Quotes from work
The Theory of Economic Development

The Theory of Economic Development
Joseph Alois Schumpeter

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 businessman. 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.

Joseph Alois Schumpeter photo

“When we inquire about the general forms of economic phenomena, about their uniformities, or about a key to understanding them, we ipso facto indicate that we wish at that moment to consider them as something to be investigated, to be sought for, as the “unknown”; and that we wish to trace them to the relatively “known,” just as any science deals with its object of inquiry.”

Joseph Alois Schumpeter The Theory of Economic Development

The Theory of Economic Development (1934), Ch. 1 : The Circular Flow of Economic Life as Conditioned by Given Circumstances

Joseph Alois Schumpeter photo

“The swarm-like appearance of new combinations easily and necessarily explains the fundamental features of periods of boom.”

Joseph Alois Schumpeter The Theory of Economic Development

The Theory of Economic Development (1934), Ch. 6 : The Business Cycle

Joseph Alois Schumpeter photo

“Since as we have seen the entrepreneurial qualification is something which, like many other qualities, is distributed in an ethnically homogeneous group according to the law of error, the number of individuals who satisfy progressively diminishing standards in this respect continually increases. Hence, neglecting exceptional cases — of which the existence of a few Europeans in a negro population would be an example — with the progressive lightening of the task continually more people can and will become entrepreneurs, wherefore the successful appearance of an entrepreneur is followed by the appearance not simply of some others, but of ever greater numbers, though progressively less qualified.”

Joseph Alois Schumpeter The Theory of Economic Development

The Theory of Economic Development (1934), Ch. 6 : The Business Cycle

Joseph Alois Schumpeter photo

“The more the process of development becomes familiar and a mere matter of calculation to all concerned, and the weaker the obstacles become in the course of time, the less the “leadership” that will be needed to call forth innovations. Hence the less pronounced will become the swarm-like appearance of entrepreneurs and the milder the cyclical movement.”

Joseph Alois Schumpeter The Theory of Economic Development

The Theory of Economic Development (1934), Ch. 6 : The Business Cycle

Joseph Alois Schumpeter photo

“The innovation is hazardous, impossible for most producers. But if someone establishes a business having regard to this source of supply, and everything goes well, then he can produce a unit of product more cheaply, while at first the existing prices substantially continue to exist. He then makes a profit. Again he has contributed nothing but will and action, has done nothing but recombine existing factors. Again he is an entrepreneur, his profit entrepreneurial profit. And again the latter, and also the entrepreneurial function as such, perish in the vortex of the competition which streams after them. The case of the choice of new trade routes belongs here.”

Joseph Alois Schumpeter The Theory of Economic Development

The Theory of Economic Development (1934), Ch. 4 : Entrepreneurial Profit

Joseph Alois Schumpeter photo

“Only a few people have these qualities of leadership and only a few in such a situation, that is a situation which is not itself already a boom, can succeed in this direction. However, if one or a few have advanced with success many of the difficulties disappear. Others can then follow these pioneers, as they will clearly do under the stimulus of the success now attainable. Their success again makes it easier, through the increasingly complete removal of the obstacles analysed in the second chapter, for more people to follow suit, until finally the innovation becomes familiar and the acceptance of it a matter of free choice.”

Joseph Alois Schumpeter The Theory of Economic Development

The Theory of Economic Development (1934), Ch. 6 : The Business Cycle

Joseph Alois Schumpeter photo

“Why do entrepreneurs appear, not continuously, that is singly in every appropriately chosen interval, but in clusters? Exclusively because the appearance of one or a few entrepreneurs facilitates the appearance of others, and these the appearance of more, in ever-increasing numbers.”

Joseph Alois Schumpeter The Theory of Economic Development

The Theory of Economic Development (1934), Ch. 6 : The Business Cycle

Joseph Alois Schumpeter photo

“Many things may be copied by the latter; the example as such also acts upon them; and many achievements directly serve other branches too […].”

Joseph Alois Schumpeter The Theory of Economic Development

The Theory of Economic Development (1934), Ch. 6 : The Business Cycle

Similar authors

Joseph Alois Schumpeter photo
Joseph Alois Schumpeter 13
Austrian economist 1883–1950
Ludwig von Mises photo
Ludwig von Mises 62
austrian economist
Friedrich Hayek photo
Friedrich Hayek 79
Austrian and British economist and Nobel Prize for Economic…
Stefan Zweig photo
Stefan Zweig 106
Austrian writer
Elfriede Jelinek photo
Elfriede Jelinek 50
Austrian writer
Jan Tinbergen photo
Jan Tinbergen 21
Dutch economist
Thomas J. Sargent photo
Thomas J. Sargent 10
American economist
Paul A. Samuelson photo
Paul A. Samuelson 47
American economist
John Maynard Keynes photo
John Maynard Keynes 122
British economist
John Hicks photo
John Hicks 14
British economist