The essence of Schumpeter's evolutionary economics: A centennial appraisal of his first book

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Abstract

Schumpeter’s unique type of evolutionary analysis can hardly be understood unless we recognise that he developed it in relation to a study of the strength and weaknesses of the Walrasian form of neoclassical economics. The paper demonstrates that Schumpeter’s major steps were already performed in his first book Wesen und Hauptinhalt der theoretischen Nationalökonomie. This German-language book—which in English might have be called ‘Essence and Limits of Equilibrium Economics’—was published a century ago (in 1908). It has never been translated into English and no systematic evaluation is available. The analysis of the 626 pages of Wesen provides many clues about the emergence and structure of Schumpeter’s research programme. Although this programme included a modernisation of equilibrium economics, he concentrated on the difficult extension of economic analysis to cover economic evolution. Schumpeter thought that his evolutionary economics required a break with basic neoclassical assumptions, but he tried to avoid controversy by—confusingly—presenting it as only requiring the introduction of innovative entrepreneurs into the set-up of the Walrasian system. Actually, he could easily define the function of his type of entrepreneurs in this manner, but the analysis of the overall process of evolution required a radical reinterpretation of the system of general economic equilibrium. He thus made clear that he could not accept the standard interpretation of the quick Walrasian process of adaptation (tâtonnement) and the standard uses of what became known as comparative statics. Instead, he saw the innovative transformation of routine behaviour as a relatively slow and conflict-ridden process. This reinterpretation helped him to sketch out his theory of cycles of economic evolution as reflecting the pattern of change under capitalism. It also served to define his life-long research programme and much of the Schumpeterian legacy.
Original languageEnglish
Publication date2008
Number of pages33
Publication statusPublished - 2008
EventInternational Schumpeter Society Conference, 12th ISS Conference - Rio, Brazil
Duration: 2 Jul 20085 Jul 2008
Conference number: 12

Conference

ConferenceInternational Schumpeter Society Conference, 12th ISS Conference
Number12
CountryBrazil
CityRio
Period02/07/200805/07/2008

Keywords

  • Joseph A. Schumpeter
  • Equilibrium economics
  • Evolutionary economics
  • Innovative entrepreneur
  • Evolutionary business cycles
  • Fields of evolutionary economics

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