Joseph Schumpeter

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Schumpeter, Joseph


Born Feb. 8, 1883, in Triesch (now Třešt’), Moravia; died Jan. 8,1950, inTaconic, Conn. Economist and sociologist.

Educated at the University of Vienna, Schumpeter served as finance minister of Austria in 1919 and 1920. He was a professor at the University of Bonn from 1925 to 1932 and at Harvard University from 1932 until his death. He regarded the history of the discipline of political economy as the development of an analytical framework and of research methods for studying economic phenomena.

Schumpeter is known primarily for his concept of economic dynamics, which assigned a central place to the entrepreneurial function. He advanced the theory of efficient competition, which depicts the market mechanism in the era of big business as the fruitful interaction of the forces of monopoly and competition. These forces are fueled by innovations and impart a particular dynamism to economic development.

Schumpeter worked out the dynamic concept of the business cycle, in which recurrent business cycles are seen as a law of economic growth. According to this concept, the driving force behind prosperity is mass investment, embodying certain innovations, in fixed capital. In Schumpeter’s view, crises are not inevitable but occur when the natural cessation of an economic boom is met by panic. The theory of cycles assigns a major role to credit, which brings additional economic resources into play and thereby helps to implement innovations. Schumpeter attempted to refute the Marxist theory of socialist revolution by arguing that capitalist free enterprise would inevitaby be transformed, gradually, into an economic system whose development would be regulated and directed by the state.


The Theory of Economic Development. New York, 1961.
Business Cycles, vols. 1–2. New York—London, 1939.
Capitalism, Socialism, and Democracy, 3rd ed. New York, 1950.
Ten Great Economists. New York [1951].
History of Economic Analysis. London [1967].


Al’ter, L. B. Burzhuaznaia politicheskaia ekonomiia SShA. Moscow, 1961.
Seligman, B. Osnovnye techeniia sovremennoi ekonomicheskoi mysli. Moscow, 1968. Chapter 8. (Translated from English.)
Clemence, R. V., and F. S. Doody. The Schumpeterian System. Cambridge, Mass., 1950.
Schumpeter: Social Scientist. Edited by E. Harris. Cambridge, Mass., 1951.
Schneider, E., and G. Spiethoff, eds. Aufsätze zur ökonomischenTheorie. Tübingen, 1952.


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The philosophy, explains Feilmeier, goes back to Joseph Schumpeter, the economist who coined the theory of "creative destruction" (that creative destruction is real, and the markets ultimately destroy everything because people invest in new ways to do things--and if you don't continue to do that internally, eventually it's going to happen to you).