Wednesday, December 23, 2009

The other great economist - Joseph Schumpeter

The guy who made the phrase "Creative Destruction" 'more famous', eventually this would be made epicly famous by Theodore Levitt in his paper "Marketing Myopia", has some slices of wisdom from the early 20th Centruy.  His name is Joseph Schumpter.  Check out this wiki article on him, and notice some of the key passages such as the following.

Schumpeter criticized John Maynard Keynes and David Ricardo for the "Ricardian vice." According to Schumpeter, Ricardo and Keynes reasoned in terms of abstract models, where they would freeze all but a few variables. Then they could argue that one caused the other in a simple monotonic fashion. This led to the belief that one could easily deduce policy conclusions directly from a highly abstract theoretical model.

Schumpeter's theory is that the success of capitalism will lead to a form of corporatism and a fostering of values hostile to capitalism, especially among intellectuals. The intellectual and social climate needed to allow entrepreneurship to thrive will not exist in advanced capitalism; it will be replaced by socialism in some form. There will not be a revolution, but merely a trend in parliaments to elect social democratic parties of one stripe or another. He argued that capitalism's collapse from within will come about as democratic majorities vote for the creation of a welfare state and place restrictions upon entrepreneurship that will burden and destroy the capitalist structure. Schumpeter emphasizes throughout this book that he is analyzing trends, not engaging in political advocacy.

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