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Prophet of Innovation: Joseph Schumpeter and Creative Destruction
Pan Am, Gimbel's, Pullman, Douglas Aircraft, Digital Equipment Corporation, British Leyland--all once as strong as dinosaurs, all now just as extinct. Destruction of businesses, fortunes, products, and careers is the price of progress toward a better material life. No one understood this bedrock economic principle better than Joseph A. Schumpeter. "Creative destruction," he said, is the driving force of capitalism.
Described by John Kenneth Galbraith as "the most sophisticated conservative" of the twentieth century, Schumpeter made his mark as the prophet of incessant change. His vision was stark: Nearly all businesses fail, victims of innovation by their competitors. Businesspeople ignore this lesson at their peril--to survive, they must be entrepreneurial and think strategically. Yet in Schumpeter's view, the general prosperity produced by the "capitalist engine" far outweighs the wreckage it leaves behind.
During a tumultuous life spanning two world wars, the Great Depression, and the early Cold War, Schumpeter reinvented himself many times. From boy wonder in turn-of-the-century Vienna to captivating Harvard professor, he was stalked by tragedy and haunted by the specter of his rival, John Maynard Keynes. By 1983--the centennial of the birth of both men--Forbes christened Schumpeter, not Keynes, the best navigator through the turbulent seas of globalization. Time has proved that assessment accurate.
"Prophet of Innovation" is also the private story of a man rescued repeatedly by women who loved him and put his well-being above their own. Without them, he would likely have perished, so fierce were the conflicts between his reason and his emotions. Drawing on all of Schumpeter's writings, including many intimate diaries and letters never before used, this biography paints the full portrait of a magnetic figure who aspired to become the world's greatest economist, lover, and horseman--and admitted to failure only with the horses.
Described by John Kenneth Galbraith as "the most sophisticated conservative" of the twentieth century, Schumpeter made his mark as the prophet of incessant change. His vision was stark: Nearly all businesses fail, victims of innovation by their competitors. Businesspeople ignore this lesson at their peril--to survive, they must be entrepreneurial and think strategically. Yet in Schumpeter's view, the general prosperity produced by the "capitalist engine" far outweighs the wreckage it leaves behind.
During a tumultuous life spanning two world wars, the Great Depression, and the early Cold War, Schumpeter reinvented himself many times. From boy wonder in turn-of-the-century Vienna to captivating Harvard professor, he was stalked by tragedy and haunted by the specter of his rival, John Maynard Keynes. By 1983--the centennial of the birth of both men--Forbes christened Schumpeter, not Keynes, the best navigator through the turbulent seas of globalization. Time has proved that assessment accurate.
"Prophet of Innovation" is also the private story of a man rescued repeatedly by women who loved him and put his well-being above their own. Without them, he would likely have perished, so fierce were the conflicts between his reason and his emotions. Drawing on all of Schumpeter's writings, including many intimate diaries and letters never before used, this biography paints the full portrait of a magnetic figure who aspired to become the world's greatest economist, lover, and horseman--and admitted to failure only with the horses.
624 pages, Hardcover
First published January 1, 2007
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694 people want to read
About the author
Thomas K. McCraw
12 books15 followersThomas Kincaid McCraw was an American business historian and Isidor Straus Professor of Business History, Emeritus at Harvard Business School.
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March 31, 2012
This is a (very long) summary of “Prophet of Innovation - Joseph Schumpeter and Creative Destruction” by Thomas McCraw, Harvard University Press, 2007. In fact, these are extracts from the book and I mentioned the pages as much as I could. If you are courageous enough to read until the end, you might be interested in buying the full book. Schumpeter is clearly the Prophet of Innovation and Thomas McCraw’s book is a great piece of historical and economic analysis. It is about Schumpeter life, which is by itself interesting. His life was not simple, a devastating first wedding, a personal bankruptcy, a short experience as a minister of finance, the rise of Nazism; stability [nearly?] came at Harvard with a new wedding. But it is first and foremost an amazing synthesis of what innovation and entrepreneurship are about. I could nearly feel a Schumpeterian when I read these clear explanations, despite the fact that Schumpeter was clearly a conservative. So let me try to summarize what I kept from this 700-page book (including 200 pages of notes).
Schumpeter especially emphasizes the role of new companies in making innovations that interrupt the circular flow. New firms “do not arise out of the old ones but start producing beside them”. In transportation for example, “it is not the owner of stage coaches who builds railways”. Schumpeter also argues that “the entrepreneur is never the risk bearer. The one who gives credit [that is, provides the necessary capital] comes to grief if the undertaking fails. … Even though the entrepreneur may risk his reputation, the direct responsibility of failure never falls on him. [Page 74]
In his definition, the entrepreneur is not a run-of-the-mill business executive, or even the owner of chief executive of a successful firm. The entrepreneur is “the modern type of captain of industry” – obsessively seeking an innovative edge. […] He is not driven solely by a wish to grow rich or by any other “motivation of the hedonist kind”. Instead he or she feels “the dream and will to found a private kingdom. […] There is the joy of creating, of getting things done, or simply of exercising one’s energy and ingenuity. [He] has some characteristics in common with Max Weber’s “charismatic leader”. [Pages 70-71]
The important players in this process are entrepreneurs and investment bankers, who generate “new purchasing power out of nothing”. The investment banker is not just the middleman standing between savers and users of capital; he is instead “a producer” of money and credit, “the capitalist par excellence”. Schumpeter hammered the function of banks in creating money. Keynes had said to him “there were not more than five people in the world who understood monetary theory”, adding that he, Schumpeter, assumed himself to be one of the five. [On note 21, page 533, the author adds “In the history of American capitalism, banks took a smaller role. This did not mean the United States was any less entrepreneurial, of course. It was the most entrepreneurial country on earth, but not because of its banks. Substantial new businesses were funded through “equity” by wealthy families.]
There are 5 types of innovation [page 73]:
(1) The introduction of a new good – or a new quality of a good.
(2) The introduction of a new method of production.
(3) The opening of a new market.
(4) The conquest of a new source of supply of raw-materials or half-manufactured goods.
(5) The carrying out of a new organization.
An important general lesson is that increases in scales almost always require advances in technology which often reduce marginal costs still further. [Note 35, page 525] Steel and automotive industries are just two examples of his time, or more generally steam, electricity, transistors.
Part II begins with an analysis of why entrepreneurship was never widespread even if there were “early forerunners such as Venice, Florence and the Netherlands.” It was even widely resisted for reasons which are “as much cultural and social as they are economic”. (We are talking about an analysis over centuries from the middle ages until the industrial revolution.)
(1) A conviction that spiritual life suffered grievous damage if people became immersed in materialism.
(2) The absence of a belief in upward social and economic mobility.
(3) No widespread sense of personal freedom and individual autonomy.
(4) The governance of most occupations and crafts by cartels (agreements to divide markets and keep prices high) and guilds (exclusive associations of craftspeople).
(5) Entailed estates market by primogeniture. Entailment (imposition of a specified succession of heirs) and primogeniture (inheritance solely by the family’s eldest son) discourage innovation and risk-taking.
(6) A primitive financial system that lacked paper money, stocks, bonds, or any other credit mechanism.
(7) The absence of the two pillars that support all successful business systems: a modern concept of private property and a framework for the rule of laws.
In 1911, Schumpeter flatly asserted that individual entrepreneurship held the key to economic growth in any country. This explains his fascination of the United States but Schumpeter may have missed that it had a strong entrepreneurial spirit from the start. “Capitalism came in the first ships”. [Pages 145-149] The economy has entered the realm of meritocracy, which is inherently hostile to hereditary class. Entrepreneurship had become a function, not a market of class. [Page 159]
In phase with my quoting Hegel [1] on passion, Schumpeter claims that “no company can ever retain a position at the top of its industry without doing very much more than this - without blazing new trails, without being devoted, heart and soul to the business alone”. Any company [falling into routines] “will soon be overtaken by aggressive, risk-taking competitive entrepreneurs”. “Entrepreneurs need extraordinary physical and nervous energy. The best of them can sustain their efforts on a high level only if they have that special kind of vision - … concentration on business to the exclusion of other interests”. [Page 162] That is why Schumpeter believes in “the Instability of Capitalism”: the whole idea of a capitalist equilibrium is misleading. […] The origins of broad expansions always come from innovations in specific industries, which then ramify into other parts of the economy … such as in textiles, then in steam engines and iron, then in electricity and chemicals. Overall industry-specific innovation does not follow but creates expansion. [Page 163]
He even added that “one cannot assume that capitalism will last forever. No other economic or social system has ever done so, and capitalism may be a transitional phase in a broad movement toward a more egalitarian order. [Note 36 page 566] Outside influences – wars, earthquakes, even many new technologies and inventions – are not the sources of the perpetual changes that characterize capitalism. Instead change is part and parcel of capitalism and it comes from entrepreneurial behavior. [Page 164] Early in the twentieth century, firms such as ATT, GE, Kodak and DuPont set up research departments. They made innovation part of their business routine. At the same time, new firms spring up alongside the giants. […] By definition, innovation causes obsolescence and Schumpeter warns against allowing the old to block the new.
Schumpeter ‘s key point is the insatiable pursuit of success and of the towering premium it pays that drives entrepreneurs and their investors to put so much time, effort and money into some new project whose future is completely uncertain. Financial speculation, though it gets bad press is an important part of the process [page 178]. The entrepreneur tries to preserve his high profit through patents, further innovation, secret processes and advertising – each move an act of aggression [Page 255]. Entrepreneurs reduce cost, then prices, stimulate demand and enable larger volumes. The dynamic process will come many times: “all successful firms have been entrepreneurial at some point, though a given company is certain to be more entrepreneurial at one point and less so at another. When their innovations dwindle, firms begin to die.” [page 181]
Part III – Business cycles – 1939, Capitalism, Socialism and Democracy – 1942, History of Economic Analysis – 1954. “Using theory, statistics and history” is a Schumpeter motto, you cannot just do one approach, you need to combine the three to make good analyses.
Business Cycles. Innovation propels the economy. New firms, entrepreneurs drive innovation. All companies must react, adapt. Meanwhile, powerful elements resist major innovations. Nobody ever is an entrepreneur all the time and nobody can ever be only an entrepreneur. The entrepreneur not only innovates but also carries day to day management. The entrepreneur may but need not be the person who furnishes capital. It is leadership rather than ownership. [Again] Risk bearing is no part of the entrepreneurial function. It is the capitalist who bears the risk. [Pages 254-255] A major theme: “the extreme difficulty of changing traditional ways of doing things”. [Page 257]
Schumpeter places heavy emphasis on the role of marketing. It was not enough to produce satisfactory soaps, it was also necessary to induce people to wash. [Page 258] Then he studies cases: textiles (cotton vs. silk) [page 258], rail [page 261], finance [page 264], automobile [page 266], steel [page 267], electricity [page 268]. But McGraw claims book is a relative failure. He apparently got lost into too many details.
Schumpeter also draws sharp distinctions between inventors and entrepreneurs and between inventions and innovations: “The making of an invention and the carrying out of the corresponding Innovation are, economically and sociologically, two entirely different things.” Often the two interact, but they are never the same, and innovations are usually more important than inventions. [page 259] “Necessity may be the mother of invention, but it does not automatically produce innovation” [page 260]. In conclusion of his book, “without innovations, no entrepreneurs; without entrepreneurial achievement, no capitalist returns and no capitalist propulsion. […] Stabilized capitalism is a contradiction in terms.”
In 1942, he published Capitalism, Socialism and Democracy. It is interesting to see the connections between Marx, Keynes and Schumpeter. They may disagree, but there was some respect due to the broadness of the vision and ambition. “The book begins with a penetrating and wholly serious fifty-eight-page analysis of Karl Marx’s work. […] Marx was the first economist of top rank to see and teach systematically how economic theory can be turned into historical analysis.” But Schumpeter thinks Marx was wrong because of “his oversimplified view of social classes”, not just capitalists and proletarians, he failed to distinguish the entrepreneur from the capitalist, and the wrong argument that “society’s total income would steadily fall”.
His first question was “Can capitalism survive? No I do not think that it can.” Even if capitalism has produced the greatest per capita output of goods ever recorded, […] in favor of the lower income groups, […] by virtue of its mechanisms […] thanks to businesses of grand size. Then Schumpeter introduces his famous term, “creative destruction”. It is an essential fact of capitalism. It is what capitalism consists in and what every capitalist concern has got to live in. He then criticizes the idea of perfect competition, which does not take business strategy into consideration. There is no perfect information. And there is a continued emergence of new products and new ways of doing things, which is the fundamental impulse that sets and keeps the capitalist engine in motion. Perfect competition and static assumptions are wrong [2]. The economy is about oligopolies, which engage in mass production with very large capital investments. All this does not ease equilibrium analysis or mathematical modeling. [Pages 348-354]
Schumpeter proposes a sharper focus on products and marketing as elements of competition. It is not [that kind of perfect] competition that counts, but the competition from the new commodity, the new technology, the new source of supply, the new type of organization. The economics profession did a capital crime: failing to acknowledge that continuous innovation is endogenous to capitalism. It should focus on change, […] with the mistaken idea that monopoly and big business are the same thing. Long-run cases of monopoly are almost non-existent. Technical innovation and organizational remodeling, not monopolistic profits, account for the prosperity of most great companies. Schumpeter identifies capitalist entrepreneurship with technology progress itself. As a matter of historical record, they were “essentially one and the same thing”, the first being the propelling force of the second.
The tendency of some industries to grow into big business while others do not has seldom been well understood, either today or during Schumpeter’s time. [...] The economics literature on why firms grow large is very extensive and often controversial. [Note 55, page 613] Many scholars debated whether Schumpeter believed innovation to be helped or hindered by the rise of big business (see the Economist post - http://www.startup-book.com/2012/01/1... ). Indeed Schumpeter could seem inconsistent. He usually argued that size in and of itself does not preclude innovation, and can promote it in ways that would not occur in small businesses. He did not usually argue that small business was inherently less innovative and he admired entrepreneurial startups throughout his career. A typical misreading: “Schumpeter believed that technological innovations are more likely to be initiated by large rather than small firms” is inaccurate, but plausible! [Note 25, page 639].
His political analysis of capitalism, socialism and democracy may look dated even if it has interesting points. But I see bias as we all have when we talk about convictions or faith… [indeed see below!] Still, let me go on quoting. “Capitalism has developed the seeds of its own destruction. Persons of supernormal ability and ambition can reach a much higher standard of living, provided they would pursue business careers. Capitalism substituted impersonal efficiency to the feudal features. So that people have “the individualistic rope” to hang themselves. The bourgeoisie is politically helpless and unable not only to lead its nation, but even to take care of its particular class interest. Furthermore capitalism and in particular big business undercut not only the aristocracy, but also many small producers and merchants. A share of stock for tangible assets takes the life out of the property. And if this trend goes on long enough, there will be nobody left to defend the bourgeois values” [Page 357].
Large businesses do not command the same degree of loyalty from their workers. Employees take economic progress for granted but they have little emotional attachment to the success of their companies. (And because of the uncertainty), they feel personally insecure. Because people have come to expect a continuous flow of new products and methods, innovation itself is being reduced to routine, progress is depersonalized and automatized. Individual entrepreneurship becomes less salient. By reducing everything to a calculus of costs and benefits, it rationalizes. Economic efficiency is only one of the many human goals and not necessarily the most important to every individual so that the future of capitalism cannot be assured on the basis of is superior economic performance. (And do not forget, there are always cycles and crises…) [Page 358]
His criticism of socialism is also dated, but here it is: a socialist system must replace an economy based on mature big-business capitalism, through routine governmental action and will take 50 to 100 years to complete. The noneconomic attributes need to be primary motives but worth the price of reduced economic efficiency. Can innovation impulses be released as in capitalism this way? Furthermore, it has to be assumed that uncertainties or imperfect information are not an issue, that improvements can be disseminated by a central authority, that business cycles are eliminated, that unemployment does not exist, that the disappearance of the private sphere eliminates friction and antagonism. One way is to nationalize big business while neglecting small producers with a way to motivate managers. (Comment: Schumpeter analyzed Germany, the UK and the USA; not France, which in a way has some attributes of his description). [Page 360]
Then he switches to the analysis of democracy. Schumpeter is not sure of what common good is as it may mean different things for individuals. And it is not the same thing as the choice of the majority. He compares voters and voting to customers and buying, with advertising/marketing as similar. McCraw adds “it is as if he were discussing capitalism in America and democracy in Europe.” “He wrote on democracy as simply a mechanism, while ignoring its powerful ethical dimension.” [Pages 369-71]
[In an over-simplistic manner we can see the old tension between left-weak-collective- equality and right-strong-individual-freedom. In the French motto, I am not sure where we put fraternity.] McCraw quotes Churchill for this chapter: “The inherent vice of capitalism is the unequal sharing of blessings; the inherent vice of socialism is the equal sharing of miseries”. But as a conclusion, imperfect competition is according to Joan Robinson the most brilliant part of the book. (With a background in math, I particularly appreciate Schumpeter’s comment: “There is nothing in my structures that has not a living piece of reality behind it. This is not an advantage in every respect. It makes, for instance, my theories so refractory to mathematical formulation.” Indeed, there may have been far too much math in economy and not enough history…)
The part on World War II shows that the combination of high public investment (military spending) and individual entrepreneurship & large scale business may be the winning recipe, a combination of Keynes and Schumpeter, even if they were academic adversaries… [Pages 383-389]. What makes the book really interesting is indeed noticed by the author himself: “by comparison with other major theorists stretching from Adam Smith to Keynes, he insisted on giving opposing arguments not only their due, but far more.” And this will be confirmed by his History of Economic Analysis published posthumously in 1952.
For Schumpeter, the troubling issue was not economic at all but ideological; widespread prejudice against business, held over from the New Deal. Thus entrepreneurs would have to do their work “in the face of public antagonism, under burdens which eliminate capitalist motivations and make it impossible to accumulate venture capital”. (In these last two words, Schumpeter made early use of a term that became commonplace four decades later. He did not invent the phrase – its origin is obscure – but was one of the first economists to use it.) [Page 424]
The History of Economic Analysis is his grand ‘oeuvre. McCraw quotes Moby Dick’s Melville: “To produce a mighty work, you must choose a mighty theme”. The book “tracks important thinkers down both productive and non productive paths. It shows how potentially seminal ideas often get lost, only to be rediscovered decades or even centuries later.” [go to my blog. I ma limited by GoodReads]
Schumpeter especially emphasizes the role of new companies in making innovations that interrupt the circular flow. New firms “do not arise out of the old ones but start producing beside them”. In transportation for example, “it is not the owner of stage coaches who builds railways”. Schumpeter also argues that “the entrepreneur is never the risk bearer. The one who gives credit [that is, provides the necessary capital] comes to grief if the undertaking fails. … Even though the entrepreneur may risk his reputation, the direct responsibility of failure never falls on him. [Page 74]
In his definition, the entrepreneur is not a run-of-the-mill business executive, or even the owner of chief executive of a successful firm. The entrepreneur is “the modern type of captain of industry” – obsessively seeking an innovative edge. […] He is not driven solely by a wish to grow rich or by any other “motivation of the hedonist kind”. Instead he or she feels “the dream and will to found a private kingdom. […] There is the joy of creating, of getting things done, or simply of exercising one’s energy and ingenuity. [He] has some characteristics in common with Max Weber’s “charismatic leader”. [Pages 70-71]
The important players in this process are entrepreneurs and investment bankers, who generate “new purchasing power out of nothing”. The investment banker is not just the middleman standing between savers and users of capital; he is instead “a producer” of money and credit, “the capitalist par excellence”. Schumpeter hammered the function of banks in creating money. Keynes had said to him “there were not more than five people in the world who understood monetary theory”, adding that he, Schumpeter, assumed himself to be one of the five. [On note 21, page 533, the author adds “In the history of American capitalism, banks took a smaller role. This did not mean the United States was any less entrepreneurial, of course. It was the most entrepreneurial country on earth, but not because of its banks. Substantial new businesses were funded through “equity” by wealthy families.]
There are 5 types of innovation [page 73]:
(1) The introduction of a new good – or a new quality of a good.
(2) The introduction of a new method of production.
(3) The opening of a new market.
(4) The conquest of a new source of supply of raw-materials or half-manufactured goods.
(5) The carrying out of a new organization.
An important general lesson is that increases in scales almost always require advances in technology which often reduce marginal costs still further. [Note 35, page 525] Steel and automotive industries are just two examples of his time, or more generally steam, electricity, transistors.
Part II begins with an analysis of why entrepreneurship was never widespread even if there were “early forerunners such as Venice, Florence and the Netherlands.” It was even widely resisted for reasons which are “as much cultural and social as they are economic”. (We are talking about an analysis over centuries from the middle ages until the industrial revolution.)
(1) A conviction that spiritual life suffered grievous damage if people became immersed in materialism.
(2) The absence of a belief in upward social and economic mobility.
(3) No widespread sense of personal freedom and individual autonomy.
(4) The governance of most occupations and crafts by cartels (agreements to divide markets and keep prices high) and guilds (exclusive associations of craftspeople).
(5) Entailed estates market by primogeniture. Entailment (imposition of a specified succession of heirs) and primogeniture (inheritance solely by the family’s eldest son) discourage innovation and risk-taking.
(6) A primitive financial system that lacked paper money, stocks, bonds, or any other credit mechanism.
(7) The absence of the two pillars that support all successful business systems: a modern concept of private property and a framework for the rule of laws.
In 1911, Schumpeter flatly asserted that individual entrepreneurship held the key to economic growth in any country. This explains his fascination of the United States but Schumpeter may have missed that it had a strong entrepreneurial spirit from the start. “Capitalism came in the first ships”. [Pages 145-149] The economy has entered the realm of meritocracy, which is inherently hostile to hereditary class. Entrepreneurship had become a function, not a market of class. [Page 159]
In phase with my quoting Hegel [1] on passion, Schumpeter claims that “no company can ever retain a position at the top of its industry without doing very much more than this - without blazing new trails, without being devoted, heart and soul to the business alone”. Any company [falling into routines] “will soon be overtaken by aggressive, risk-taking competitive entrepreneurs”. “Entrepreneurs need extraordinary physical and nervous energy. The best of them can sustain their efforts on a high level only if they have that special kind of vision - … concentration on business to the exclusion of other interests”. [Page 162] That is why Schumpeter believes in “the Instability of Capitalism”: the whole idea of a capitalist equilibrium is misleading. […] The origins of broad expansions always come from innovations in specific industries, which then ramify into other parts of the economy … such as in textiles, then in steam engines and iron, then in electricity and chemicals. Overall industry-specific innovation does not follow but creates expansion. [Page 163]
He even added that “one cannot assume that capitalism will last forever. No other economic or social system has ever done so, and capitalism may be a transitional phase in a broad movement toward a more egalitarian order. [Note 36 page 566] Outside influences – wars, earthquakes, even many new technologies and inventions – are not the sources of the perpetual changes that characterize capitalism. Instead change is part and parcel of capitalism and it comes from entrepreneurial behavior. [Page 164] Early in the twentieth century, firms such as ATT, GE, Kodak and DuPont set up research departments. They made innovation part of their business routine. At the same time, new firms spring up alongside the giants. […] By definition, innovation causes obsolescence and Schumpeter warns against allowing the old to block the new.
Schumpeter ‘s key point is the insatiable pursuit of success and of the towering premium it pays that drives entrepreneurs and their investors to put so much time, effort and money into some new project whose future is completely uncertain. Financial speculation, though it gets bad press is an important part of the process [page 178]. The entrepreneur tries to preserve his high profit through patents, further innovation, secret processes and advertising – each move an act of aggression [Page 255]. Entrepreneurs reduce cost, then prices, stimulate demand and enable larger volumes. The dynamic process will come many times: “all successful firms have been entrepreneurial at some point, though a given company is certain to be more entrepreneurial at one point and less so at another. When their innovations dwindle, firms begin to die.” [page 181]
Part III – Business cycles – 1939, Capitalism, Socialism and Democracy – 1942, History of Economic Analysis – 1954. “Using theory, statistics and history” is a Schumpeter motto, you cannot just do one approach, you need to combine the three to make good analyses.
Business Cycles. Innovation propels the economy. New firms, entrepreneurs drive innovation. All companies must react, adapt. Meanwhile, powerful elements resist major innovations. Nobody ever is an entrepreneur all the time and nobody can ever be only an entrepreneur. The entrepreneur not only innovates but also carries day to day management. The entrepreneur may but need not be the person who furnishes capital. It is leadership rather than ownership. [Again] Risk bearing is no part of the entrepreneurial function. It is the capitalist who bears the risk. [Pages 254-255] A major theme: “the extreme difficulty of changing traditional ways of doing things”. [Page 257]
Schumpeter places heavy emphasis on the role of marketing. It was not enough to produce satisfactory soaps, it was also necessary to induce people to wash. [Page 258] Then he studies cases: textiles (cotton vs. silk) [page 258], rail [page 261], finance [page 264], automobile [page 266], steel [page 267], electricity [page 268]. But McGraw claims book is a relative failure. He apparently got lost into too many details.
Schumpeter also draws sharp distinctions between inventors and entrepreneurs and between inventions and innovations: “The making of an invention and the carrying out of the corresponding Innovation are, economically and sociologically, two entirely different things.” Often the two interact, but they are never the same, and innovations are usually more important than inventions. [page 259] “Necessity may be the mother of invention, but it does not automatically produce innovation” [page 260]. In conclusion of his book, “without innovations, no entrepreneurs; without entrepreneurial achievement, no capitalist returns and no capitalist propulsion. […] Stabilized capitalism is a contradiction in terms.”
In 1942, he published Capitalism, Socialism and Democracy. It is interesting to see the connections between Marx, Keynes and Schumpeter. They may disagree, but there was some respect due to the broadness of the vision and ambition. “The book begins with a penetrating and wholly serious fifty-eight-page analysis of Karl Marx’s work. […] Marx was the first economist of top rank to see and teach systematically how economic theory can be turned into historical analysis.” But Schumpeter thinks Marx was wrong because of “his oversimplified view of social classes”, not just capitalists and proletarians, he failed to distinguish the entrepreneur from the capitalist, and the wrong argument that “society’s total income would steadily fall”.
His first question was “Can capitalism survive? No I do not think that it can.” Even if capitalism has produced the greatest per capita output of goods ever recorded, […] in favor of the lower income groups, […] by virtue of its mechanisms […] thanks to businesses of grand size. Then Schumpeter introduces his famous term, “creative destruction”. It is an essential fact of capitalism. It is what capitalism consists in and what every capitalist concern has got to live in. He then criticizes the idea of perfect competition, which does not take business strategy into consideration. There is no perfect information. And there is a continued emergence of new products and new ways of doing things, which is the fundamental impulse that sets and keeps the capitalist engine in motion. Perfect competition and static assumptions are wrong [2]. The economy is about oligopolies, which engage in mass production with very large capital investments. All this does not ease equilibrium analysis or mathematical modeling. [Pages 348-354]
Schumpeter proposes a sharper focus on products and marketing as elements of competition. It is not [that kind of perfect] competition that counts, but the competition from the new commodity, the new technology, the new source of supply, the new type of organization. The economics profession did a capital crime: failing to acknowledge that continuous innovation is endogenous to capitalism. It should focus on change, […] with the mistaken idea that monopoly and big business are the same thing. Long-run cases of monopoly are almost non-existent. Technical innovation and organizational remodeling, not monopolistic profits, account for the prosperity of most great companies. Schumpeter identifies capitalist entrepreneurship with technology progress itself. As a matter of historical record, they were “essentially one and the same thing”, the first being the propelling force of the second.
The tendency of some industries to grow into big business while others do not has seldom been well understood, either today or during Schumpeter’s time. [...] The economics literature on why firms grow large is very extensive and often controversial. [Note 55, page 613] Many scholars debated whether Schumpeter believed innovation to be helped or hindered by the rise of big business (see the Economist post - http://www.startup-book.com/2012/01/1... ). Indeed Schumpeter could seem inconsistent. He usually argued that size in and of itself does not preclude innovation, and can promote it in ways that would not occur in small businesses. He did not usually argue that small business was inherently less innovative and he admired entrepreneurial startups throughout his career. A typical misreading: “Schumpeter believed that technological innovations are more likely to be initiated by large rather than small firms” is inaccurate, but plausible! [Note 25, page 639].
His political analysis of capitalism, socialism and democracy may look dated even if it has interesting points. But I see bias as we all have when we talk about convictions or faith… [indeed see below!] Still, let me go on quoting. “Capitalism has developed the seeds of its own destruction. Persons of supernormal ability and ambition can reach a much higher standard of living, provided they would pursue business careers. Capitalism substituted impersonal efficiency to the feudal features. So that people have “the individualistic rope” to hang themselves. The bourgeoisie is politically helpless and unable not only to lead its nation, but even to take care of its particular class interest. Furthermore capitalism and in particular big business undercut not only the aristocracy, but also many small producers and merchants. A share of stock for tangible assets takes the life out of the property. And if this trend goes on long enough, there will be nobody left to defend the bourgeois values” [Page 357].
Large businesses do not command the same degree of loyalty from their workers. Employees take economic progress for granted but they have little emotional attachment to the success of their companies. (And because of the uncertainty), they feel personally insecure. Because people have come to expect a continuous flow of new products and methods, innovation itself is being reduced to routine, progress is depersonalized and automatized. Individual entrepreneurship becomes less salient. By reducing everything to a calculus of costs and benefits, it rationalizes. Economic efficiency is only one of the many human goals and not necessarily the most important to every individual so that the future of capitalism cannot be assured on the basis of is superior economic performance. (And do not forget, there are always cycles and crises…) [Page 358]
His criticism of socialism is also dated, but here it is: a socialist system must replace an economy based on mature big-business capitalism, through routine governmental action and will take 50 to 100 years to complete. The noneconomic attributes need to be primary motives but worth the price of reduced economic efficiency. Can innovation impulses be released as in capitalism this way? Furthermore, it has to be assumed that uncertainties or imperfect information are not an issue, that improvements can be disseminated by a central authority, that business cycles are eliminated, that unemployment does not exist, that the disappearance of the private sphere eliminates friction and antagonism. One way is to nationalize big business while neglecting small producers with a way to motivate managers. (Comment: Schumpeter analyzed Germany, the UK and the USA; not France, which in a way has some attributes of his description). [Page 360]
Then he switches to the analysis of democracy. Schumpeter is not sure of what common good is as it may mean different things for individuals. And it is not the same thing as the choice of the majority. He compares voters and voting to customers and buying, with advertising/marketing as similar. McCraw adds “it is as if he were discussing capitalism in America and democracy in Europe.” “He wrote on democracy as simply a mechanism, while ignoring its powerful ethical dimension.” [Pages 369-71]
[In an over-simplistic manner we can see the old tension between left-weak-collective- equality and right-strong-individual-freedom. In the French motto, I am not sure where we put fraternity.] McCraw quotes Churchill for this chapter: “The inherent vice of capitalism is the unequal sharing of blessings; the inherent vice of socialism is the equal sharing of miseries”. But as a conclusion, imperfect competition is according to Joan Robinson the most brilliant part of the book. (With a background in math, I particularly appreciate Schumpeter’s comment: “There is nothing in my structures that has not a living piece of reality behind it. This is not an advantage in every respect. It makes, for instance, my theories so refractory to mathematical formulation.” Indeed, there may have been far too much math in economy and not enough history…)
The part on World War II shows that the combination of high public investment (military spending) and individual entrepreneurship & large scale business may be the winning recipe, a combination of Keynes and Schumpeter, even if they were academic adversaries… [Pages 383-389]. What makes the book really interesting is indeed noticed by the author himself: “by comparison with other major theorists stretching from Adam Smith to Keynes, he insisted on giving opposing arguments not only their due, but far more.” And this will be confirmed by his History of Economic Analysis published posthumously in 1952.
For Schumpeter, the troubling issue was not economic at all but ideological; widespread prejudice against business, held over from the New Deal. Thus entrepreneurs would have to do their work “in the face of public antagonism, under burdens which eliminate capitalist motivations and make it impossible to accumulate venture capital”. (In these last two words, Schumpeter made early use of a term that became commonplace four decades later. He did not invent the phrase – its origin is obscure – but was one of the first economists to use it.) [Page 424]
The History of Economic Analysis is his grand ‘oeuvre. McCraw quotes Moby Dick’s Melville: “To produce a mighty work, you must choose a mighty theme”. The book “tracks important thinkers down both productive and non productive paths. It shows how potentially seminal ideas often get lost, only to be rediscovered decades or even centuries later.” [go to my blog. I ma limited by GoodReads]
February 23, 2022
من دنبال مفهوم تخریب خلاق میگشتم و فقط همین یه کتاب رو پیدا کردم. کتاب جذاب و سهلیابی بود برام، با اینکه چیز زیادی هم از اقتصاد نمیدونم. فقط مشکل اینه که چاپ اول کتاب تموم شده و منم رفتم یه کتابخونه و خوندمش.
January 25, 2024
McCraw's biography of Schumpeter reads as quite an authoritative voice on the life and intellectual journey of a very interesting man. The writing is generally very accessible, with plenty of anecdotes and contextual exposition to the story of JS.
For a biography of an economist, the book does a pretty good job at exploring the intellectual drivers of JS without getting overly distracted by the economic history of the world he lived in. The deeply personal insights available from the breadth of material makes it a very expansive piece of work. Schumpeter's ideas, especially the journey from searching for an exact science to his final conclusion - and all the work he did in the meantime - is also well explored to the extent you'd expect from a biography. This is not an expansive description of his ideas nor a dive into them, but rather on how they form part of the story of Schumpeter the man.
My only real criticism of the book, is that it didn't feel like it engaged with much of the counter arguments to Schumpeter outside of his formative experiences in Europe, and thereby, in some cases felt a bit biased in the treatment of the reception to his ideas. This was confirmed somewhat in the epilogue where the author's own proclivities towards capitalism in the pure form came across as "hypotheses" on what JS "would have believed", a call that I feel McCraw didn't have the authority nor credibility to undertake.
Overall, a very pleasant read into a very enigmatic and exciting personality in economics. Would definitely recommend as a top 10 read for any economist wishing to have any amount of academic excellence outside of the traditional schools.
For a biography of an economist, the book does a pretty good job at exploring the intellectual drivers of JS without getting overly distracted by the economic history of the world he lived in. The deeply personal insights available from the breadth of material makes it a very expansive piece of work. Schumpeter's ideas, especially the journey from searching for an exact science to his final conclusion - and all the work he did in the meantime - is also well explored to the extent you'd expect from a biography. This is not an expansive description of his ideas nor a dive into them, but rather on how they form part of the story of Schumpeter the man.
My only real criticism of the book, is that it didn't feel like it engaged with much of the counter arguments to Schumpeter outside of his formative experiences in Europe, and thereby, in some cases felt a bit biased in the treatment of the reception to his ideas. This was confirmed somewhat in the epilogue where the author's own proclivities towards capitalism in the pure form came across as "hypotheses" on what JS "would have believed", a call that I feel McCraw didn't have the authority nor credibility to undertake.
Overall, a very pleasant read into a very enigmatic and exciting personality in economics. Would definitely recommend as a top 10 read for any economist wishing to have any amount of academic excellence outside of the traditional schools.
October 18, 2020
The subject of this book is personally fascinating, and the many diary entries and letters that litter the book make him more so. Joseph Schumpeter grew up the son of a small-town widow, Joanna Schumpeter, who through hook or crook moved him into the capital of the Austro-Hungarian Empire and herself married a high-ranking army officer. She gave him money and education and helped him to eventually be appointed to the University of Vienna and, temporarily, the finance minister of the truncated Austrian Republic in 1919.
As the sociologist Daniel Bell said, Schumpeter was that rare economist with a tragic view of life, and he carried that sense with him everywhere. When he married the daughter of his mother's concierage, Annie, and then she died within years and about the same time as his beloved mother, he would carry this pain with him forever. In constant diary entries he thanks his two "Hasen" or bunnies, and prays to them for decades. When he moved to the University of Bonn he took a mistress, Mia Stockel, who sent sexually explicit and fawning letters to him before she was killed by the Nazis with her new husband and children in Hungary. Finally, at Harvard University, where he taught after 1931, he married Elizabeth Broody, an accomplished economist in her own right, who wrote on British trade in the early modern period and the growth of the Japanese economy.
The problem with this book is that, besides the fascinating personal side, it goes into intricate detail on almost all of Schumpeter's major economic works, but I left feeling that each was composed of platitudes with little original insight. Yes, his "Theory of Economic Development" in 1912 cemented the position of the "entrepreneur" in economic analysis, and his "Capitalism, Socialism, and Democracy" of 1942 crafted the indelible term "creative destruction" to describe how capitalism works. Yet in each discussion, it's hard for the reader to understand how Schumpeter brought new facts or concrete theories to these words, and they come across more as the very things Schumpeter himself often warned about, economist's "vision" and "slogans" overcoming their analysis.
Schumpeter may be one of the greatest economists of the 20th century, and he is often listed as such, but one doesn't get a concrete sense of that from this book. Instead, one gets an intriguing sense of his tortuous path through life in a tumultuous time.
As the sociologist Daniel Bell said, Schumpeter was that rare economist with a tragic view of life, and he carried that sense with him everywhere. When he married the daughter of his mother's concierage, Annie, and then she died within years and about the same time as his beloved mother, he would carry this pain with him forever. In constant diary entries he thanks his two "Hasen" or bunnies, and prays to them for decades. When he moved to the University of Bonn he took a mistress, Mia Stockel, who sent sexually explicit and fawning letters to him before she was killed by the Nazis with her new husband and children in Hungary. Finally, at Harvard University, where he taught after 1931, he married Elizabeth Broody, an accomplished economist in her own right, who wrote on British trade in the early modern period and the growth of the Japanese economy.
The problem with this book is that, besides the fascinating personal side, it goes into intricate detail on almost all of Schumpeter's major economic works, but I left feeling that each was composed of platitudes with little original insight. Yes, his "Theory of Economic Development" in 1912 cemented the position of the "entrepreneur" in economic analysis, and his "Capitalism, Socialism, and Democracy" of 1942 crafted the indelible term "creative destruction" to describe how capitalism works. Yet in each discussion, it's hard for the reader to understand how Schumpeter brought new facts or concrete theories to these words, and they come across more as the very things Schumpeter himself often warned about, economist's "vision" and "slogans" overcoming their analysis.
Schumpeter may be one of the greatest economists of the 20th century, and he is often listed as such, but one doesn't get a concrete sense of that from this book. Instead, one gets an intriguing sense of his tortuous path through life in a tumultuous time.
September 21, 2023
One of the best books you can read, to begin your journey on understanding economics and capitalism. Once, this has been checked off your list, read the trilogy on American Capitalism by Galibraith. The books are: American Capiralism, The Affluent Society, and the Industrial State.
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April 1, 2014Good book to know about the initial thoughts on capitalism and schumpeter particularly!Loved it.
August 10, 2018
Great biography of an incredible life. The most important point for a scholar of Schumpeter's writings is McCraw's claim that the famous "predictions" in Capitalism, Socialism and Democracy about the demise of capitalism were in fact ironic. This makes sense in light of Schumpeter's scholarship, character and predilection for showmanship. The book is well-written and easy to read. I would highly recommend it to anyone who wants to understand more about the towering economist behind "creative destruction."
May 1, 2022
Comprehensive. Love the detailed background before every section, gives newbies a sense how Schumpeter thought and acted in every stage of his life.
November 27, 2025
well written biography and economics lessons rolled up in one excellent volume
June 6, 2015
In this biography of 20th century economist Joseph Schumpeter, Thomas McCraw strikes a good balance between Schumpeter's life× on the one hand and his thoughts, theories and ideas about economics on the other.
Schumpeter's academically active life spans the first part of the 20th century. As a resident of Vienna, Bonn and Boston, he had first hand experiences of WW 1, the great depression and WW 2. Besides the history of Schumpeter's life, the book gives several interesting insights into these events. Especially noteworthy is the perspective on the decline and disintegration of the Austrian-Hungarian empire in the second half of WW 1.
As for his ideas, it is amazing that he developed his points of view on entrepreneurship as the driving force of capitalism while not really knowing any entrepreneurs personally. Especially in his later Harvard years he seems to be a scholar in an ivory tower, and still manages to focus on the importance of the business world in economic science and the central place that entrepreneurship has in capitalism.
His brilliant ideas about innovation, entrepreneurship, credit creation and, of course, creative destruction are still very relevant and fresh, despite the fact that he first wrote about them a 100 years ago. As McCraw writes: ''Schumpeter's signature legacy is his insight that innovation in the form of creative destruction is THE driving force not only for capitalism but of material progress in general. Almost all businesses, no matter how strong they seem to be at a given moment, ultimately fail - and almost always because they failed to innovate''.
He accepts that constant change is the essence of capitalism, and that ''short-run inequality is the price that must be paid by the masses for the rising living standards that capitalism can achieve'' (The author wisely manages to avoid any speculation of what Schumpeter would make of today's perhaps excessive inequality).
Besides his main contributions to the understanding of the dynamism of capitalism, Schumpeter was a broad intellectual that didn't limit his thinking just to economics: ''Schumpeter knew that at some point partial and general syntheses of the insights from all relevant disciplines become essential if people are going to make sense of the world''.
For the most part of his life, he also tried to establish economics as an exact science. It is only in the last years of his life that he realises that economics can never be an exact science. Human psychology, the emergence of exceptional individuals and completely random and unpredictable occurrences are just some of the examples that affect economics and can't be captured in (mathematical) models that can accurately predict the future. He seems to accept that psychology has a place in the center of economic thinking. Schumpeter concludes that economics can never achieve total certainty. Many of today's model-oriented economist are well served to take notice.
Although he probably was ahead of his time with this insights on capitalism, creative destruction and entrepreneurship, in other aspects he was a man of his time: He saw a the battle between capitalism and socialism as black and white, and had difficulty recognising the emerging ''mixed economy'' and social-democratic states as a viable long-term sustainable possiblities.
''Prophet of Innovation'' gives a very good overview of both Schumpeter's life and intellectual achievements, and thus serves as a great introduction to the man and his ideas. Well recommended.
Schumpeter's academically active life spans the first part of the 20th century. As a resident of Vienna, Bonn and Boston, he had first hand experiences of WW 1, the great depression and WW 2. Besides the history of Schumpeter's life, the book gives several interesting insights into these events. Especially noteworthy is the perspective on the decline and disintegration of the Austrian-Hungarian empire in the second half of WW 1.
As for his ideas, it is amazing that he developed his points of view on entrepreneurship as the driving force of capitalism while not really knowing any entrepreneurs personally. Especially in his later Harvard years he seems to be a scholar in an ivory tower, and still manages to focus on the importance of the business world in economic science and the central place that entrepreneurship has in capitalism.
His brilliant ideas about innovation, entrepreneurship, credit creation and, of course, creative destruction are still very relevant and fresh, despite the fact that he first wrote about them a 100 years ago. As McCraw writes: ''Schumpeter's signature legacy is his insight that innovation in the form of creative destruction is THE driving force not only for capitalism but of material progress in general. Almost all businesses, no matter how strong they seem to be at a given moment, ultimately fail - and almost always because they failed to innovate''.
He accepts that constant change is the essence of capitalism, and that ''short-run inequality is the price that must be paid by the masses for the rising living standards that capitalism can achieve'' (The author wisely manages to avoid any speculation of what Schumpeter would make of today's perhaps excessive inequality).
Besides his main contributions to the understanding of the dynamism of capitalism, Schumpeter was a broad intellectual that didn't limit his thinking just to economics: ''Schumpeter knew that at some point partial and general syntheses of the insights from all relevant disciplines become essential if people are going to make sense of the world''.
For the most part of his life, he also tried to establish economics as an exact science. It is only in the last years of his life that he realises that economics can never be an exact science. Human psychology, the emergence of exceptional individuals and completely random and unpredictable occurrences are just some of the examples that affect economics and can't be captured in (mathematical) models that can accurately predict the future. He seems to accept that psychology has a place in the center of economic thinking. Schumpeter concludes that economics can never achieve total certainty. Many of today's model-oriented economist are well served to take notice.
Although he probably was ahead of his time with this insights on capitalism, creative destruction and entrepreneurship, in other aspects he was a man of his time: He saw a the battle between capitalism and socialism as black and white, and had difficulty recognising the emerging ''mixed economy'' and social-democratic states as a viable long-term sustainable possiblities.
''Prophet of Innovation'' gives a very good overview of both Schumpeter's life and intellectual achievements, and thus serves as a great introduction to the man and his ideas. Well recommended.
August 25, 2008
Of greatest interest to me is the context or frame-of-reference the biographical material provides for one of Schumpeter's most influential business concepts, "creative destruction," which he introduced in his most popular book, Capitalism, Socialism, and Democracy," first published in 1942. Scholars have divided opinions as to the influences on Schumpeter's development of this concept. They probably include Karl Marx, Friedrich Nietzsche, and Werner Sombart.
According to Schumpeter, there is a "process of industrial mutation -- if I may use that biological term -- that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in." He goes on to explain, "The first thing to go is the traditional conception of the modus operandi of competition. Economists are at long last emerging from the stage in which price competition was all they saw. As soon as quality competition and sales effort are admitted into the sacred precincts of theory, the price variable is ousted from its dominant position. However, it is still competition within a rigid pattern of invariant conditions, methods of production and forms of industrial organization in particular, that practically monopolizes attention. But in capitalist reality as distinguished from its textbook picture, it is not that kind of competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization (the largest-scale unit of control for instance) - competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives." (from "The Process of Creative Destruction," 1942) There are countless examples of applications of this concept, notably Jack Welch's determination to "blow up" GE after he succeeded Reginald Jones as CEO.
According to Schumpeter, there is a "process of industrial mutation -- if I may use that biological term -- that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in." He goes on to explain, "The first thing to go is the traditional conception of the modus operandi of competition. Economists are at long last emerging from the stage in which price competition was all they saw. As soon as quality competition and sales effort are admitted into the sacred precincts of theory, the price variable is ousted from its dominant position. However, it is still competition within a rigid pattern of invariant conditions, methods of production and forms of industrial organization in particular, that practically monopolizes attention. But in capitalist reality as distinguished from its textbook picture, it is not that kind of competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization (the largest-scale unit of control for instance) - competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives." (from "The Process of Creative Destruction," 1942) There are countless examples of applications of this concept, notably Jack Welch's determination to "blow up" GE after he succeeded Reginald Jones as CEO.
March 18, 2012
McCraw, one of the most respected business historians, finds a perfect subject in Jo Schumpeter, one of the top economists of the last century (along with Keynes, who occupied the other end of the economic thought spectrum). The biography presents Schumpeter's personal life (with many women as his carers, lovers and influencers followed by many tragedies through his life with some women he loved most being lost to death) and the context of his times (2 world wars and Germany's political and economic resurgence in between the 2 wars) as the backdrop for introducing this anglophile European's sharp, original and wide ranging economic thought and theories. Schumpeter's quote in the book sums up his attitude - that his ambition was to be the best economist in the world, horseman and lover and that he failed to meet his objective relating to the horses (no vanity then!) !
McCraw does a great job of explaining Schumpeter's economic thought including his coinage of the term 'creative destruction' which has become part of the business lexicon. Schumpeter was one of the most prolific economist writing more than 10,000 pages of published works - with each expressing an original idea, worth a career by itself. His pathbreaking ideas on innovation, economic history, entrepeneurs and his most popular book ' capitalism, socialism and democracy' (which clarified how capitalism is a sustainable system whereas socialism is not - hmmm) are explained well in the book without at any time becoming boring 'only for economists' textbook type. Whilst Schumpeter's legacy is being questioned as the capitalism seems to be in crisis after 2007 financial meltdown, the influence of this colourful, sharp intellectual will continue to underpin the economic and business thinking for another 100 years and McCraw makes sure his book is worthy of him. Recommended for people with interest in economics, struggles of great thinkers and those who like well written biographies.
McCraw does a great job of explaining Schumpeter's economic thought including his coinage of the term 'creative destruction' which has become part of the business lexicon. Schumpeter was one of the most prolific economist writing more than 10,000 pages of published works - with each expressing an original idea, worth a career by itself. His pathbreaking ideas on innovation, economic history, entrepeneurs and his most popular book ' capitalism, socialism and democracy' (which clarified how capitalism is a sustainable system whereas socialism is not - hmmm) are explained well in the book without at any time becoming boring 'only for economists' textbook type. Whilst Schumpeter's legacy is being questioned as the capitalism seems to be in crisis after 2007 financial meltdown, the influence of this colourful, sharp intellectual will continue to underpin the economic and business thinking for another 100 years and McCraw makes sure his book is worthy of him. Recommended for people with interest in economics, struggles of great thinkers and those who like well written biographies.
July 8, 2012
Schumpeter was something else - great economist, teacher, mentor and a true innovator. Finding out more about him through this book makes me want to read his classic - Capitalism, Socialism, and Democracy. So many of the terms we take for granted were dear to Schumpeter - creative destruction, innovation, capitalism, venture capital, business strategy and business history to name a few. He was truly a Renaissance Man - raised and educated in the Austro-Hungarian Empire, world traveler, lawyer, professor in Austria, Germany and at Harvard. And possibly one of the best teachers ever who was so self-effacing that he never mentioned his own work in his voluminous books and many lectures. How can anyone measure up to the high standards he set? My favorite quote from the book is "Schumpeter was never narrow, and always more than an economist."
April 5, 2011
I'd say 3.5 stars for this book. The concept of creative destructionism alone is worth digesting if it's not something you've come across (The Ecnomist has a weekly column in his name). New developments, particularly creative ones vs. adaptive, will inherently be disruptive from everything from the car replacing the carriage to the computer usurping the typewriter. Beside the ideas reading about Schumpeter's life is fairly inspiring between his work ethic, affability among economists of all stripes, breadth of knowledge, and generosity of his time with his students. The writing is very well done and the quotes starting each chapter from Churchill to Auden are clever rather than cloying.
March 5, 2010
Schumpeter was a truly incredible thinker. While not a strict Austrian nor German economist, Schumpeteter's powerful research on the importance of the entrepreneur and the characteristics of the business cycle are still relevant today. Though less well-known than Keynes, Schumpeter's idea of creative destruction and the power of the entrepeneur to drive innovation will likely stand the test of time. Unfortunately, history repeats itself and the current wave of Keynesian government intervention through lowering of rates and government infrastructure investment will provide a real-world test case on the failure of Keynesian economics as an effective policy response to a balance sheet economic contraction.
June 7, 2016
An excellent read not only about a man's life and work but also the ideas he created and championed. His views include the concept of creative destruction.
This is an important book that probably won't be made into a movie but will influence ones' thoughts on capitalism vs. the managed economy crowd. At some point even an idiot realizes that individual freedoms, economic systems and prosperity are interdependent.
This is an important book that probably won't be made into a movie but will influence ones' thoughts on capitalism vs. the managed economy crowd. At some point even an idiot realizes that individual freedoms, economic systems and prosperity are interdependent.
May 6, 2010
Read this for an academic reading group and it was very well received. I liked the parts talking about his thinking and the historical surroundings than the particulars of his relationships, but it was fun to plow through. I have some background material on my blog.
http://blogs.lawrence.edu/economics/2...
http://blogs.lawrence.edu/economics/2...
April 23, 2012
A very good biographer of an incredible man and thinker. My review of this book appeared in The Weekly Standard...
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August 12, 2013I started this on the basis of "Creative Destruction" - an interesting biography of an economist in economically interesting times.
The book placed the phrase and concept in the context of the man, his experiences and history.
The book placed the phrase and concept in the context of the man, his experiences and history.
March 24, 2016
One of the most well written books I have read in a while. Fascinating discourse on Schumpeter's thoughts, relevant last century and just as relevant today. I wish some more DC folks would read about him and less about Keynes.
June 12, 2008
Schumpeter has long been my intellectual hero, so my five stars are hardly impartial. But if you have any interest in economics and innovation and history, this is a must-read. Highly recommended!
August 6, 2008
The greatest economists that we've never heard of. Schumpeter is seeing an awakening. Too bad Keyes' failed policies were in vogue in 1930-1970.
Currently reading
December 12, 2008I won't stop learning about economics
June 16, 2010
Must read for folks in this academic area and in the practice of creativity.
July 26, 2014
Great Book. Good range of economic theory.
July 13, 2015
The weaving in of the personal to Schumpeter's intellectual development was fascinating. Great insight on a seminal figure in innovation.
November 24, 2012
Interesting biography, but could have been half as long.
March 6, 2012
See my review at http://www.BillDahl.net or http://www.ThePorpoiseDivingLife.com
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April 14, 2019Un libro entretenido, jocoso. Sin duda McCraw tiene bases sólidas en la economía y diluye muy bien conceptos claves de Schumpeter, pero dándose tal Libertad también interpreta otros, que a mi parecer son más abstractos de los que cree y los sesga. Por momentos la lectura se vuelve tediosa en su aspecto jocoso, hay demasiada información en las relaciones personales de Schumpi, francamente la extensión de unas partes se me hace innecesaria, pero se que al lector le darán respiro. Interesante libro, pero un poco largo.
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