Joseph Schumpeter

Economist, philosopher

• Born: February 8, 1883
• Place of Birth: Triesch, Moravia, Austria-Hungary (now the Czech Republic)
• Died: January 8, 1950
• Place of Death: Taconic, Connecticut

• Education: University of Vienna; University of Cambridge; University of Oxford; London School of Economics
• Significance: Joseph Schumpeter was an Austrian-born American economic theorist primarily known for his writings on capitalism. Schumpeter had a lengthy career as an educator across multiple prestigious institutions. He published a number of influential texts throughout his career, and his work contributed to a number of developing theories in the fields of economics and sociology.

Background

Joseph Schumpeter was born on February 8, 1883, in Triesch, Moravia, Austria-Hungary (now the Czech Republic). His father was a textile factory owner and died when Schumpeter was four. He had a close relationship with his mother throughout his youth. She later remarried an officer in the Austro-Hungarian army, and this union gave Schumpeter the opportunity to attend the prestigious Theresianum, the leading secondary school in Vienna. In 1901, he enrolled at the University of Vienna, where he studied law and economics. Schumpeter also spent time studying at a number of respected institutions across Europe, including the University of Cambridge, University of Oxford, and London School of Economics. He received instruction from two of the leading economic theorists of his time, Friedrich von Wieser and Eugen von Böhm-Bawerk. The two were prominent members of the Austrian school of economic thought that believed the mechanisms of an economy result from the decisions and actions of individuals.

Schumpeter earned his doctorate in 1906 and briefly worked at a law firm in Cairo, Egypt, in 1907. He also began work on his first major text, Das Wesen und der Hauptinhalt der Theoretischen Nationalökonomie (The Nature and Essence of Economy Theory), published in 1908. In 1909, he took a position as professor at the University of Czernowitz. He then accepted a position at the University of Graz, teaching economics in 1911. At twenty-eight years old, he was the youngest professor in the Austro-Hungarian Empire. The following year, he published his first major work, Die Theorie der Wirtschaftlichen Entwicklung (The Theory of Economic Development). The text discussed the dynamics involved in credit creation, the function of entrepreneurs, and the role of the banking systems. His book was one of the first to elaborate on the roles of entrepreneurs, distinguishing the position from other roles such as the manager and inventor. The Theory of Economic Development received critical acclaim but did not garner much recognition until it was translated into English in the 1930s.

Schumpeter remained with the University of Graz until 1921, briefly teaching a course at Columbia University in New York City in 1913. He also published Epochen der Dogmen- und Methodengeschichte (Economic Doctrine and Method) in 1912, and it provided a chronology of the development of economics since ancient Greece. After World War I (1914–1918) ended, he also served on the Commission to Socialize the German Coal Industry and served as Austria's finance minister for six months in 1919. Between 1921 and 1924, Schumpeter was president of the Biedermann Bank in Vienna. He then returned to education in 1925, accepting a position as professor of economics at the University of Bonn in Germany. Remaining there for the next seven years, Schumpeter was also a visiting professor at Harvard University in 1927 and 1930, as well as Hitotsubashi University in 1931. He left the University of Bonn in 1932 and relocated to the United States, taking a position at Harvard as a professor of economics.

Life's Work

Schumpeter's time at Harvard was especially productive, particularly in terms of published material. He published a two-volume text titled Business Cycles in 1939 that analyzed the capitalist process from historical, theoretical, and statistical standpoints. He was president of the Econometric Society from 1940 to 1941. In 1942, he published what many argue to be his best work, Capitalism, Socialism and Democracy. The book examines the intersection of economics, sociology, and political theory and how this interplay creates issues within a capitalist system, particularly concerning entrepreneurship.

Schumpeter's beliefs about capitalism were often compared to the views of German philosopher Karl Marx. Marx believed capitalism would be destroyed by those it had exploited. Schumpeter believed capitalism would be destroyed, but not by its enemies. His views held capitalism would be destroyed by those who succeeded within the system. Schumpeter imagined a capitalistic society destroyed by the very class it benefited. He believed the intellectual class would eventually attack the systems and freedoms essential to their existence, causing the capitalist economy to implode. Capitalism, Socialism and Democracy defends capitalism as a nurturer of entrepreneurship. The text also introduced Schumpeter's concept of "creative destruction," in which innovation by an entrepreneur causes old business systems to become obsolete and allows for progress and an improved standard of living.

In 1948, Schumpeter was elected president of the American Economic Association, and was elected to the same position for the International Economic Association two years later. He passed away in 1950 at his home in Taconic, Connecticut. Several of his works in progress were published posthumously, including Imperialism and the Social Classes (1951), Ten Great Economists from Marx to Keynes (1952), History of Economic Analysis (1954), and Das Wesen des Geldes (1970).

Impact

Upon Schumpeter's death, numerous publications wrote of his great contributions to the field of economics. Alongside his views on the future of economic theory, Schumpeter's writings also led to a better understanding of the history of economic thought. His works have also played an important role in the development of many fields of study, including economic sociology, evolutionary economics, and globalization studies. Although his work was initially overshadowed somewhat by that of Keynes, many have come to see Schumpeter's work as key to understanding contemporary economics.

Personal Life

Schumpeter was married three times. His first wife was Gladys Ricarde Seaver, whom he married in 1907 and divorced in 1925. He then married Anna Reisinger in 1925; she died during childbirth less than a year later, as did the couple's newborn son. Schumpeter married again in 1937 to Elizabeth Boody. His third wife often edited his later work and helped bring his writings to the attention of larger audiences.

Bibliography

Augello, Massimo M. Joseph Alois Schumpeter: A Reference Guide. Springer-Verlag, 1991.

Hawthorn, Geoffrey. "Schumpeter the Superior." London Review of Books, vol. 14, no. 4, 1992, pp. 15–6.

"In Praise of Entrepreneurs." Economist, 26 Apr. 2007, www.economist.com/node/9070610. Accessed 5 Oct. 2024.

"Joseph Alois Schumpeter." Library of Economics and Liberty, www.econlib.org/library/Enc/bios/Schumpeter.html. Accessed 5 Oct. 2024.

Liberto, Daniel. "Who Was Joseph Schumpeter, and What Was He Known For?" Investopedia, 30 Jan. 2022, www.investopedia.com/terms/j/joseph-schumpeter.asp. Accessed 5 Oct. 2024.

Shook, John R., editor. Dictionary of Modern American Philosophers. Thoemmes, 2005.