Schumpeter, J.A., 1934 (2008), The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest and the Business Cycle

Abstract

Schumpeter, J.A., 1934 (2008), The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest and the Business Cycle, translated from the German by Redvers Opie, New Brunswick (U.S.A) and London (U.K.): Transaction Publishers.A review to a book that is 100 years old1'The Theory of Economic Development' is still one of the most famous and influential books in the entire field of economics. This book was published when Joseph was only 28 years old and he considered it to be his seminal work. Since this book's publication, Schumpeter's reputation as a prophet of innovation (McCraw, 2007) has been firmly established. Just a few years ago, the well known economist Richard Swedberg (2007: 2) wrote that from the theories of entrepreneurship that exist, Schumpeter's theory is still, to my mind, the most fascinating as well as the most promising theory of entrepreneurship that we have. Last but not least, this book contains some significant elements used as foundations for building contemporary analysis which is labelled as being in the sphere of the economic sociology (Martinelli, 1994: 478-480).Joseph was born in 1883 and in his youth specialized in law and economics at the University of Vienna. In this period Schumpeter had studied with Friedrich von Wieser, Eugen von Philippovitch and Eugen von Bohm-Bawerk in Vienna and had acquired an intimate knowledge of their contributions (Kurz: 2008: 263). His academic career started in 1909 at the University of Czernowit, and two years later, in 1911, moved at the University of Graz. Between 1914 and 1925 there was a break in his academic life wherein he served as the Austrian finance minister for a short time. After that he acted as the president of a private bank in Vienna. The next phase of his academic life, during which he was linked with the University of Bonn, started in 1926 and finished in the early 1930s. In the last part of his life he accepted a professorship at Harvard University where he remained until his death in 19503.The Schumpeterian system of economic thought was built in such a way as to realize a necessary symbiosis between economic, historical, political, social and all other elements of the process of the functioning and development of the capitalist world. All of these specific aspects of capitalist society could be approached as separate entities because this was considered to be the most appropriate way to effectively access the economic aspects of reality. Certainly, from the Schumpeterian point of view, economic phenomena are not an isolated and undetermined, but this is not a reason to explain the economic world through external factors. 'The Theory of Economic Development' was a first step in this Schumpeterian effort to create the theoretical tools and concepts which were needed to approach the economic sphere of reality while assigning phenomena such as wars, political upheaval, and cultural or spiritual issues a secondary significance. The important influence of these latter are not effaced, rather succeeded in elegant fashion in focusing the analysis of the economic development of the capitalist world on exclusively economic elements of the process. The central argument of his system of thought assigned the most significant role to entrepreneurship with its inseparable and embedded innovative nature.The theoretical aspects of the economic phenomena of the capitalist world analyzed in this book were developed and detailed further by in another two books, namely Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process4 (1939) and Capitalism, Socialism and Democracy5 (1942).In 'The Theory of Economic Development' and all of Schumpeter's subsequent seminal books, one of the most important aspects of the analysis is the distinction between exogenous and endogenous factors of the economic system. …

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