Schumpeter on Economic Evolution and the Evolution of Economics
Peter Wynarczyk, University of Northumbria at Newcastle-United Kingdom
Much, if not all, of Schumpeter's contribution to economics is captured in his work on economic evolution and the evolution of economics. He was both a grand system theorist and a historian of economic analysis. This duality in his work between the world of production and the world of ideas is more closely linked than generally recognised by his interpreters. Fifty years after his death there is a need to more directly address this issue.
One of the key themes the paper examines is the, to date, completely unexplored connection between Schumpeter's theory of economic development and the development of economic theory in terms of his anticipation of the subsequent growth-of-knowledge (GK) literature. When commentators allude to such anticipations in Schumpeter they usually refer to a very limited number of family resemblances to Kuhn, Lakatos or Popper, in his historiography and completely neglect the insights contained in his work on economic evolution or production dynamics contained especially in his Theory of Economic Development [1911] but also in Business Cycles [1939] and Capitalism, Socialism and Democracy [1942]. An important part of the originality inherent in the present paper resides in its imbibing of this Schumpeterian spirit by applying his model of economic evolution in a new novel twist or unforeseen direction - to intellectual scientific constructions and their transformation. This represents a reversal of the more recent trend which tends to maintain that entrepreneurial activity is best captured by the GK framework with the latter providing fertile insights for human agency and learning within a market-orientated environment.
In highlighting this duality between economy and science in Schumpeter it is important to note that he believed his theory of innovation was widely applicable to a number of areas including science. Likewise in his History of Economic Analysis [1954] it was argued that analytical progress in economics can be likened to technological progress so that the world of intellectual construction was not distinct from the world of material production. For Schumpeter, the structure of scientific intellectual production can be rocked like the structure of material production. This Schumpeterian duality on economic evolution and the evolution of economics appears to be neither total nor entirely consistent in his work. It is argued here that his contribution to economic evolution displays primarily profound Kuhnian traits whilst his historiography has distinct Kuhnian and Lakatosian characteristics. Schumpeter's model of economic evolution had no discernible reapprochement toward continuity (apart, perhaps, following the close of capitalism and the onset of socialism), unlike the later Kuhn, whereas his economic historiography highlighted revolution (Kuhn) alongside synthesis and incorporation (Lakatos). One possible resolution of this duality problem in Schumpeter is to use the more general GK framework of Laudan which has a more fluid concept of change which would serve to enhance Schumpeter's model of innovation by making it applicable to both dramatic and incrementalist transformations.
Section One provides a new interpretation of Schumpeter (with a twist). Section Two provides a more exhaustive list of Schumpeter's anticipations of GK before Kuhn and Lakatos than has been provided by past commentators. Section Three is the main core of the paper exploring the dynamics of knowledge evolution and the close similarities between Schumpeter and Kuhn. It focuses on: tranquility and endogenous change; the extraordinary scientist as entrepreneur; innovation and discontinuity; and, finally, creative destruction and knowledge devaluation. The paper concludes by suggesting that Schumpeter and Kuhn both have something to offer in terms of our understanding of change: Kuhnian insights on the psychology of the entrepreneurial event and the novel idea may help in understanding the background to the search for innovation whereas Schumpeterian concern with the diffusion of products, methods and ideas should serve to enhance our understanding of consensus formation in science as elsewhere.