The Economic Crisis in Retrospect

The Economic Crisis in Retrospect

Explanations by Great Economists

Edited by G. Page West III and Robert M. Whaples

As the United States continues its slow recovery from the global financial crisis of 2008, politicians, policymakers and academics are increasingly turning to the lessons of history to gain insight into how we might address both current and future economic challenges. This volume offers contributions by eminent economists and historians, each commenting on the theories of a particular 20th century economist and the ways in which those theories apply to modern economic thought.

Chapter 6: Insights from Joseph Schumpeter

Richard N. Langlois

Subjects: economics and finance, economic psychology, history of economic thought, international economics, political economy


The aspect of Joseph Schumpeter that I usually think about and talk about is his ideas about the large corporation and the evolution of capitalism more generally. I will discuss some of these matters today, but will also move out of my comfort zone and consider what this great economist might have to say about the recent financial crisis and today’s trying economic times. Schumpeter, like his rival John Maynard Keynes, was born in 1883. He was born in one of the outposts of the Austrian Empire and educated at the University of Vienna under Eugen von Böhm-Bawerk and Friedrich Wieser, who were the second generation of what is sometimes called the Austrian School of Economics. The initiator of the Austrian School was Carl Menger, one of the so-called marginalist revolutionaries, who in the 1870s changed the way we thought about economics. Böhm-Bawerk and Wieser were Menger’s students, so Schumpeter was kind of a third-generation Austrian economist. Friedrich Hayek – the subject of Bruce Caldwell’s Insights lecture – would have been the fourth generation, because he was almost two decades younger than Schumpeter. Schumpeter started his professional career at the University of Cernowitz, before moving to the University of Graz, the University of Bonn, and eventually Harvard. A great story from Cernowitz gives you an idea about Schumpeter’s personality.

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