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HISTORY OF ECONOMIC ANALYSIS... HISTORY OF ECONOMIC ANALYSIS BY JOSEPH A.SCHUMPETER EDITED FROM MANUSCRIPT BY ELIZABETH BOODY SCHUMPETER AND WITH AN INTRODUCTION BY MARK PERLMAN... Ta

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HISTORY OF ECONOMIC ANALYSIS

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HISTORY OF ECONOMIC

ANALYSIS

BY

JOSEPH A.SCHUMPETER

EDITED FROM MANUSCRIPT BY ELIZABETH BOODY SCHUMPETER

AND WITH AN INTRODUCTION BY MARK PERLMAN

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First published in Great Britain in 1954 by Allen & Unwin (Publishers) Ltd

This edition published in the Taylor & Francis e-Library, 2006

“To purchase your own copy of this or any of Taylor & Francis or Routledge's collection of

thousands of eBooks please go to www.eBookstore.tandf.co.uk.”

Twelfth impression 1981 First published in paperback 1986 This book is copyright under the Berne Convention

© Introduction by Mark Perlman All rights reserved No part of this book may be reprinted or reproduced or utilized in any form or

by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission

in writing from the publishers

British Library Cataloguing in Publication Data

A catalogue reference for this book is available from the British Library

ISBN 0-203-98391-2 Master e-book ISBN

ISBN 0-415-10888-8 (Print Edition)

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Table of Contents

INTRODUCTION BY

PART I INTRODUCTION SCOPE AND METHOD

CHAPTER

CHAPTER

2 INTERLUDE I: THE TECHNIQUES OF ECONOMIC ANALYSIS 10

CHAPTER

3 INTERLUDE II: CONTEMPORANEOUS DEVELOPMENTS IN OTHER SCIENCES 23

CHAPTER

PART II FROM THE BEGINNINGS TO THE FIRST CLASSICAL SITUATION (TO ABOUT 1790)

CHAPTER

CHAPTER

2 THE SCHOLASTIC DOCTORS AND THE PHILOSOPHERS OF NATURAL LAW 70

CHAPTER

3 THE CONSULTANT ADMINISTRATORS AND THE PAMPHLETEERS 139

CHAPTER

4 THE ECONOMETRICIANS AND TURGOT 202

CHAPTER

5 POPULATION, RETURNS, WAGES, AND EMPLOYMENT 240

CHAPTER

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6

CHAPTER

PART III FROM 1790 TO 1870

CHAPTER

CHAPTER

CHAPTER

CHAPTER

CHAPTER

5 GENERAL ECONOMICS: A CROSS SECTION 502

CHAPTER

6 GENERAL ECONOMICS: PURE THEORY 548

CHAPTER

PART IV FROM 1870 TO 1914 (AND LATER)

CHAPTER

CHAPTER

CHAPTER

3 SOME DEVELOPMENTS IN NEIGHBORING FIELDS 749

CHAPTER

4 SOZIALPOLITIK AND THE HISTORICAL METHOD 768

CHAPTER

5 THE GENERAL ECONOMICS OF THE PERIOD: MEN AND GROUPS 793

CHAPTER

6 GENERAL ECONOMICS: ITS CHARACTER AND CONTENTS 853

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CHAPTER

CHAPTER

PART V CONCLUSION A SKETCH OF MODERN DEVELOPMENTS

CHAPTER

CHAPTER

2 DEVELOPMENTS STEMMING FROM THE MARSHALL-WICKSELL APPARATUS 1114

CHAPTER

3 ECONOMICS IN THE ‘TOTALITARIAN’ COUNTRIES 1119

CHAPTER

4 DYNAMICS AND BUSINESS CYCLE RESEARCH 1126

CHAPTER

5 KEYNES AND MODERN MACROECONOMICS 1136

LIST OF BOOKS FREQUENTLY QUOTED 1171

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Introduction

MARK PERLMAN* There is, as we shall see, much in this book which is

redundant, irrelevant, cryptic, strongly biased, paradoxical,

or otherwise unhelpful or even harmful to understanding

When all this is set aside, there still remains enough to

constitute, by a wide margin, the most constructive, the

most original, the most learned, and the most brilliant

contribution to the history of the analytical phases of our

discipline which has ever been made (Viner 1954, pp

894–5)

I PUTTING SCHUMPETER AND HISTORIES

OF ECONOMIC THOUGHT IN PERSPECTIVE

1.1 Schumpeter was a man of many interests as well as talents Beyond that he had, certainly as a young man, monumental ambitions It is not appropriate in this essay to devote much space to the journey of his life; fortunately there are now available not only the 1950 insightful memorials by his colleagues, particularly the one by Gottfried Haberler,1 a massive as well as a magnificent piece of bibliographical scholarship on what he wrote, who wrote about him, and with whom was he most frequently compared

by Massimo M.Augello (1990),2 but also three recent (1991) and assuredly major

biographies of the man Schumpeter, A Biography by Richard Swedberg contains a

particularly carefully balanced, scholarly assessment of

*

Thanks are owed to several friends who have read and corrected the manuscript: Professors A.W.Coats, Warren Samuels, Yuichi Shionoya, Richard Swedberg and Shigeto Tsuro, and Dr Charles McCann

1

This essay appeared originally in the Quarterly Journal of Economics It was reprinted in

Seymour Harris’s edited volume, Schumpeter, Social Scientist (Harris, 1951) and again in Haberler (1993) The 1951 volume also contained essays by 16 leading economists, including inter alia

Ragnar Frisch, Arthur Smithies, Paul A.Samuelson, Jan Tinbergen, and Fritz Machlup

2

Augello cites 260 works (including articles and books translated into languages other than the original) by Schumpeter and 1916 works on Schumpeter Augello’s own generalizations or findings are in a comprehensive 93-page essay, replete with valuational (that is, Augello’s straightforward evaluations) notes I am not aware of a comparable task done recently by any economist on an economist

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Schumpeter’s four or five major efforts as well as an intriguing general account of the

times and environments in which he lived Swedberg discusses ad seriatim the various

decades of Schumpeter’s life and work, and if he attempts to explain the man, he does so only by inference

The second biography is different Opening Doors: The Life and Work of Joseph

Schumpeter by Robert Loring Allen has more of the characteristics of James Boswell’s The Life of Samuel Johnson, LL.D or Samuel Pepys’ Diary (1815) Benefitting greatly

from the massive, scholarly, even daunting3 task of deciphering Schumpeter’s personal diaries undertaken by Mrs Erica Mattschnigg Gershenkron,4 Allen interpreted the often elliptical, if not actually obscure, materials Unlike Swedberg (a sociologist), Allen (an economist) was a much-impressed, even overwhelmed, Schumpeter student Allen documents much of what Swedberg could do no more than infer

The third biography, Joseph Schumpeter: Scholar, Teacher, and Politician by Edward

März, a Viennese Marxian historian, eschews not only discussion of Schumpeter, the idiosyncratic individual, but virtually all mention of Schumpeter’s historico-cultural-epistemological interests März’s effort is to fit Schumpeter into the ranks of latter-day Marxians, an interesting effort but one hardly germane to what we are interested in For that reason, what follows is based in large measure on the memorials and the other two studies

1.2 I believe that Schumpeter’s intellectual efforts centered on five (possibly four and

a half) major projects I would classify the first burst of effort (including three books) as

at least two major projects, one involving the nature of economic theory and economic science and the other concentrating on the nature and sources of economic development

The first surfaced in the 1908 Das Wesen und der Hauptinhalt der theoretischen

Nationalökonomie (The Nature and Essence of Theoretical Economics) and to a lesser

degree in the 1914 Der Dogmen- und Methodengeschichte (Economic Method and

Entwicklung (The Theory of Economic Development)

His next (I would term it the third) major effort involved a book on money (partly

written but never published by him although it did appear in 1970 as Das Wesen des

paralleled Maynard Keynes’s 1930 abortive Treatise on Money and his thoroughly successful 1936 General Theory of Employment, Interest, and Money

Schumpeter did not think that his Capitalism, Socialism, and Democracy was a major

effort; indeed he ‘often called it a “pot-boiler”’ (Allen, 1992, II, p 133) Others have not shared that assessment, and it may well be termed Effort ‘Three and a Half’ or even Four

3

The task was daunting because much was written, even scribbled, in an archaic German

shorthand

4

I am indebted to Professor Yuichi Shionoya for this information and other points, too

5

This book was essentially the basis for the last effort However, as Schumpeter thought all study

of economic theory involves knowledge of its origins, at the time (pre-World War I) he linked the two

6

Edited and introduced by F.K.Mann Göttingen: Vandenhöck & Ruprecht, 1970, pp xxvii, 341

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