Marshall and Schumpeter on Evolution

Marshall and Schumpeter on Evolution

Economic Sociology of Capitalist Development

Edited by Yuichi Shionoya and Tamotsu Nishizawa

This unique and original work contends that, despite the differences between Marshallian and Schumpeterian thinking, they both present formidable challenges to a broad type of social science beyond economics, particularly under the influence of the German historical school. In a departure from the received view on the nature of the works of Marshall and Schumpeter, the contributors explore their themes in terms of an evolutionary vision and method of evolution; social science and evolution; conceptions of evolution; and evolution and capitalism.

Chapter 10: Schumpeter in the Harvard Yard: Inventions, Innovations and Growth

Kiichiro Yagi

Subjects: economics and finance, economic psychology, evolutionary economics, history of economic thought


Kiichiro Yagi 10.1 SCHUMPETER’S TWO DISTINCTIONS Joseph A. Schumpeter is generally considered one of the most influential originators of contemporary evolutionary economics. Although he competes with Thorstein Veblen, Friedrich Hayek, Alfred Marshall and others for this position, a group of evolutionary economists are proud to call themselves neo-Schumpeterians.1 The main concern of this group is technological and institutional innovation as the driving forces of economic development. Their interests cover not only theoretical investigation but also a wide range of research, from historical analyses of innovations to science and research policy. Indeed, Schumpeter reformulated his theory in a chapter of Business Cycles (Schumpeter, 1939), under the title, ‘How the economic system generates evolution’. In this chapter, Schumpeter limits the source of ‘economic evolution’ exclusively to ‘innovation’ in the sense of ‘the setting up of a new production function’ (ibid.: 87). To reach this conclusion, he maintains two distinctions, upon which not all contemporary evolutionary economists agree. The first is the distinction between economic growth and economic evolution (development), and the second is that between invention and innovation. The first distinction is well known, since discerning qualitative change from quantitative change is a logically necessary step to grounding economic evolution (that is, development) in innovation. It is the theoretical position that Schumpeter manifests first in Theorie der wirtschaftlichen Entwicklung (1911), whose English edition, Theory of Economic Development (1934), was published several years prior to Business Cycles. As Schumpeter considers that an economic system has the inherent tendency to move to a...

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