Schumptoberfest 2012 is taking place this weekend on the Grinnell College campus. We started this back in 2010 with a group of students as a Bjorklunden retreat, and for the past two years the Associated Colleges of the Midwest has provided funding to bring in faculty and students to talk about innovation and entrepreneurship in the liberal arts curriculum.
This year’s keynote comes from Columbia Business School’s Ray Horton, “The Utility of Schumpeter’s Conception of Entrepreneurship Then and Now.” It will be interesting to hear what he has to day.
Lawrence will also have a solid presence. The Flickey guys will be talking about the fruits of the Pursuit of Innovation course, which was the subject of a nice This is Lawrencefeature. Babajide Ademola and Patrick Pylvainen will also talk about their work looking at innovation & entrepreneurship in post-conflict Sierra Leone. You can learn about Professor Skran’s work there in this This is Lawrence video.
Speaking of The Road to Serfdom, here is a handy link to the Mises Institute’s reprint of the “cartoon” guide to the Hayek classic.
Over the past four terms, we have focused on books that focus on the dynamics of the capitalist system. We started with Schumpeter’s biography and followed that up with Capitalism, Socialism, and Democracy. These really gave us a 10,000-foot view of where Schumpeter thought the system might head coming out of World War II. Schumpter seems sanguine about the “inevitability” of socialism, while Hayek gives us a much different, quite chilling vision of the meshing of politics and the economic system. Certainly, I would attribute part of this to Schumpeter and Hayek’s respective views of the importance of the price system — Schumpeter asserting that it is overplayed, whereas Hayek underscores its importance.
Next term, we will continue to sponsor an economics read, though our focus will likely shift to the future of the system coming out of the current crisis. I will be posting those books shortly in the event that you want to get a head start over break.
Abstract: This article explores the degree to which Joseph Schumpeter may be regarded as a follower of Karl Marx. It argues that Schumpeter and Marx shared a common vision, including agreement on the growth in the size of the firm and in industrial concentration, the inherent instability of capitalism and the inevitability of “crises”, and the eventual destruction of capitalist institutions and the arrival of a socialist form of economic organization as a result of the working out of the internal logic of capitalist evolution. Schumpeter’s main qualification is his insistence upon the importance of temporal lags, i.e., social forms that persist after they have lost their economic rationale, and he suggests that the essence of capitalism lies in the inevitable tendency of that system to depart from equilibrium. The article emphasizes the continuing importance of economic history for economics.
Was Schumpeter a Marxist? My own answer is “No.” Why? Because I have a simple standard for judging who is in and who is out when Marx is the subject. To be a Marxist, I think you need to use the labor theory of value; you need to use social classes as a central element in your theory; and you need to believe that the end point of capitalist development is the inevitable economic collapse of a system that cannot sustain itself even with desperate political and military measures.
Since Schumpeter did not use the labor theory of value, did not employ social classes as a central element in his grand theory, and certainly did not see economic collapse as the end point of capitalism, he cannot be a Marxist.
I recently picked up again one of my favorite books, How to be an Alien by George Mikes. (It’s online, without the wonderful illustrations, here. If you look for it online, don’t be fooled by the inferior “Penguin Readers” version, which is… well, for aliens.)
Mikes was a Hungarian writer who moved to England in 1938. One of the chapters, on Civil Servants, immediately reminded me of some of our discussions in the Schumpeter Roundtable. In Capitalism, Socialism and Democracy (CSD), Schumpeter sometimes idolizes those experts who know how to run things rationally. Contrast that with these words from Mikes: Continue reading Civil(?) Servants, and a handbook for aliens
A 22-year-old government major from Atlanta, Ga., McMillan is the granddaughter of Harlon Joye, an early member of Students for a Democratic Society (SDS), a 1960s organization that helped fuel the nation’s civil rights movement, fought for economic justice and participatory democracy and protested the Vietnam War.
Ms. McMillan has been busy down in Mad-town, even organizing a Tuesday bus trip. Yet, she still found time to come and talk about Capitalism, Socialism, and Democracy.
No mention of Schumpeter in the article, but she undoubtedly had a well dog-eared copy with her on the bus.
One thing about capitalism that’s pretty certain is that it’s changing. Capitalism a hundred years ago looked very different from capitalism today, and capitalism looks different in different countries. The field of comparative economic systems was born out of the socialism vs. capitalism debate, and, for that reason, those of us interested in that field should be thankful for that debate. At the same time, the socialism vs. capitalism debate has done and is doing much harm to intelligent discussion of economic systems. Those of us reading Capitalism, Socialism and Democracy this term know that Schumpeter thought socialism could follow capitalism naturally, in Marxian fashion, but it really wouldn’t look very different from the super-big-business capitalism that would exist at that time.
Today’s OnPoint on NPR featured two distinguished guests who were discussing the future of capitalism. Business guru and Harvard professor Michael Porter (remember the 5-forces analysis?) talked about his recent article in the Harvard Business Review on the new capitalism, based on Shared Value, in which firms recognize that the way to be truly profitable is to align their goals with societies and to do good while doing well. But not in that outdated Corporate Social Responsibility (CSR) way, relegating to a CSR department the task of undoing the harm done by the core business, but by integrating the doing good part into the core business mission. Porter argued that the best companies are doing this already, and that capitalism will be made better not through more regulation and more government, but, au contraire, by businesses moving to the “shared value” model.
Robert Reich, author of Supercapitalism, was the other guest, and he was not buying any of that feel-good talk. He couldn’t help but remember the many examples he personally saw of companies investing a lot into what was clearly bad for society but good for profit. His book on the future of capitalism, Supercapitalism, agrees with Porter in finding the CSR model wanting, but thinks that the future lies in separating capitalism from democracy as much as possible. These were questions Schumpeter struggled with in his book. It is easy (apparently, for some) to dismiss those musings from 1942 as idle speculation, but these contemporary contributions and debates remind us that we still know little about how economic and political systems work, that knowing more would still be extremely important, and that capitalism is changing in perhaps fundamental ways even as we continue to talk about a model of a market economy that never really existed. Porter’s view seems to be going in the direction of moving government and business closer to each other. Reich thinks the way to progress is through separating those two as much as possible.
Having dispensed with the ever-dynamic Marx, the Schumpeter Roundtable continues through Capitalism, Socialism, and Democracy this week with a close read of Part II — Can Capitalism Survive? After some wonderful writing on Creative Destruction in Chapter VII, we move on to the projected demise of capitalism, oh, sometime in the next 100 years or so. (Of course, this was published in 1942, so we could still be on schedule). In Chapter XIII we are faced with “Growing Hostility,” and Schumpeter provides us with some rather inflammatory views of the “The Sociology of the Intellectual.” To wit, Schumpeter contends that “unlike any other type of society, capitalism inevitably and by virtue of the very logic of its civilization creates, educates, and subsidizes a vested interest in social unrest.”
In response to my post on The Spirit Level, Oscar Koberling pointed out in an email that the most recent issue (pronounce that with an “s”, not “ishue”) of The Economist includes a Special Report on “The Few” (not the proud, but the rich). One article in that Report beats up pretty effectively on The Spirit Level. Thanks for the tip!
Several articles in the Report are interesting. One of them is on higher education, and it points out that “[i]n some of the hardest disciplines most postgrads at American universities are foreign: 65% in computing and economics, 56% in physics and 55% in maths…”
Last time we met for the Schumpeter Roundtable tutorial, we discussed Schumpeter’s point that perhaps the greatest strength of capitalism is that it provides precise, prompt, exact and effective incentives in the promise of great riches and the threat of great destitution. He would know, having been on both ends of that spectrum (well, almost). That sort of system has inequality built into it—inequality that serves an important purpose, some would say. A discussion on inequality and progress ensued, with spiritual, moral, economic, and technological dimensions, eventually leading one participant to remark that “going to Best Buy is a spiritual journey!” But there is, of course, a serious question: Is inequality good for a society (in the long run)? Or, to put it in terms of a trade-off, how much inequality is best? Tonight Tom Ashbrook on NPR spoke with UK Professors Pickett and Wilkinson, authors of The Spirit Level: Why Greater Equality Makes Societies Stronger. The book is based on research that shows, the authors claim, that more equal societies always do better in a number of ways, including overall population health. They argue that more equal societies are even more innovative, contrary to what Schumpeter might say about the importance of incentives in driving progress. As Professor Gerard has pointed out, economists do think about inequality and its consequences, and this book may add evidence to one or both sides. One member of the Schumpeter Roundtable argued that there is so much inequality in the US today, that most people are too discouraged to try hard to reach the top. This book seems to support that argument. Contrast that with Adam Smith’s view that the great driving force of economic development is the extraordinary effort of “[t]he poor man’s son, whom heaven in its anger has visited with ambition,” struggling to attain riches in the (erroneous) belief that money can buy happiness.
For those of you interested in an extra unit or two, this term we are offering an independent study / tutorial reading Joseph Schumpeter’s classic, Capitalism, Socialism, and Democracy. For those of you unfamiliar with the book, here is a review by Schumpeter biographer, Thomas McCraw.
This is a thick book, so you might think about your time commitments before you complete the registration. The likely trajectory for this is for us to set up a weekly discussion time beginning the week of January 10 or 17. Right now I have three hands raised that want to participate.
I am thinking about requirements right now. The bulk of the effort will be focused on the reading, and there will be an attendant writing assignment as well.