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Hello Mr.Schumpeter,

I am glad to see someone like you devoting his life to economic research, just like I did. However, I am saddened to see that you have chosen your path the wrong way. As the man who first developed the theory of capitalism, I must tell you that individuals acting in their own self-interest would naturally seek out economic activities that provided the greatest financial rewards. Please elaborate further as to how you came to the conclusion that capitalism would ever not be the best solution to a well accounted economy.

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Due to my belief that  the economic cycle is the downward and upward movement of GDP around its long term growth trend, I will agree with your statement that inflation and deflation have some relation to the business cycles.

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Though our ideas may have some similarity, our stances on short term government intervention are still polar opposites.

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Thank you for your supports on my ideas of creative destruction.

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I popularised your fragmented thoughts into a theory of economic innovation. Something that you weren't able to do. And also, do you not believe that people are at different intellectual levels? Are you saying that everyone is equal in intelligence? Also, variation in social structure is how a country grows, look at the modern day example of how China flourished once opening up to capitalism.  And to answer your question, the benefits of a growing economy out weigh the slim chance of a lower social class rebellion..

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Hello Schumpeter, I take it that your main idea is basically that the economy runs in a cycle of ups and downs. This reminded me of my work on deflation where I stated that deflation would actually improve the economy. Would you say that your cycles have anything to do with inflation and deflation?

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From what I have read on this padlet, I stand positive on the idea of creative distruction and entrepreneurship that will lead to economic growth. Such "creative distruction" will definitely create new technology that could possibly support the exponentially growing population, which was the utmost concern of mine.

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Hello Mr. Schumpeter, I enjoyed reading your padlet. I think we have some similar ideas, but we focused on different aspects. Your theory revolves around innovation of the suppliers, and my theory revolves around the consumption by average people.

I would say that the government has a larger role in the economy than you may think, and that

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Hi Mr.Schumpeter,
I'd like to congratulate you on developing my ideas of "creative destruction".You mentioned that people were at different intellectual levels which would most likely suggest a variation in social structure. Therefore, do you believe it not to be likely that a lower social class will engage in a rebellion?

Sincerely,
Karl Marx

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He argued that economic change revolves around innovation, entrepreneurial activities, and market power. He sought to prove that innovation-originated market power can provide better results than the invisible hand and price competition. He argues that technological innovation often creates temporary monopolies, allowing abnormal profits that would soon be competed away by rivals and imitators. These temporary monopolies were necessary to provide the incentive for firms to develop new products and processes.

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Schumpeter was possibly the first scholar to theorize about entrepreneurship. His fundamental theories are often referred to as Mark I and Mark II.

In Mark I, Schumpeter argued that the innovation and technological change come from the entrepreneurs. He often used the word Unternehmergeist, German for "entrepreneur-spirit".

In Mark II, Schumpeter argued that the agents that drive innovation and the economy are large companies which have the capital to invest in research and development of new products and services and to deliver them to customers cheaper, thus raising their standard of living. In his book "Capitalism, Socialism and Democracy", Schumpeter wrote:

"As soon as we go into details and inquire into the individual items in which progress was most conspicuous, the trail leads not to the doors of those firms that work under conditions of comparatively free competition but precisely to the door of the large concerns – which, as in the case of agricultural machinery, also account for much of the progress in the competitive sector – and a shocking suspicion dawns upon us that big business may have had more to do with creating that standard of life than with keeping it down."

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In his book "Capitalism, Socialism and Democracy", Schumpeter describes his theory of democracy which challenged many of the classical ideas of this topic. He disagreed with the idea that democracy was a process by which the electorate identified the common good. He argued this was unrealistic, and that people's ignorance and superficiality meant that in fact they were largely manipulated by politicians, who set the agenda. This made a 'rule by the people' concept both unlikely and undesirable.

Instead he advocated a minimalist model, much influenced by Max Weber, where democracy is the mechanism for competition between leaders, like a market structure. Although periodic votes by the general public legitimize governments and keep them accountable, the policy program is very much seen as their own and not that of the people, and the participatory role for individuals is usually very limited.

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Published in 1934

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Joseph Schumpeter was considered one of the first scholars to develop theories on entrepreneurship. From this, his textbooks on economic policy, management studies, industrial policy, and the study of innovation are widely looked at by students of economics. (Schumpeter also influenced the European Union's Innovation program and the development plan of the Lisbon Strategy through his outlooks on innovation)

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Evolutionary economics is part of mainstream economics, focusing on topic likes interdependencies, competition, growth, structural change, and resource constraints but analyses these aspects in different ways. Joseph Schumpeter contributed to this by writing his book "The Theory of Economic Development" contributing to how these subjects were looked at by economists.

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This is seen as Schumpeters largest influence on Economics, (coming from a six-page chapter in his book "Capitalism, Socialism, and Democracy). Explaining how economic progression is not gradual and peaceful but disjointed. Creative Destruction is an economics concept which is seen as the "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one"(Schumpeter). It was first an idea from the works of Karl Marx though Schumpeter popularized it as a theory of economics innovation and the business cycle.

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The business cycle, also known as the economic cycle is the "downward and upward movement of GDP around its long term growth trend." (Madhani). Throughout the 20th century, he worked with other economists and proposed a typology of business cycles according to their periodicity:

1. The Kitchin Inventory Cycle of 3-5 Years, caused by the lag of information flow in the industry and the change in inventory
2. The Juglar Fixed-Investment cycle of 7-11 years
3. The Kuznets Infrastructural Investment Cycle of 15-25 years
4. The Kondratiev Wave or long technological cycle of 45  to 60 years.

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Schumpeter's views were most influential among various evolutionary economists, who were interested in industrial organization, evolutionary theory and economic development. They tended to be on the other end of the political spectrum from Schumpeter and were often influenced by Keynes, Karl Marx, and Thorstein Veblen.
Economists influenced by Schumpeter
include:

Heiner Flassbeck, Nicholas, Georgescu-Roegen, Fredric M. Scherer, Christopher Freeman, Mariana Mazzucato, Edith Penrose, Jack Downie, Hyman Minksy, Paul Sweezy, Kenneth Arrow, Ronald Coase, Douglas North, Robert Solow, William Baumol, Peter Howitt, Philippe Aghion, Paul Romer, Trevor Swan, Finn E. Kydland, Edward C. Prescott, Ha-Joon Chang

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Joseph Schumpeter was influenced by Economists; Ann-Robert-Jacques Tugot, Karl Marx, Leon Walras (whom Joseph beileved was the great economist of all time (Econlib) ) , Carl Menger, Gustav von Schmoller, Nikolai Kondratiev, Max Weber, Vilfredo Pareto, Eufen von Bohm-Bawerk (his university professor) and Werner Sombar.

People believe Schumpeter's change-oriented economics came from the Historical School of Economics though another outlook on him shows that "his ideas were continuations of works from Gustav von Schmoller and Werner Sombar."(The Influence of the German Historical School of Schumpeter,)

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Published 1942

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Joseph Schumpeter was born in Austria-Hungray (now Czech Republic) in 1883, though when his father passed when he was four years old, him and his mother moved to Vienna.

His economics career began when he undertook obtaining a PhD “studying law at the University of Vienna under the capital theorist Eugen von Böhm-Bawerk” (Schumpeter and the Idea of Social Science: A Metatheoretical Study).  From this, he became a professor of economics and government at the University of Czernowtiz and then the University of Graz. He then became a member of the Socialization Commission and was invited to become Minister of Finance for the Republic of German-Austria to take on the debt of the war. In 1925, he was chair at the University of Bonn and lectured in American and Tokyo. From this, he decided to become a US citizen and became a professor at Harvard. During his time.

Through his life, Schumptere wrote around 30 books and the goals he set himself were “to be the greatest economist in the world, to be the best horseman in all of Austria and the greatest lover in all of Vienna. When asked about this, he said that he had reached two of goals and that there were too many fine horsemen in Austria for him to succeed all his aspirations.”(P.A. Samuelson and W.D. Nordhaus, Economics). He married three times and in 1925, his second wife and child died during birth around the same time as his mothers death. He endured through and in 1937 married “American economic historian Elizabeth Boody, who helped him popularize his work and edited what became their magnum opus, the posthumously published History of Economic Analysis.”(Schumpeter and the Idea of Social Science: A Metatheoretical Study).

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One of Schumpeter's most significant contributions to the field of economics was the theory of the business cycle. He states that when the circular flow is being disturbed by entrepreneurs, the economy is being stimulated. the stimulation of the economy causes it to develop. Schumpeter observed this development to be a repeating cycle in different time scale.

He suggested a model known as the Business Cycle, which used to demonstrate the unsteady growth of the economy (measured in GDP). This model includes four main cycles of different time lengths, which occur simultaneously. These include The Kondratiev Cycle (takes 54 years), Kuznets Cycle (18 years), Juglar Cycle  (9 years) and Kitchin Cycle (about 4 years).

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"Joseph Alois Schumpeter." Joseph Alois Schumpeter: The Concise Encyclopedia of Economics | Library of Economics and Liberty. N.p., n.d. Web. 17 Jan. 2017.

Root. "Joseph Schumpeter." Investopedia. N.p., 04 Oct. 2009. Web. 17 Jan. 2017.

"Joseph Schumpeter and Creative Destruction." Home. N.p., 03 July 2014. Web. 17 Jan. 2017.

Shionoya, Yuichi (2007). Schumpeter and the Idea of Social Science: A Metatheoretical Study. Cambridge.

P.A. Samuelson and W.D. Nordhaus, Economics (1998, p. 178)

PG Michaelides, The Influence of the German Historical School of Schumpeter, 17th International Conference of the European Association for. Evolutionary Political Economy, Bremen/Germany, November 2005.

Madhani, P. M. (2010). "Rebalancing Fixed and Variable Pay in a Sales Organization: A Business Cycle Perspective".

Schumpeter, Joseph A. (1994) [1942]. Capitalism, Socialism and Democracy. London: Routledge. pp. 82-83. ISBN 978-0-415-10762-4. Retrieved 23 November 2011

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In his book "Capitalism, Socialism and Democracy", Schumpeter discusses the eventual downfall of capitalism.

While he agrees with Karl Marx that capitalism will collapse and be replaced by socialism, Schumpeter predicts a different way this will come about. Marx predicted that capitalism would be overthrown by a violent proletarian revolution, while Schumpeter believed that capitalism would gradually weaken by itself and eventually collapse. Specifically, the success of capitalism would lead to corporatism and to values hostile to capitalism, especially among "intellectuals".

In this book, he defines "intellectuals" as a social class in the position to critique societal matters for which they are not directly responsible and to stand up for the interests of other classes. Intellectuals tend to have a negative outlook of capitalism, even while relying on it for prestige, because their professions rely on antagonism toward it.

The growing number of people with higher education is a great advantage of capitalism, according to Schumpeter. Yet, unemployment and a lack of fulfilling work will cause intellectual critique, discontent and protests. Parliaments will increasingly elect social democratic parties, and democratic majorities will vote for restrictions on entrepreneurship. Increasing workers' self-management, industrial democracy and regulatory institutions would evolve non-politically into "liberal capitalism". Thus, the intellectual and social climate needed for thriving entrepreneurship will be replaced by some form of "laborism". This  will ultimately undermine and destroy the capitalist structure.

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Joseph Schumpeter (1883-1941) is an Austrian-born American, considered "one of the 20th century's greatest intellectuals"(Investopedia). In 1919, he became Austrian's  finance minister. A decade later, he moved to the United States to teach at Harvard and became "the first immigrant to be elected president of the American Economic Association* "(Investopedia).

*The American Economic Association is a learned society in the field of economics. Their purposes are to   : 1) The encouragement of economic research, especially the historical and statistical study of the actual conditions of industrial life;   2) The issue of publications on economic subjects;   3) The encouragement of perfect freedom of economic discussion

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A major contribution to the history of ideas as well as to economics, History of Economic Analysis by Joseph Schumpeter provided a complete history of economic theory from Ancient Greece to the end of the second world war.

Topics addressed include the techniques of economic analysis, contemporaneous developments in other sciences and the sociology of economics. As well as dealing with all of the major economists from Adam Smith to Maynard Keynes, the book considers the economic writings of Plato and Aristotle, of the Medieval Scholastics and of the major European economists. Throughout, Schumpeter perceived economics as a human science and this is reflected in a volume which is lucid and insightful throughout.

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Picture taken at-Age 42 (1925)

"Joseph Schumpeter and Creative Destruction." Home. N.p., 03 July 2014. Web. 17 Jan. 2017.