Joseph Schumpeter
Hello people, my name is Joseph Schumpeter. I am an Autrian economist and am promoting capitalism I am particularly famous for claiming "creative destruction".Other illustrious works of mine are the research of entrepreneurship, expounding the theory of democracy and publishing a book called "Capitalism, Socialism and Democracy". Besides that, my ideas of Business cycles and economic development are also well-known. I strongly believe innovations that entrepreneurs create induce stronger market power than the one caused by the invisible hand expounded by Adam Smith.
Year8 Feb 1883
1887 1906 1909 1911 1919 1920-1924 1925-1932 1927-1928 &1930 1930~ 1931 1932 1939 1940-1941 1942 7 Jan 1950 |
EventsI was born in Austria-Hungary (now Czech Republic).
Lost my father who owned a factory and moved to Vienna with my mother. Studied law in University of Vienna and took Doctor of Philosophy. ecame a professor of economics and government in University of Czernowitz Joined the University of Graz. Served as the Austrian finance minister of France Became a president of the private Biedermann Bank but the bank collapse and I went bankrupt. Became a professor at University of Bonn (Germany) Lectured in Harvard Started to study how the capitalist system was affected by innovation on market Became a visiting professor at The Tokyo University of Commerce. Moved to the United States Got the US citizenship Became the president of Econometric Society Published “Capitalism, Socialism and Democracy” I passed away in my home in Taconic (US) at the age of 66 |
Other than the things mentioned above, i married 3 times in my life in 1907, 1925 and 1937...
People who influenced me
My innovation-based economic view was influenced by Gustav von Schmoller and Werner Sombart in Histrical school of economics.
My Economic Theory
My view of economics is based on innovations. I first classified innovation to 5 categories and made them its definition:
Creative destruction
I stated in "Capitalism, Socialism and Democracy" that the creative destruction as "the process of industrial mutation that incessantly revolutionizes the old one, incessantly creating a new one". This basically means that in capitalistic market, an innovation that an entrepreneur creats replaces old entreprises eventually replaced by its improved efficiency, technology and most importantly the new creative ideas and this process is repeated over and over. Through this process, the whole market is reconstructed. The repititions of the reconstruction of market is the process economic development. I believe that this process of economic development is inherently dynamic because changing production function is an essential process to capitalistic development. I personally think this creative destruction works better than the "invisible hand" by Adam Smith which states the market forces of demand and supply achieve the most efficient level of production, consumption and distibution of goods in the society.
I disagree with any type of government intevention because it impairs capitalistic development. Entrepreneurs should be free to innovate new business and technology which would give a bettr efficiency. This must not be intervened by the government.
All in all, I believe that the process of capitalistic development is brought about by the introduction of new combination through innovation created by the entrepreneurs.
Examples of creative destruction
One of the examples of creative destruction is the railroadization of the Middle West in 20th century. It was initialted by the Illinois Central. However, other businesses came there to start their enterprise seeking the advantage of the new transport available by the road so new cities were buit around it and the land was also cultivated. This leads the old argriculture of the West to decline and eventually vanish.
Another example is compact displays known as CDs in general. People used to listen to music by cassette tapes however as soon as CD was invented, people chose CDs instead of those cassette tapes so they were vanshed over time. Yet, the CDs are not new anymore currently. Many people nowadays download songs to their MP3 from the internet so CDs might have reached the turning point and started declining.
- The introduction of new goods
- The new methods of production
- The opening of new markets
- The conquest of new sources of supply
- The carrying out of a new organization of any industry
Creative destruction
I stated in "Capitalism, Socialism and Democracy" that the creative destruction as "the process of industrial mutation that incessantly revolutionizes the old one, incessantly creating a new one". This basically means that in capitalistic market, an innovation that an entrepreneur creats replaces old entreprises eventually replaced by its improved efficiency, technology and most importantly the new creative ideas and this process is repeated over and over. Through this process, the whole market is reconstructed. The repititions of the reconstruction of market is the process economic development. I believe that this process of economic development is inherently dynamic because changing production function is an essential process to capitalistic development. I personally think this creative destruction works better than the "invisible hand" by Adam Smith which states the market forces of demand and supply achieve the most efficient level of production, consumption and distibution of goods in the society.
I disagree with any type of government intevention because it impairs capitalistic development. Entrepreneurs should be free to innovate new business and technology which would give a bettr efficiency. This must not be intervened by the government.
All in all, I believe that the process of capitalistic development is brought about by the introduction of new combination through innovation created by the entrepreneurs.
Examples of creative destruction
One of the examples of creative destruction is the railroadization of the Middle West in 20th century. It was initialted by the Illinois Central. However, other businesses came there to start their enterprise seeking the advantage of the new transport available by the road so new cities were buit around it and the land was also cultivated. This leads the old argriculture of the West to decline and eventually vanish.
Another example is compact displays known as CDs in general. People used to listen to music by cassette tapes however as soon as CD was invented, people chose CDs instead of those cassette tapes so they were vanshed over time. Yet, the CDs are not new anymore currently. Many people nowadays download songs to their MP3 from the internet so CDs might have reached the turning point and started declining.
My 3 Major Publications
- Capitalism, Socialism and Democracy (1942)
- Theory of Economic Development (1934)
- Business cycles (1922)
- Business cycles
- Economic Development
- Entrepreneurship
- Evolutionary Economics
This is a tutorial video explaning the creative destruction
Comments
Mr. Schumpeter, Sir: You said that, "Entrepreneurs should be free to innovate new business and technology which would give a bettr efficiency. This must not be intervened by the government" Certainly you can't believe this?! To use dynamite to extract valuable fish from coral reefs rather than using spears would be considered "better efficiency" and being "free to inovate" but I don't think kind of creative destruction is a positive thing as it destroys the very ecosystem on which the livelyhood of the fishermen depend. Don't you agree?
- Jeffrey Sachs
- Jeffrey Sachs
Dear Jeffrey Sachs
If you see the shprt term, the creative destruction might not a perfect way to go since it does give some environmental impacts as you say above. However, if you look at the creative destruction at the longer term, it is certainly better than the market intervened by the government. It's because entrepreneurs will innovate even better technology or creative method that overcome those negative impacts on environment as entrepreneurs always seek the greater products that create increased demand which brings them greater profit. If the government restricts those innovation by the entrepreneurs, the economic development will slow down as the innovation and economic development are closely related.
- Joseph Schumpeter
If you see the shprt term, the creative destruction might not a perfect way to go since it does give some environmental impacts as you say above. However, if you look at the creative destruction at the longer term, it is certainly better than the market intervened by the government. It's because entrepreneurs will innovate even better technology or creative method that overcome those negative impacts on environment as entrepreneurs always seek the greater products that create increased demand which brings them greater profit. If the government restricts those innovation by the entrepreneurs, the economic development will slow down as the innovation and economic development are closely related.
- Joseph Schumpeter