Political economist Joseph Schumpeter was born on February 8, 1883 in Moravia, the Czech Republic. Schumpeter was one of the most influential and renowned 20th-century economists and promoted the phrase “creative destruction,” an economic concept.
Joseph Schumpeter was one of the most influential and renowned 20th-century economists and promoted the phrase “creative destruction,” which is an economic concept.
In 1942, Schumpeter introduced “creative destruction,” also referred to as Schumpeter’s gale. He also published his most popular publication, “Capitalism, Socialism and Democracy,” in the same year.
Schumpeter argued that “entrepreneurs” bear the responsibility of fostering technological advancements and innovation.
Joseph Schumpeter’s Early Life
Joseph Schumpeter was born in Triesch, Czech Republic. His parents were German speakers, while both of his grandmothers are of Czech origins. Schumpeter moved to Vienna in 1893, where he went to school at the Theresianum. He enjoyed access to a great education and gained exposure to languages and subjects such as History, Mathematics, and Science.
After completing school, Schumpeter enrolled in the University of Vienna, where he pursued a degree in Civil and Roman Law, focusing his studies on History, Economics, and Law. He graduated in 1906 with a doctorate in Law. During his stay at the University of Vienna, Schumpeter published three (3) statistical studies/papers.
In 1907, Schumpeter began working at a law firm in Egypt, Cairo. During his time at the Italian law firm, Joseph published “The Nature and Content of Theoretical Economics” in 1908.
Schumpeter later returned to Vienna to further his education and pursued a Ph.D., which enabled him to become a professor. Upon submission of his thesis in 1909, he became employed as an assistant professor at the University of Czernowitz. While working as a professor, Schumpeter published “Theory of Economic Development” in 1911. In the publication, he introduced and argued his theory of entrepreneurship. In 1911, he also took on employment as a full professor at the University of Graz.
In 1918, Schumpeter became a member of the Socialization Commission of Germany, and in 1919, he was asked to serve in office as the German-Austria Minister of Finance. In 1921, he became the Biedermann Bank’s president. He moved to the U.S. in 1932 and obtained his U.S. citizenship in 1939.
Schumpeter published his most popular publication, “Capitalism, Socialism and Democracy,” in 1942.
Schumpeter’s Renowned Theories
In 1942, Joseph Schumpeter introduced “Creative Destruction.” The economic concept is also referred to as Schumpeter’s gale, which describes “the process of industrial mutation that continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”
Schumpeter created the word German “Unternehmergeist,” which directly translates to “entrepreneur-spirit.” The word “entrepreneurship” is believed to have been derived from the German word. He argued that “entrepreneurs” bear the responsibility of fostering technological advancements and innovation. He also emphasized that markets do not instinctively move toward equilibrium unless profit margins are completely removed. Rather, the economist stated that entrepreneurial creativity and exploration are continually replacing the old equilibria and producing new ones, thereby making greater standards of life attainable.
In his work centered on business cycles and development theories, Schumpeter argued that entrepreneurs disrupt equilibriums (in conjunction with his theories regarding entrepreneurship) and are the predominant driver of economic growth, which progresses cyclically across a series of time scales.
Furthermore, Schumpeter described innovation as an essential element for economic reform. He concluded that economic development is centered around innovation, entrepreneurial activity, and market forces.
Schumpeter further attempted to show that innovation-instigated market forces could produce greater outcomes than price competitiveness, among others. He contended that technological advancements also produce transient monopolies, resulting in abnormal gains, which would, in turn, be sought after by competitors and imitators. Such “transient monopolies” were required to create incentives for companies to introduce new technologies, products, and procedures.
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