Essays

On Entrepreneurs, Innovations, Business Cycles and the Evolution of Capitalism

Joseph A. Schumpeter

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351311465
• Edition: 1
• Topic: Business
• Subtopic: Business generale
• Index: Business

Ordinarily, the word essays is invoked at great risk by authors and publishers alike. But in the case of this special collection by Joseph A. Schumpeter, the great Austrian economist who finally settled at Harvard, the scholarly world knows this particular volume as his Essays. For a less pious younger generation, a subtitle has been added describing what these essays are about.In addition to the major themes of Schumpeter's life: the place of the entrepreneur in economic development, the risks and rewards of innovation, business cycles and why they occur, and the evolution of capitalism in Europe and America, the Essays contain statements on how Schumpeter viewed his own development; they discuss how he looked at Marxism, and how he feared that economics was in danger of becoming too ideological.Several of the Essays are classics. This is the case for "The Creative Response in Economic History" in which Schumpeter makes a plea for the close cooperation between economic theory and economic history. Another is "Science and Ideology, " which constitutes Schumpeter's presidential address before the American Economic Association. Finally, there is the intriguing preface to the Japanese translation of Theory of Economic Development, in which Schumpeter names Walras and Marx as his two great predecessors.Even those who treasure the original publication were irritated by the remarkably poor quality of much of the book, which reproduced everything from typewriter script to nearly unreadable, reduced double columns. These lapses have been corrected in this new edition. Here Schumpeter's Essays can finally be read with the enjoyment, no lesS than enlightenment, they deserve. The volume is alive to the basic issues of our time. The reader can look forward to intellectual insight and stimuli of the highest order.

INTRODUCTION TO THE TRANSACTION EDITION

The articles in this collection constitute an excellent and enjoyable introduction to Schumpeter’s work. All the major themes in his thought—the entrepreneur, innovations, business cycles, and the evolution of capitalism—are discussed in this volume. Several of the articles are minor “classics,” such as Schumpeter’s presidential address to the American Economic Association in 1948, “Science and Ideology”; his seminal essay on entrepreneurship and economic history, “The Creative Response in Economic History”; and the intriguing preface to the Japanese edition of The Theory of Economic Development. There is also a fine bibliography at the end of the volume, which was put together by Schumpeter’s widow just after his death in January 1950. All in all, Essays is a very useful work, both for those who want an introduction to Schumpeter’s work and for those who already have developed an interest in Schumpeter and want to pursue it further.

The idea to put together Essays came from Richard V. Clemence, who is most known in this context as the coauthor with Francis S. Doody of The Schumpeterian System (1950). As Clemence describes it in the preface, he approached Schumpeter in the late 1940s with the idea of putting together a collection of Schumpeter’s articles. Schumpeter, who does not seem to have been overly interested, gave him free hands. It was made clear from the beginning, however, that the collection would not include any of Schumpeter’s biographical essays.¹ The reason for this was that Schumpeter had already decided to publish these separately (they eventually appeared as Ten Great Economists). However, before Clemence had finished putting together the collection, Schumpeter died. On important points Clemence started to consult with Elizabeth Schumpeter.

Essays contains all of Schumpeter’s essays, which were originally written in English, except for those published in Ten Great Economists. The famous article “The March into Socialism” (1950) is however not included; it can instead be found as an appendix to the third edition of Capitalism, Socialism and Democracy (1950). Various well-known articles by Schumpeter, which are available in English translation, such as the essays on imperialism, social classes, and the tax state, are not to be found in this collection either. Still, Essays contains more than twenty articles from 1909 to 1949 and thereby covers nearly all the years that Schumpeter was active as an economist. The essays were arranged by Clemence in chronological order. This is a reasonable way of arranging the material, even if it does not necessarily make sense for the reader to plough through the volume in the same order as the essays were written. This introduction therefore contains a guide to the content in Essays. The four major themes in Essays are presented and commented upon: Economic Theory and the Business Cycle; The Evolution of Capitalism; Schumpeter’s Reevaluation of Economic History in the 1940s; and Marxism and Sociology.

Preceding the presentation of these themes there is a brief note on some of the more recent writings on Schumpeter’s work and life. For those who are only vaguely familiar with Schumpeter, this note can serve as an introduction to some basic facts about his life and work. Since an important reevaluation of Schumpeter is presently going on, these introductory remarks also contain some material which is of interest to the more advanced student of Schumpeter’s work.

Some Recent Works on Schumpeter

For a brief account of Schumpeter’s life, I can cite a letter he wrote in May 1934 to a Stewart S. Morgan.² Schumpeter normally didn’t like to give information about himself, but Morgan had just told Schumpeter that one of his essays, “Depressions” (reprinted in Essays), had been specially selected for a collection to be used in English composition. Schumpeter was clearly very pleased with this, and his letter has an air of happiness:

You want to have some facts about myself. Well, I am an Austrian by birth, born in 1883 in a village called Triesch in what was then a province of the Austro-Hungarian Empire, viz. Moravia, which now forms part of the Chechoslovakian Republic. I was educated in Vienna, and following up an impulse which very early asserted itself, I then travelled about for a few years studying economics from various standpoints and began to give lectures on Economic Theory at the University of Vienna in 1909, in which year I was also appointed to a chair of Economics in Czernowitz, then the most eastern town of Austria, now belonging to Roumania. I was called to the University of Graz in 1911, and in 1913–14 I acted as what was called an exchange professsor to Columbia University, when I first made acquaintance with and fell in love with this country. Later on I entered politics and took office as Minister of Finance in Austria after the war. I did not return to scientific life unil 1925, when I accepted a professorship at the University of Bonn, Germany. In 1927–28 and again in 1930 I visited Harvard University, which I joined as a member of her permanent staff in 1932.

If Schumpeter had written this letter during the first few days of January 1950—he died during the night between January 7 and 8—it might also have said that Schumpeter in 1948 became president of the American Economic Association. He was a founding member of the Econometric Society, and just before his death he had been elected the first president of the International Economic Association.

In his letter to Morgan, Schumpeter also described his intellectual interests:

At present my interests are exclusively in Economic Theory and in the analysis of the phenomena of the business cycle, about which I hope to publish a rather portly volume within a year.Other things partly or entirely outside the economic sphere will engage my attention later on. As to publications, if everything be counted they probably run into something like two hundred items, but most of the results of my work have been published in two books, the one entitled The Nature and Essence of Theoretical Economics (1908), the other The Theory of Economic Evolution (1912). The latter has been translated into French, Italian and English (the Italian translation has appeared already; the French and English ones will do so shortly, while Russian and Japanese translations are in hand). Perhaps I may also mention a History of Economics (1914) and two sociological pieces of work: The Sociology of Imperialism and The Theory of Social Classes, which, originally intended for books, actually appeared only in a German scientific periodical called the Archiv fur Sozialwissenschaft und Sozialpolitik of which I was also co-editor and to which also I contributed half a dozen other papers. There is of course a lengthy series of papers which probably mean something to the specialist, but for our purpose I do not think that I need mention any more titles.³

Again, if this letter had been written just before Schumpeter’s death, the author would surely have mentioned that in 1939 he published a massive two-volume set entitled Business Cycles and in 1942 Capitalism, Socialism and Democracy. During his last years he also worked on a giant history of economic thought, which his wife and some former students and colleagues edited and published in 1954 as History of Economic Analysis.

Apart from a great number of translations, especially of Capitalism, Socialism and Democracy, it can also be noted that most of Schumpeter’s German essays have been republished in various collections after his death.⁴ One of Schumpeter’s manuscripts on money has also found a German publisher.⁵ Most of Schumpeter’s writings on economic theory have been well known to the scholarly community for many years. This however has not been the case with a number of articles on economic policy, which in 1985 appeared in a volume entitled Aufsaetze zur Wirtschaftspolitik. This work contains a host of fascinating material, such as secret political memoranda by Schumpeter, speeches from his time as finance minister, and articles he wrote for the weekly press. The volume was put together by Wolfgang Stolper and Christian Seidl, two scholars whose work—together with that of Stephan Verosta and Eduard Maertz—has led to a reevaluation of Schumpeter’s political activities in Austria and Germany.⁶ The final verdict is not in yet, but it seems that the earlier notion that Schumpeter was a failure as a finance minister and an underhanded enemy of the socialization attempts in Germany and Austria just after World War I is incorrect. Of particular interest among Schumpeter’s early political writings is a political memorandum from 1916, which was secretly circulated in conservative, catholic circles in the Austrian-Hungarian Empire during World War I. Schumpeter especially hoped that it would reach the foreign minister and convince him that a customs union with Germany was not in his country’s interest.

It is also clear from the memorandum that Schumpeter wanted a monarchy with a strong aristocratic leadership. The press would not be free, and the emperor would have considerable power over the parliament.

In their introduction to Schumpeter’s writings on economic policy, Stolper and Seidl point out that according to his contemporaries, Schumpeter had such a strong political ambition that it verged on opportunism. They quote from various different sources, which all agree that Schumpeter was very good at presenting himself to whatever audience he was facing, as if he was one of them. “How great it must be to have three souls in one!” one newspaper ironically noted apropos Schumpeter in March 1919.⁷

Another topic that is starting to emerge in the scholarly discussion of Schumpeter’s politics has to do with his stance during World War II. Here, however, a complete analysis is still missing, and only fragments of the full story are known. What is clear beyond doubt is that Schumpeter was intensely hostile to the Roosevelt administration, and that this tended to isolate him during the war years. Less clear is his attitude to the Hitler regime. According to Richard Goodwin, who knew Schumpeter very well, “he [Schumpeter] was pro-Hitler, saying to anyone who cared to listen, that Roosevelt and Churchill had destroyed more than Jenghis Kan.”⁸ Karl-Heinz Paque agrees.⁹ When talking to a number of Schumpeter’s colleagues and students, I have however been told that this is simply not true.¹⁰ In his correspondence, Schumpeter defines himself as a “conservative”—never as a “fascist.”¹¹ Until more evidence is presented—and at present there only exist impressionist testimonies—it is not possible to definitely state what Schumpeter’s political attitudes during World War II were like.

Schumpeter’s personality was clearly very complex; and the simplistic image in much of the earlier scholarship of Schumpeter as a great lover-economist-horseman is perhaps on its way out. Instead a picture is emerging of a man who has both his sympathetic and unsympathetic sides. Paul Samuelson has, for example, testified to Schumpeter’s antisemitism. In Schumpeter’s opinion, “Jews were ‘early bloomers’ who would unfairly receive more rewards than they deserved in free competition.”¹² This theory undoubtedly belongs to the mythology of antisemitism. In most cases, however, it seems as if Schumpeter did not let his antisemitism interfere with his judgment of a colleague’s skill as an economist or with his personal liking for someone.

Several of the questions pertaining to Schumpeter’s personality will no doubt benefit from the analysis of Robert Loring Allen, an economist who has just completed the manuscript to the first major biography of Schumpeter.¹³ Allen has been able, as the first Schumpeter scholar, to penetrate Schumpeter’s shorthand writings and thereby get access to his voluminous diaries and notes. From the information Professor Allen has been generous enough to share with me, it is clear that Schumpeter’s relationship to women played a decisive role in forming his character. Two women especially—his strong mother, who was early widowed, and his beloved second wife, who died young in childbirth—influenced his world view. Through Richard Goodwin’s testimony we already have a short version of Schumpeter’s love story with Annie Reisinger. We hope Al...