Joseph Schumpeter

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Joseph Schumpeter : biography

8 February 1883 – 8 January 1950

Schumpeter and entrepreneurship

The research of entrepreneurship owes much to his contributions. He was probably the first scholar to develop theories in this field. His fundamental theories are often referred to as Mark I and Mark II. In the first, Schumpeter argued that the innovation and technological change of a nation come from the entrepreneurs, or wild spirits. He coined the word Unternehmergeist, German for entrepreneur-spirit. Mark II was developed when Schumpeter was a professor at Harvard. He asserted that the agents that drive innovation and the economy are large companies which have the resources and capital to invest in research and development. These arguments may be complementary today.

Schumpeter and innovation

Schumpeter identified innovation as the critical dimension of economic change.An Introduction to Economics with Emphasis on Innovation, Pol, E Carroll,P, 2006 He argued that economic change revolves around innovation, entrepreneurial activities, and market power. He sought to prove that innovation-originated market power could provide better results than the invisible hand and price competition. He argues that technological innovation often creates temporary monopolies, allowing abnormal profits that would soon be competed away by rivals and imitators. He said that these temporary monopolies were necessary to provide the incentive necessary for firms to develop new products and processes.

Schumpeter and the gold standard

Joseph Schumpeter recognized the implication of a gold monetary standard compared to a fiat monetary standard. In History of Economic Analysis he stated the following:

His legacy

For some time after his death, Schumpeter’s views were most influential among various heterodox economists, especially European, who were interested in industrial organization, evolutionary theory, and economic development, and who tended to be on the other end of the political spectrum from Schumpeter and were also often influenced by Keynes, Karl Marx, and Thorstein Veblen. Robert Heilbroner was one of Schumpeter’s most renowned pupils, who wrote extensively about him in The Worldly Philosophers. In the journal Monthly Review John Bellamy Foster wrote of that journal’s founder Paul Sweezy, one of the leading Marxist economists in the United States and a graduate assistant of Schumpeter’s at Harvard, that Schumpeter "played a formative role in his development as a thinker". Other outstanding students of Schumpeter’s include the economists Nicholas Georgescu-Roegen and Hyman Minsky and former chairman of the Federal Reserve, Alan Greenspan. Future Nobel Laureate Robert Solow was his student at Harvard, and he expanded on Schumpeter’s theory.

Today, Schumpeter has a following outside of standard textbook economics, in areas such as in economic policy, management studies, industrial policy, and the study of innovation. Schumpeter was probably the first scholar to develop theories about entrepreneurship. For instance, the European Union’s innovation program, and its main development plan, the Lisbon Strategy, are influenced by Schumpeter. The International Joseph A. Schumpeter Society awards the Schumpeter Prize.

The Schumpeter School of Business and Economics opened in October 2008 at the University of Wuppertal. According to University President Professor Lambert T. Koch, "Schumpeter will not only be the name of the Faculty of Management and Economics, but this is also a research and teaching programme related to Joseph A. Schumpeter."

On 17 September 2009, The Economist inaugurated a column on business and management named "Schumpeter." The publication has a history of naming columns after significant figures or symbols in the covered field, including naming its British affairs column after former editor Walter Bagehot and its European affairs column after Charlemagne. The initial Schumpeter column praised him as a "champion of innovation and entrepreneurship" whose writing showed an understanding of the benefits and dangers of business that proved to be far ahead of its time.