribution To describe it he borrowed the phrase "creative destruction," and made it famous by using it to describe a process in which the old ways of doing things are endogenously destroyed and replaced by new ways. The notion of creative destruction is found in the writings of Mikhail Bakunin, Friedrich Nietzsche and in Werner Sombart 's Krieg und Kapitalismus

Schumpeter's theory is that the success of capitalism will lead to a form of corporatism and a fostering of values hostile to capitalism, especially among intellectuals. Historically corporatism (corporativismo refers to a political or Economic system in which power is held by civic assemblies that represent Economic The intellectual and social climate needed to allow entrepreneurship to thrive will not exist in advanced capitalism; it will be replaced by socialism in some form. Entrepreneurship is the practice of starting new Organizations or revitalizing mature Organizations particularly new Businesses generally in response to identified There will not be a revolution, but merely a trend in parliaments to elect social democratic parties of one stripe or another. TalkParliament#Screen-size. -->A  parliament is a Legislature, especially in those Social democracy is a Political ideology of the left and centre-left He argued that capitalism's collapse from within will come about as democratic majorities vote for the creation of a welfare state and place restrictions upon entrepreneurship that will burden and destroy the capitalist structure. This article refers specifically to the Welfare state of the United Kingdom. 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 availabiliy of fulfulling work is however limited and this, coupled with the experience of unemployment, produces discontent. The intellectual class is then able to organise protest and develop critical ideas.

In Schumpeter's view, socialism will ensure that the production of goods and services is directed towards meeting the authentic needs of people and will overcome some innate tendencies of Capitalism such as conjecture fluctuation, unemployment and waning acceptance of the system. [3]

Schumpeter and democratic theory

In the same book, Schumpeter expounded a theory of democracy which sought to challenge what he called the 'classical doctrine'. Democracy is a form of government in which the supreme power is held completely by the people under a free electoral system 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, whereby democracy is the mechanism for competition between leaders, much like a market structure. Maximilian Carl Emil Weber (maks 'veːbɐ (21 April 1864 &ndash 14 June 1920 was a German political economist and sociologist who was considered Although periodical votes from 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 severely limited.

Schumpeter and entrepreneurship

The concept of entrepreneurship cannot be fully understood without his contributions, being probably the first scholar to develop its theories. Entrepreneurship is the practice of starting new Organizations or revitalizing mature Organizations particularly new Businesses generally in response to identified 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, developed later 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.

His legacy

For some time after his death, Schumpeter's views were most influential among various heterodox economists, especially European, who were interested in industrial organization, evolutionary theory, 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. Heterodox economics refers to the approaches or schools of economic thought, that are considered outside of mainstream, that is orthodox economics eVolution is the third Album by eLDee, it was due to be released in 2008 Thorstein Bunde Veblen (born Tosten Bunde Veblen July 30, 1857 &ndash August 3, 1929) was a Norwegian-American sociologist Robert Heilbroner was one of Schumpeter's most renowned pupils, who wrote extensively about him in The Worldly Philosophers. Robert Heilbroner ( March 24, 1919 &ndash January 4, 2005) was an American Economist and historian of economic thought The Worldly Philosophers The Lives Times and Ideas of the Great Economic Thinkers is a Book by Robert L Other outstanding students of Schumpeter's include the economist Nicholas Georgescu-Roegen and former chairman of the Federal Reserve, Alan Greenspan[4]. Nicholas Georgescu-Roegen, born Nicolae Georgescu ( Constanţa, Romania, 4 February 1906 &ndash Nashville, Tennessee Alan Greenspan (born March 6 1926 in New York City) is an American Economist and was from 1987 to 2006 the Chairman of the Federal Reserve of 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. The term innovation means a new way of doing something It may refer to incremental radical and revolutionary changes in thinking products processes or organisations The concept of entrepreneurship cannot be fully understood without his contributions, being probably the first scholar to develop its theories. Entrepreneurship is the practice of starting new Organizations or revitalizing mature Organizations particularly new Businesses generally in response to identified For instance, the European Union's innovation program, and its main development plan, the Lisbon Strategy, are based on Schumpeter. The European Union ( EU) is a political and economic union of twenty-seven member states, located primarily in The Lisbon Strategy, also known as the Lisbon Agenda or Lisbon Process, is an action and Development plan for the European Union.

Major Works

See also

Notes

  1. ^ Schumpeter, J. The Austrian School, also known as the “ Vienna School ” or the “ Psychological School ” is a heterodox school of economics that advocates The following list is a selection of famous Austrians. For full lists of all famous Austrians please view the sublists This is a list of Austrian scientists and scientists from the Austria of Austria-Hungary. Social innovation refers to new Strategies, Concepts, Ideas and Organizations that meet Social needs of all kinds - from working The notion of creative destruction is found in the writings of Mikhail Bakunin, Friedrich Nietzsche and in Werner Sombart 's Krieg und Kapitalismus The term innovation means a new way of doing something It may refer to incremental radical and revolutionary changes in thinking products processes or organisations A. The theory of economic development : an inquiry into profits, capital, credit, interest, and the business cycle / translated from the German by Redvers Opie (1961) New York: OUP
  2. ^ Muller, Jerry Z. The Mind and the Market. Anchor Books, New York. 2003.
  3. ^ It is interesting to note, that Schumpeter's theories of the transition of capitalism into socialism has – according to some analysts – been ‘nearly right’ in some cases: Where Schumpeter was Nearly Right - The Swedish Model and Capitalism, Socialism and Democracy by Magnus Henrekson, Ulf Jakobsson. Available at http://swopec.hhs.se/iuiwop/papers/iuiwop0533.pdf
  4. ^ "I've watched the process [creative destruction] at work through my entire career," p. 48, Greenspan, Alan The Age of Turbulance : Adventures in a New World (2007) New York: Penguin Press

References

External links

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