Economic Sociology of Capitalist Development
Edited by Yuichi Shionoya and Tamotsu Nishizawa
Chapter 6: The Broken Thread: Marshall, Schumpeter and Hayek on the Evolution of Capitalism
J.S. Metcalfe* INTRODUCTION In this chapter I explore some of the foundations for an evolutionary approach to economics by considering the writing of three important economists, Marshall, Schumpeter and Hayek, in the light of evolutionary theory. In particular, I suggest that these diverse writers are linked by a thread of evolutionary reasoning made evident in their treatment of the dynamics of economic development, its connection to innovation and economic adaptation to emergent novelty and, more deeply, to the link between wealth creation and the growth of knowledge. Within the canon of modern economic thought that thread is broken. It turned out that while Marshall explicitly invoked evolutionary reasoning in his Principles, published in 1890 with revised editions through to 1920, his followers systematically eliminated all traces of this dynamic perspective from the body of economic theory. Schumpeter and Hayek, too, wrote in evolutionary terms but remained out of the mainstream. Yet the writings of this triumvirate provide the basis for a general theory of evolutionary economics. Of course, modern evolutionary economists enthusiastically acknowledge a debt to Schumpeter; my claim is that they should also acknowledge the contributions of Marshall and Hayek in providing the foundations for evolutionary economic dynamics. What is at stake is no mere quibble over terms with mainstream, neoclassical economics but a thoroughgoing diﬀerence of view into the nature of modern capitalism and its development. Ideas in relation to equilibrium states, competition, development, institutions and the role of knowledge are deeply contested. The fundamental change in...
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