Foundations of Post-Schumpeterian Economics

Innovation, Institutions and Finance

Beniamino Callegari

• Publisher: Routledge
• Year: 2020
• Print ISBN:
  9780367210663
• eBook ISBN:
  9780429560231
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

The neo-Schumpeterian interpretation dominating the field of evolutionary economics puts focus on technological innovation, Darwinian evolution and economic growth, and has proven to be fertile ground for the past forty years. However, as the evolutionary school attempts to engage with a world of inequality, financialization and economic fragility, the limits of such an interpretation begin to show. Contributing to the development of a more balanced post-Schumpeterian economics, this book offers a complementary interpretation of Schumpeter's theory which is based on economic innovation, Bergsonian creative evolution and monetary mechanisms and institutions.

The theoretical consequences of this new interpretation are significant and numerous. First, it leads to a conceptual separation of economic and technological innovation. Second, it offers a deeper integration of monetary and financial elements within the theory of the process of development, illustrating the adaptive and planning role provided by financial speculation under capitalist conditions. Third, it provides the foundations for a post-Schumpeterian theory of capitalist crisis, built on the relationship between innovation funding, the institutional development of banking and speculative credit creation. Finally, by discussing several key recent developments in evolutionary economics, the interpretation illustrates the opportunities unlocked by a pluralist approach to disciplinary development, aiming towards the development of a comprehensive post-Schumpeterian approach to economics.

This text is essential reading for scholars and students of Schumpeter, evolutionary economics, post-Keynesian economics, institutional economics and all economists interested in the ontological, methodological and theoretical challenges posed by economic development.

1 Introduction

Aims and vision

The last decades have witnessed the unlikely resurrection of Schumpeterian economics from the dusty oblivion that the Keynesian Revolution and the subsequent neoclassical restoration had apparently consigned it. Schumpeter has become the primary source of inspiration for the growing multidisciplinary innovation studies; more generally, interest in various aspects of his work has resurfaced both inside and outside economics, as signaled by an increasing amount of biographies, translations and articles. These developments have been made possible by the rise of the first Schumpeterian school of economics, the neo-Schumpeterian/evolutionary approach and the consequent emergence of dedicated areas of academic debate, providing an important avenue for theoretical, empirical and methodological development. While still largely contained within the heterodox fringes of disciplinary discourse, the availability of a sizable and growing niche for academic experimentation has allowed the unexpected and exceptional revival of the Eighties to turn into a semi-permanent boom that continues today.

While Schumpeterian economics might have never enjoyed such a positive period before, a growing number of issues are becoming more and more visible. Some are a legacy of the peculiar history of the field. Being founded more than thirty years after Schumpeter’s passing, neo-Schumpeterian economics initially held a weak connection to the original contribution. While most founders were well acquainted with Schumpeterian thought, the actual analytical use of the Schumpeterian framework was sparse, with original approaches being more prominent. Schumpeter provided inspiration, and a degree of common ground, but analytical heterogeneity dominated. Furthermore, the object of study of the young neo-Schumpeterian school was limited in comparison to Schumpeter’s, sporting a clear focus on technological innovation and micro competitive dynamics, both analyzed primarily from an evolutionary perspective. Monetary and financial aspects of development, in particular, were conspicuously missing, leading to a rather partial revival of the original contribution. While an impressive amount of analytical development has taken place within the field, from a theoretical perspective, the original Schumpeterian contribution, with all its significant limits, still today remains broader in scope than any specific neo-Schumpeterian framework.

On the positive side, the heterogeneous nature of the school begat a significant degree of intellectual openness, which over time enabled more and more clearly Schumpeterian elements to be first reintegrated in present debates. The progressive extension of the approach to new theme and the establishment of a commonly shared identity also resulted in a commonly shared opposition to neoclassical approaches, and the consequent embrace of heterodox status. This has facilitated a constructive exchange with other heterodox communities, especially post-Keynesian, institutionalist and Marxian economists, further reinforcing the long-term Schumpeterian trend toward hybridization. Theoretical and analytical cross-fertilization, however, requires a clear understanding of the foundational assumptions of both frameworks involved; they require clarity of vision. While the initial heterogeneity has proven to be an asset for the development of the school, the current situation requires a common effort toward the analysis of implicit and explicit assumptions and principles. This analytical task is motivated not by the need to reaffirm an intellectual identity, or exclude diversity, but to support the current pluralist trend by defining shared areas and critical limits, requiring joint theoretical development to be resolved.

This necessary task, to be performed gradually through a dedicated academic debate, is the primary motivation for this book, meant as a modest personal contribution to this ongoing process. As any Schumpeterian analytical effort, it is predicated on a specific pre-analytical vision. Schumpeter original contribution was marred by the combination of exceedingly ambitious goals, to be achieved by the tireless efforts of a single, isolated genius. As the focus on implementation over ideation inherent in Schumpeterian theory makes clear, this was not an effective blueprint for academic entrepreneurship. Since then, a very significant amount of Schumpeterian thought has developed, although mostly in an uncoordinated, piecemeal fashion, that similarly failed to deliver on the original vision of disciplinary renewal. The situation has changed with the emergence of a fertile Schumpeterian school, although its rather spurious neo-Schumpeterian origins have ensured that most Schumpeterian analytical development would continue to take place in rather uncoordinated fashion. If the valuable contributions that have accumulated since the Fifties were to be progressively brought together within a consistent analytical framework, the result would greatly surpass the original Schumpeterian contribution: it would be the dawn of post-Schumpeterian economics, conjugating the ambitions for change dreamt by the noble ancestor with the collective efforts of his successors.

Several attempts toward the development of new, ambitious Schumpeterian theoretical frameworks are currently ongoing. A post-Schumpeterian economics will eventually emerge when constructive academic debate will bring to light their common ground. In this regard, the original Schumpeterian contribution can also play a role. Thanks to the work of Schumpeter himself and the numerous commentators that have followed him, the original framework, while not the most general, remains the most advanced in terms of economic theory, covering all main economic phenomena of development, with many of its concepts still being dominant in the field today, starting from the very concept of innovation. However, decades of criticism have exposed a number of limitations inherent to the original construct. While theoretical limitations are to be expected, especially in light of the significant developments that have taken place since then, more worrying are the numerous inconsistencies that appear to exist within the very ontological foundations of the framework. If the original contribution is to contribute to the ongoing process of theoretical synthesis, such problems must be addressed first.

The main contribution of this book is to contribute to this process of theoretical development by finally shedding some light on one of the few remaining unsolved mysteries of the original contribution: the connection between Schumpeter and Bergson. This elusive red thread is used to reconstruct the Schumpeterian ontological vision from a specifically Bergsonian perspective, addressing a number of open questions along the way, such as the nature of Schumpeter’s evolutionary perspective, the validity of open- and closed-system approaches to economic analysis of development, and the relative role of scientific and extra-rational elements for the analytical process. The resulting ontological interpretation is then brought to bear on methodological and theoretical issues to contribute to current debates while illustrating the relevance of foundational assumptions for theoretical development. Finally, the pluralist nature of the approach is illustrated by describing its similarities, differences and potential contributions to three different trajectories of theoretical development currently influential in the Schumpeterian area. The objective is to demonstrate how such interpretation can constructively interact with different ontological, methodological and analytical approaches within and without the discipline, as part of that process of broad academic debate required for a satisfactory synthetic post-Schumpeterian framework to emerge.

A Bergsonian interpretation for Schumpeterian economics

Briefs (1960) narrates how, when questioned by Marschak in regard to the missing behavioral equations necessary to make the creative response operational in the context of an analytical model, Schumpeter answered that such behavioral equations were deliberately not included, and that the reason behind such choice could be found in reading Bergson. In one letter from Schumpeter to Marschak published by Stolper (1994) on the same topic, Schumpeter justified the choice of prose rather than equations to describe crucial elements of his theory of economic development by appealing to the presence of a fundamental element refractory to quantification: “there is something of évolution créatrice about it (as there is I think – another confessio fidei – about every true evolution, a biological ‘sport’ for instance, or de Vries’ ‘mutation’)” (ibid., p. 375). This prompted Marschak to reconsider his initial intention to contribute to the further development of the Schumpeterian framework. Briefs recounts the exchange as an instance of communication failure caused by an ontological divide existing between these two authors. It is certainly regrettable how this ontological distance prevented a potentially fertile collaboration to develop further. It is perhaps more regrettable, however, that this distance lingers today, as the Bergsonian roots of Schumpeterian thought still await exploration.

The connection between Bergson and Schumpeter has not gone entirely unnoticed, however. Among Schumpeter’s contemporaries, Taymans (1950) described them as joint parents of the idea of development, a proposition he considered so self-evident as to not require any supporting argument, incidentally ensuring that little attention would be paid to the idea. Leontief (1950) underlined “the remarkable affinity” between Schumpeterian theory and Bergsonian philosophy, hypothesizing the existence of a common basis linking the two conceptual schemata. The suggestion, however, was not followed, and the Bergsonian trail went cold. Much later, during the Schumpeterian renaissance of the Eighties, Gallegati (1984) advanced a similar hypothesis, arguing for the Bergsonian foundations of Schumpeter’s evolutionary thinking, attracting little interest. More recently, Ebner (2006) recalled in a note how the Bergsonian foundations of the Schumpeterian argument may have been a factor in preventing its formalization. Shionoya (2007) claimed that Schumpeter’s pre-analytical vision was grounded in Continental philosophy, bearing an explicit anti-Enlightenment stance, explicitly mentioning Bergson in a later contribution, as one among several potential philosophical influences on Schumpeter (Shionoya, 2012). The recent scholar to pay more attention to the connection, however, has been Andersen. In his work on the evolutionary themes of Schumpeterian theory, he claimed that: “Bergson’s ideas about time and consciousness seem of direct relevance for the understanding of the Schumpeterian entrepreneur and his insertion into the circular-flow model” (Andersen, 2009, p. 312). The connection between Bergsonian ontological influences and Schumpeter’s choice to avoid mathematical operationalization of his theory of economic development is also mentioned. According to Andersen, this choice led to several key components of the Schumpeterian contribution becoming “hidden in the cloud of semi-philosophical issues that emerged from Schumpeter’s reference to Bergson’s strange book on Creative Evolution” (ibid., p. 314).

Andersen’s words suggest that Bergson continues being a catalyst for repeating communication failures between Schumpeter and those who intend to take his contribution farther. Those who believe a mathematical operationalization of Schumpeter’s model to be necessary would naturally be frustrated by the discovery that a Bergsonian infatuation prevented Schumpeter from taking this step. It would be natural, in this case, to disregard the issue, and proceed to develop the theoretical framework precisely in those directions that have been originally blocked by the Bergsonian hold-up. As Briefs pointed out, however, the situation could also be interpreted as a symptom of an enduring ontological distance between Schumpeter and his academic successors, with Bergson at its center. If this were the case, the refusal to engage in the underlying argument implied by Schumpeter’s response could be a potentially harmful stance. To develop an existing theoretical framework from a limited, or, in the worst case, faulty interpretation of its ontological roots is likely to result in the emergence of a number of tensions and inconsistencies, hardly admitting of a solution that does not involve opening the discarded ontological box. Some of the reasons why the Schumpeterian contribution is often perceived by its very successors as paradoxical or contradictory may also be traced to the same issue. This may be the case, however, only if the Bergsonian position can be construed as relevant for Schumpeter.

As the previous reference shows, Schumpeter describes his Bergsonian evolutionary position as a confessio fidei. Even allowing for some irony, the statement appears significant, especially in light of the evolutionary dimension’s relevance for the Schumpeterian framework. It might be argued that, even admitting a Bergsonian factor, it might be of relatively little importance within the broad scope of the contribution. There is evidence, however, to think that Schumpeter believed otherwise:

Bergson meant that the new truth or, more generally, the new creation is not worked out by logical processes at all. This involves indeed (…) an entirely new Weltanschaung wholly at variance, among other things, with the views then current (the Marxist one included) about cultural development

(Schumpeter, 1954, p. 778)

The great esteem in which Schumpeter always demonstrated for Marx’s contribution to the subject should hint to the significance attributed to Bergson. The point is reinforced by a second confissio fide, this time a public one: “evolution may also be looked upon as transcending the means of empirical science (évolution créatrice) and Marx and Darwin may both be wrong. I believe they are” (Schumpeter, 1984, p. 591, n5). While Bergson’s name is missing, the creative evolution reference is sufficient to dispel any doubt as to the meaning. The declaration confirms that Schumpeter considered the Bergsonian conceptualization of evolution as comparable in relevance to both Marx’s and Darwin’s and, at least in certain aspects, superior to both.

Are these hints sufficient to make Schumpeter a Bergsonian, to recast his theory of development as an attempt to bring to social sciences the concept of creative evolution? Certainly not. This fanciful revisionism would require a wealth of explicit analytical references within Schumpeter’s works establishing the core of his theoretical contribution. None exist. There is no sufficient evidence to establish whether Schumpeter was inspired by Bergson in his early years, or if he came into contact with his writings later, was impressed by the analogies with his own thought and decided to use some of Bergson’s arguments as ex-post support for his own theoretical choices. What can be reasonably claimed on the sole basis of the few explicit references is that Schumpeter was familiar with Bergson’s writings, that he believed Bergson to have produced an evolutionary paradigm comparable in scope and relevance to both Marx’s and Darwin’s, that such paradigm was judged by Schumpeter as a viable ontological starting point for theorizing the process of evolution within the social sphere, that it was not entirely alien to Schumpeter’s own thinking on the subject and that it directly inspired at least some of his methodological choices. The evidence appears sufficient to confirm the claim of a significant Bergsonian connection, whose specific contents, however, remain unclear.

What I also claim, perhaps unreasonably, is that the ontological foundations of Schumpeterian analysis can be understood as a development of the Bergsonian paradigm, as if the two authors shared almost identical positions on such matters. There is no ground to argue that they truly did. The approach is explicitly hypothetical, and does not involve any claim of exclusivity, or superior fidelity to the original, in relation to any alternative interpretation. The proposed Bergsonian interpretation aims to achieve legitimacy through consistency with the original ma...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of figure
• List of tables
• List of abbreviations
• 1 Introduction
• Section 1 Ontological foundations
• Section 2 Methodology and theory
• Section 3 Interactions
• Index