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Schumpeter proclaims in this classical analysis of capitalist society first published in 1911 that economics is a natural self-regulating mechanism when undisturbed by "social and other meddlers." In his preface he argues that despite weaknesses, theories are based on logic and provide structure for understanding fact. Of those who argue against him, Schumpeter asks a funda Schumpeter proclaims in this classical analysis of capitalist society first published in 1911 that economics is a natural self-regulating mechanism when undisturbed by "social and other meddlers." In his preface he argues that despite weaknesses, theories are based on logic and provide structure for understanding fact. Of those who argue against him, Schumpeter asks a fundamental question: "Is it really artificial to keep separate the phenomena incidental to running a firm and the phenomena incidental to creating a new one?" In his answers, Schumpeter offers guidance to Third World politicians no less than First World businesspeople. In his substantial new introduction, John E. Elliott discusses the salient ideas of The Theory of Economic Development against the historical background of three great periods of economic thought in the last two decades.


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Schumpeter proclaims in this classical analysis of capitalist society first published in 1911 that economics is a natural self-regulating mechanism when undisturbed by "social and other meddlers." In his preface he argues that despite weaknesses, theories are based on logic and provide structure for understanding fact. Of those who argue against him, Schumpeter asks a funda Schumpeter proclaims in this classical analysis of capitalist society first published in 1911 that economics is a natural self-regulating mechanism when undisturbed by "social and other meddlers." In his preface he argues that despite weaknesses, theories are based on logic and provide structure for understanding fact. Of those who argue against him, Schumpeter asks a fundamental question: "Is it really artificial to keep separate the phenomena incidental to running a firm and the phenomena incidental to creating a new one?" In his answers, Schumpeter offers guidance to Third World politicians no less than First World businesspeople. In his substantial new introduction, John E. Elliott discusses the salient ideas of The Theory of Economic Development against the historical background of three great periods of economic thought in the last two decades.

30 review for The Theory of Economic Development

  1. 4 out of 5

    Otto Lehto

    Schumpeter's comprehensive theory of economic development as entrepreneurial innovation was first laid down in this 1911 book. It prefigures his theory of "creative destruction" in Capitalism, Socialism and Democracy. Compared to the scanty attention paid to the subject in that later and arguably more famous book, The Theory of Economic Development explains the matter in detail. The book is all about the impact of innovation on the shape and trajectory of the evolving economy. This process expla Schumpeter's comprehensive theory of economic development as entrepreneurial innovation was first laid down in this 1911 book. It prefigures his theory of "creative destruction" in Capitalism, Socialism and Democracy. Compared to the scanty attention paid to the subject in that later and arguably more famous book, The Theory of Economic Development explains the matter in detail. The book is all about the impact of innovation on the shape and trajectory of the evolving economy. This process explains the creative destruction of business fortunes, technological innovations, and the oscillating nature of capitalism's triumph. The book has six chapters. It is possible to get the heart of his theory, as Schumpeter readily admits, by simply reading Chapter 2 if you are already familiar with the essence of the neoclassical equilibrium theory, i.e. what Schumpeter calls the theory of "circular flow". If you need refreshment, this theory is summarized, with idiosyncratic flourishes, in Chapter 1. The second chapter, however, marks a departure from this "circular flow" theory by providing an endogenous theory of development focused on the entrepreneurial act of innovation, defined as the creative recombination of existing resources and goods, that upsets the commercial equilibrium. This theory explains how capitalism is essentially an evolutionary process that proceeds through "jerky motion" and does not "grow like a tree" (both metaphors used by Schumpeter himself). In this process, old industries, techniques, and values are destroyed, and new ones are born/birthed which again gives rise to various new profit opportunities that can be seized by alert innovators. The last four chapters explicate this theory, with dogged persistence, into the realm of banking, credit, entrepreneurial profit, wage levels, prices, rising prosperity, and business cycles. The value of this chapters lies in their brilliant exposition of the link between entrepreneurial innovation and the functioning of the rest of the economy. He convincingly shows how the continual disturbance of equilibrium conditions through entrepreneurship has massive ramifications for the various classes of the "evenly rotating economy". However, in the final analysis, re-evaluating Schumpeter's theory in light of numerous advances in business cycle theory, credit theory, monetarism, casts some doubt as to the universal validity of some of his suggestions which remain sketchy. Schumpeter himself later on became rather dissatisfied with some of the exposition in these later chapters, as explained in the author's preface to the second edition of the book. At any rate, the brilliance of the central theory cannot be doubted. The equilibrium theory of neoclassical economics can explain important parts of the economic process, but it also leaves several important parts unexplained. These can better be explained by seeing innovation and creativity as propelling the economy into a disequilibrium, evolutionary process. The field of contemporary evolutionary economics owes its origin to Schumpeter's marvelous insights. They remain as fresh and exciting today as they must have been when originally presented.

  2. 4 out of 5

    Marco Sán Sán

    Es brillante la capacidad de plantear un juego, crear el tablero y decirnos cómo jugarlo. A diferencia de Keynes que toma prestado el tablero o de Marshall que sólo pone las reglas. Al igual que Menger, Schumpeter ve dinamismo en el desarrollo de la economía, para estos pensadores no hay sujetos sometidos a una estructura que fluye indiferente a ellos, hay individuos que producen valores de cambio conforme a su capacidad en determinado momento de la historia. Schumpeter logra con una elegancia so Es brillante la capacidad de plantear un juego, crear el tablero y decirnos cómo jugarlo. A diferencia de Keynes que toma prestado el tablero o de Marshall que sólo pone las reglas. Al igual que Menger, Schumpeter ve dinamismo en el desarrollo de la economía, para estos pensadores no hay sujetos sometidos a una estructura que fluye indiferente a ellos, hay individuos que producen valores de cambio conforme a su capacidad en determinado momento de la historia. Schumpeter logra con una elegancia sobrada y coherencia sublime plantear como único motor de la economía al individuo, algo que a Keynes con sus políticas estadistas ni por la mente le pasaría o punto que Hayek nunca logro entrever partiendo de las mimas bases austriacas. Su gran erudición logra equilibrar las dos corrientes de su tiempo, la escuela austriaca y la neoclásica. Algo así como un campo de juego para el empresario, figura fundamental en todo su planteamiento, aquel que logra combinar utilidades para crear innovaciones que creen una constante para el desarrollo del mercado, una vez afianzadas tales innovaciones en el mercado, el empresario desaparece para volverse un capitalista y así comenzar el ciclo de la llamada “destrucción creativa” bajo la competencia del mercado. Osea otro empresario que juegue el juego para crear “nuevas” necesidades. Es increíble cómo logro ver todo este desarrollo casi 100 años antes del florecimiento de internet donde las distancia desaparecen y el coste de producción baja a mínimos nunca antes vistos. Me recuerda a Kojève diciendo con gusto en plena primera guerra mundial “no se preocupen, vamos a confortable zoológico. No les quepa duda” y avecinándose la segunda guerra mundial que seria mucho peor repitiéndolo “no se preocupen, vamos a confortable zoológico. No les quepa duda”. Hombres que simplemente entendieron lo que Hegel planteo “la liberta es conciencia de la necesidad”. Brillantes.

  3. 5 out of 5

    Non Liu

    The basic requirement for Schumpeterian Theory of Innovation

  4. 4 out of 5

    Ken Davidian

    I really liked this book! The introduction was a good overview of academic economic history and gave good background for the original text. Having read the other two books of the "trilogy" first (I read the third book, "Capitalism, Socialism and Democracy" first, "Business Cycles" second, and *then* this book) I could see where Schumpeter was heading when he started referring to business cycles. I feel bad only giving this book three stars at first, but I'll review my notes and revise the rating I really liked this book! The introduction was a good overview of academic economic history and gave good background for the original text. Having read the other two books of the "trilogy" first (I read the third book, "Capitalism, Socialism and Democracy" first, "Business Cycles" second, and *then* this book) I could see where Schumpeter was heading when he started referring to business cycles. I feel bad only giving this book three stars at first, but I'll review my notes and revise the rating if there was something else of value that I'm forgetting about...

  5. 4 out of 5

    Marks54

    This is an edition of Schumpeter's first book and a good articulation of his theory of innovation and entrepreneurship and how they fit into the capitalist order. It is especially valuable in showing how creative destruction and entrepreneurial finance fit into an economic system that is already at high employment. It is not for the faint of heart and their are better presentation of these ideas by Schumpeter later down the road, such as in Capitalism, Socialism, and Democracy.

  6. 4 out of 5

    Phillip Bryant

    "The 2nd chapter is the best. The first chapter sets up the logic and arguments supporting the second chapter. The rest of the book is dry and difficult reading. Also, Schumpeter wrote with an egotistical tone. As an example, "But I shall not add another word of explanation because the matter must be clear to the reader who gives it the appropriate attention." Recommended only for those with a keen academic interest in the role that entrepreneurship plays in economic development."

  7. 5 out of 5

    Paul Tennant

    i love how he uses the circular flow of capital. what happens to capital once all domestic sources of investment are exhausted. great book on understanding the bottom up approach. That said it is not the easiest of reads, but his mind will amaze you.

  8. 5 out of 5

    Ferhat Culfaz

    Seminal work, but very technical and theoretical. Not suitable for laymen. Good for reference.

  9. 5 out of 5

    Gerry

  10. 5 out of 5

    Henrique Rodrigues

  11. 5 out of 5

    Benedict De Meulemeester

  12. 4 out of 5

    Marcus Linder

  13. 5 out of 5

    Łukasz

  14. 5 out of 5

    Gabo Mtz

  15. 5 out of 5

    Sungjin Kim

  16. 5 out of 5

    Eric Schultz

  17. 4 out of 5

    Matthias

  18. 5 out of 5

    JW

  19. 4 out of 5

    Steve Dust

  20. 4 out of 5

    Sarah McPherson

  21. 4 out of 5

    Lee

  22. 4 out of 5

    Dave

  23. 4 out of 5

    Bob Costello

  24. 5 out of 5

    Waqiyuddin

  25. 5 out of 5

    Kyle

  26. 4 out of 5

    Richard Marney

  27. 5 out of 5

    Grace

  28. 5 out of 5

    Ziliang

  29. 4 out of 5

    Sebastian Francisco Rebagliati

  30. 5 out of 5

    Lee

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