Schumpeter’s Market

Schumpeter’s Market

Enterprise and Evolution

David Reisman

Schumpeter was an interdisciplinary political economist who made institutional transformation the centrepiece of his theory of supply and demand. This comprehensive monograph reconstructs and assesses Schumpeter’s contribution to the restless economics of entrepreneurship, disequilibrium and search. Examining the evidence from all of Schumpeter’s published work, the book fills a significant gap in the literature of economic thought. Partly because Schumpeter was so prolific, partly because he touched on so many interrelated topics, there have been few books that have sought to span the whole of this important author's influential insights.

Chapter 5: Corporate Capitalism

David Reisman

Subjects: business and management, entrepreneurship, economics and finance, methodology of economics


Schumpeter by Capitalism, Socialism and Democracy had decided that history was on the side of the large corporation, long-lived and powerful. His vision of the iron cage of organisation, private sector or public sector, extended at once to the triumph of the giant bureaucracy and the decline of the individual entrepreneur. Schumpeter, like Marx, predicted the concentration of capital and the withering away of the petty bourgeoisie (Schumpeter, 1942a:140). The small firm in market economics has long been held up as the exemplar of all that is best in responsiveness and rivalry. Whatever it may have been in the past, the present has a need for a more substantial meal. The perfect competitor ‘is in many cases inferior in internal, especially technological, efficiency. If it is, then it wastes opportunities.’ (Schumpeter, 1942a:106). Obsolescent and uneconomical, no one in the circumstances will be very sorry to see it go. Schumpeter from the early 1920s was saying that the future lay in the economies of size and the research and development that protected the large and weeded out the small. In The Theory of Economic Development he had tended to look to towering individuals for major new departures. By Capitalism, Socialism and Democracy he was writing as if newness had become the collective function of the group – if indeed there would still be room for significant newness at all. The contrast between the Schumpeter of 1911 and the Schumpeter of 1942 will be discussed in Individual and team, the first...

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