Schumpeter&Equilibrium

rakesh bhandari djones at uclink.berkeley.edu
Tue Apr 23 08:09:36 MDT 1996


A reading note...

I am reading (again) Wolfgang Stolper's biography *Joseph Alois Schumpeter:
the public life of a private man* (Princeton).

It always surprises me how profoundly Schumpeter is Marx's other.  Here are
a couple of examples.

1. The concept of equilibrium

As Grossmann and now Freeman and Carchedi (eds) have argued, Marx freed
social analysis from the dead hand of equilibrium theory.

Stolper emphasizes that this was Schumpeter's aim as well:

"Schumpeter's theoretical problem was to explain how an equilibrium
situation was disrupted, why adjustment processes did not lead back to the
old equilibrium as described by the implied dynamics of supply-demand
analysis; why it led to a dynamic process first away from equilibrium,
then, as a wavelike process, to another higher equilibrium level.  In the
process of thinking about the process, the model became successively more
complicated.  But at all times it must not be forgotten that for Schumpeter
any theory was, in Alfred Marshall's words, a machine to organize facts. It
was an always changing reality that had to be explained." (58).

2. the historicity of all categories.

At one point, Marx referred to his project as a critique of economic
categories.  Perhaps this can be interpreted as an analysis of why
historically specific categories are experienced as natural (see Moishe
Postone's section of the fetishization of abstract labor and Patrick
Murray's analysis of general and determinate abstractions); also Marx
attempted to show how it is impossible to achieve a rational understanding
of bourgeois society on the basis of the categories of political economy.

Schumpeter also grapples with the problem of the historicity of categories.
  This is Stolper's discussion:

"Unlike wages and rent which exist everywhere and at all times in some
form, but also unlike entrepreneurial profits which are also a universal
category in any development economy, interest is a truly *social* category
in the sense that it appears only in an evolutionary society with private
property.  The reason for it being a capitalist phenomenon is linked to the
function of credit creation as thel ever which allows the entrepreneur to
shift resources to do the new things he or she has in mind.  In
socialism--and this will be discussed fully later--entrepreneurs need no
credit but get direct command over resources." (p. 57).

In fact Schumpeter argues "it is important to argue that interest is only
the consequence of a special method of carrying out new combinations, and
that this method can be much more easily changed than the other fundamental
institutions of the competitive system." (TED, p. 210)

a.  why is it that even with Schumpeter's observance of evolution and flux,
all economic categories (exchange value, wage labor, profit, etc) but
interest seem universal?

b. didn't the NAZIS also claim, however demagogically, that interest should
be abolished while they fetishized the entrepreneur, profit and the dynamic
new combinations he organized?

rb





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