- Born in Triesch, Moravia.
- Received PhD in Law from the University of Vienna.
- Appointed Professor of Economics and Government at the University of Czernowitz.
- Appointed Professor of Economics at the University of Graz.
- Appointed Austrian Minister of Finance.
- Appointed President of the Biederman Bank.
- Appointed to a Professorship at the University of Bonn.
- Lectured at Harvard University.
- Publication of Theory of Economic Development.
- Publication of Business Cycles.
- Appointed President of the Econometric Society.
- Publication of Capitalism, Socialism and Democracy.
- Appointed President of the American Economic Association.
- Died in Taconic, Connecticut.
Life and Career
Joseph Schumpeter was an influential economist, classical liberalist, and political scientist, whose research on economic analysis, capitalism, business cycles, and entrepreneurship were central to the development of economic theory in the first half of the 20th century. He was Austrian minister of finance during a period of hyperinflation–which caused his dismissal–before turning to banking. As president of Biederman Bank, he made and lost a fortune, which prompted him to pursue a career in academia. He taught at the University of Bonn, before teaching economics for many years at Harvard, where his pupils included Alan Greenspan and Robert Solow. He was one of the first to study and theorize on the concept of entrepreneurship, and based his research on an attempt to integrate and unite the different social sciences.
Schumpeter was one of the first to analyze the role of entrepreneurs, in Theory of Economic Development, arguing that they created innovation and technological change, in the face of competition and falling profits.
He proposed that the wider economy also benefits from large corporations that have the resources to invest in research and development.
In History of Economic Analysis, he expanded his theory of entrepreneurship and theory of growth into a wider theory of the development of capitalism, also integrating it into theories of the business cycle, and socioeconomic evolution.
In Capitalism, Socialism, and Democracy he defended capitalism as helping to create entrepreneurship, and distinguished inventions from innovations.
He also discussed how capitalism might evolve, applying the phrase “creative destruction” to describe how traditional ways of doing things are replaced by the new.
In Business Cycles, he develops his arguments against government intervention in industry, first presented in Theory of Economic Development.
Schumpeter believed continual change in the economy meant most businesses fail, becoming victims of innovation by their competitors.
Argued that entrepreneurs innovate, not just by figuring out how to use inventions, but also by introducing new means of production, new products, and new forms of organization.
He discounted perfect competition as being the most efficient way to maximize economic wellbeing, viewing some type of monopoly as preferable to holding back competition from innovation.
He challenged the classical view that democracy is a process by which the electorate choose the politicians who would best carry out the common good, arguing that this was unrealistic, and that politicians set the agenda and manipulate the people.
He integrated a sociological understanding into his work, as he preferred to use sociology to explain economic principles, rather than the abstract models of his predecessors.
Helped found the concept of “evolutionary economics”, as based on economic change brought about by the interaction between individuals, and the economy as a whole.
“The ballot is stronger than bullets.”