Economic Sociology of Capitalist Development
Edited by Yuichi Shionoya and Tamotsu Nishizawa
Chapter 12: Frictions in Schumpeter’s Theory of Unemployment
Mauro Boianovsky and Hans-Michael Trautwein 12.1 INTRODUCTION Joseph Alois Schumpeter (1883–1950) is world renowned for various innovations that he introduced to economic thinking, such as the concept of innovation itself and the notion of economic development as an evolutionary process of creative destruction. He is less well known for his views on unemployment. This may largely be due to the fact that unemployment was not a prominent theme in his writings. Throughout his long career, Schumpeter dedicated only one article (1927) and one section in Business Cycles (1939) to a systematic discussion of unemployment. His other comments on the issue are brief and scattered over a wide range of publications from more than four decades.1 Furthermore, Schumpeter presented his views on unemployment in a fashion that seemed to downplay its relevance. In his Theory of Economic Development (1911; 1934) and elsewhere, he considered unemployment to be a frictional phenomenon that occurs temporarily, when production factors are reallocated from contracting to expanding units during the cyclical process of creative destruction. Expounding his ‘liquidationist’ conviction, according to which depressions should be understood as cures of previous maladjustments to technological and economic change, Schumpeter argued that cyclical unemployment and other ‘recurrent troubles of the capitalist society . . . are the means to reconstruct each time the economic system on a more eﬃcient plan’ (1934 : 113). With regard to the debates about the employment eﬀects of technical progress, which had started with Ricardo’s (1821 ) chapter ‘On machinery’, Schumpeter declared that ‘[t...
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