Tag: Schumptoberfest

Schumpeter Turns 130

Happy Birthday (posthumously, of course) to Joseph Schumpeter (a.k.a., Jozsi, Schum, Schumy, Schump, Go-Go, and probably some less flattering names as well), born on February 8, 1883.

We’ve had a lot of fun with Schumpter over the past few years, including several iterations of Schumptoberfest (see here, here, and here), as well as an entire reading group built around him.  Let’s hope that we can instill just a little bit of this into our student body:

Economists are at long last emerging from the stage in which price competition was all they saw. As soon as quality competition and sales effort are admitted into the sacred precincts of theory, the price variable is ousted from its dominant position… But in capitalist reality as distinguished from its textbook picture, it is not that kind of competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization (the largest-scale unit of control for instance)–competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives. (Capitalism, Socialism, and Democracy, 84).

We’ll see you for Schumptoberfest 2013.

Schumptoberfest 2012

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 Lawrence feature.   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.

You can read  more at the LU homepage or on the Grinnell homepage.

The World Schumpeter Made, or the World That Made Schumpeter?


Warch Campus Center

Saturday, October 22,  4:30 p.m.

David A. Hounshell

Roderick Professor of Technology & Social Change

Carnegie Mellon University

I present a brief overview of Joseph A. Schumpeter’s fundamental theory of innovation and the entrepreneurial function in capitalism.  I further demonstrate how Schumpeter realized that the principal locus of innovation had changed between the time he first launched his ideas in Theory of Economic Development (1911) and 1942, when Capitalism, Socialism, and Democracy first appeared.  The shift in locus had profound repercussions for Schumpeter’s thinking about capitalism, which I discuss.  I also demonstrate that just as there was an intermediate position between the Schumpeter of 1911 (often called “Schumpeter, Mark 1”) and the Schumpeter of 1942 (“Schumpeter, Mark 2”), what I call “Schumpeter, Mark 1.5.”  Drawing from my research on the history of industrial R&D in the United States, I historicize these three versions of Schumpeterian theory about the entrepreneurial function in capitalism.  I go further, however, to channel Schumpeter’s thoughts about the entrepreneur and the locus of innovation in American capitalism over the last sixty-one years since his death—what I am calling “Schumpeter, Mark 3” (ca. 1965) and “Schumpeter 4.0” (ca. 2011, to express it in the lexicon we use today).  Looking into the future, I complete the Schumpeterian arc of capitalism by concluding with thoughts about the locus of innovation in 2050, the centennial year of Schumpeter’s death, when the principal locus of innovation might well be where Schumpeter believed it was in 1911, under what he called Competitive Capitalism.

About the Speaker: David Hounshell was originally trained as an electrical engineer (BSEE, Southern Methodist University, 1972) before he saw the bright light of history of science, technology, business, and public policy (Ph.D., History, University of Delaware, 1978).   His early publications include work on inventors in electrical and communications technologies of the 19th-century, for which he received the Browder J. Thompson Prize of the IEEE in 1978.  His first book, From the American System to Mass Production, 1800-1932 (Johns Hopkins University Press, 1984) remains in print today; the Society for the History of Technology (SHOT) awarded it the Dexter Prize in 1987.  Science and Corporate Strategy:  DuPont R&D, 1902-1980 (Cambridge University Press, 1988), co-authored with John Kenly Smith, Jr.,  received the Newcomen Prize in 1991.  He is the recipient of the Business History Conference’s Williamson Medal (1992) and the Society for the History of Technology’s Leonardo DaVinci Medal (2007).  He served as President of SHOT in 2002 and 2003.  He has published on Cold War science and technology, the history of industrial research and development, and technology-forcing regulation in post-World War II United States.

Coming Saturday: “The World Schumpeter Made”

Historian David Hounshell from Carnegie Mellon University will be on campus this weekend to deliver a talk, “The World Schumpeter Made: Innovation, Entrepreneurship, and the New Economy.”  Professor Hounshell has deep knowledge of the U.S. innovation system, and the talk will touch on who funds R&D and why it matters. If you would like to see him in action, here is a talk he gave at the Kaufman Foundation last year: “Innovation and the Growth of the American Economy.”

Professor Hounshell is a pretty good source for this type of insight. He literally wrote the book on the  genesis and evolution of the U.S. industrial system with From the American System to Mass Production, 1800-1932.  Murray Rothbard himself had this to say about Hounshell’s influence:

Until recent years, the history of technology used to be written, and taught, for its own sake and almost completely isolated from economic and social history…

This tiresome tradition came to a sudden end with the arrival of the fascinating and crucially important work of David A. Hounshell, From the American System to Mass Production, 1800-1932, which created a new paradigm dominating the field of American technological history.  Hounshell’s achievement was to integrate technological with economic and social history, and bring us, for the first time, a genuine history of the development of mass production.  Thus, for example, in his pioneering history of the bicycle industry of the 1890s, Hounshell showed that the bicycle was, in two ways, a critical prelude to the invention and development of the automobile because, (1) the bicycle taught consumers the possibility and the joy of individual mobile transportation (in contrast to the mass transportation between fixed points essential to the railroad; and (2) it taught bicycle makers the technology of the wheel, the tire, and the axle. It is no accident that the first automobiles were made in bicycle shops.*

In addition to the opus on mass production, Professor Hounshell is also steeped in studying industrial research and development, including a definitive piece on DuPont:  Science and Corporate Strategy: Dupont R&D, 1902-1980.  This work chronicles corporate strategy and innovation, and has been described as “one of the most comprehensive business history books ever written.”

Of course, he continues to keep busy, and his talk Saturday will incorporate some of his current work on the evolution of industrial innovation.  I am looking forward to hearing what he has to say.

Professor Hounshell’s talk is at 4:30 in the Warsh Campus Cinema.  We hope to see you there.

Schumptoberfest is here

This year’s turbocharged Schumptoberfest is also known as the ACM workshop on Innovation and Entrepreneurship in the Liberal Arts Curriculum. You can find the program online at, or click on the posters below. The keynote address is open to the public, and you wouldn’t want to miss it if you are on campus. If you are interested in some of the other sessions, talk to Professor Gerard or Galambos.

Schumpeter and the Fashion Industry

Today we are treated to a discussion of the fashion industry from Ms. Richter & Ms. Li.   The first from the Schumptoberfest collection.  Enjoy!


“The evolution of the capitalist style of life could be easily – and perhaps most tellingly – described in terms of the genesis of the modern Lounge Suit.” -Joseph Schumpeter

Creative destruction saturates the fashion industry; you must be the trend-setter otherwise the “foundation of your very life” will be in jeopardy. Large firms enjoy an advantage in spreading risk over many projects (e.g. inventions that never “catch” as a trend) and have the resources and brand power to set trends, thus helping their inventions turn into successful innovations, driving the fashion cycle forward through induced obsolescence. Due to lack of IP laws, large firms do not enjoy the monopolistic protectionism that IP rights provide, but they have other means justifying their investments. Schumpeter’s hypothesis suggests that large firms foment innovation for factors other than scale economies, and in the fashion industry, and the fashion cycle is a key example of this phenomenon.

The fashion industry, a $200 billion industry in the United States alone, is comprised of nearly 150,000 establishments, ranging in size from large fashion houses to smaller start-ups. Although there are a large number of firms competing in the industry, according to the 2002 Census, five percent of firms in the clothing industry accounted for twenty percent of total revenue and sales. These large firms, , also play an important role in the diffusion of new design trends and the continuation of induced obsolescence, the dynamic force driving the fashion cycle forward; the influence of large firms contributes to the top-down structure of the industry.

Consumers are not strictly motivated by price, but also pay attention to  brand, quality, design differentiation, or trendiness (flocking). Because of complex consumer decision-making, product differentiation and new designs are essential to driving the industry forward Raustiala and Sprigman (2009) argue that  induced obsolescence is the process by which designs, through copying and diffusion into mainstream fashion, become obsolete and therefore undesirable to fashion-forward consumers. These fashion-forward people then demand new designs, which are invented by top firms and diffused downward through trends, again, through copying. This process is called the fashion cycle. This cycle is very rapid and is completed each season.

Continue reading Schumpeter and the Fashion Industry

Capitalism, Socialism, & Democracy Group Read

For those of you interested in an extra unit or two, next 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 if you are interested, I would recommend that you pick up a copy and start in on it over break. The likely trajectory for this is for us to set up a weekly discussion time, and for each student to provide a review essay.   See Professor Gerard or Galambos for details.

Schump-Voter Fest?

Rational ignorance is a common theme of economists thinking about voting and the electorate, but what about willing ignorance?  That’s the gist of this Schumpeter quotation:

[T]he typical citizen drops down to a lower level of mental performance as soon as he enters the political field. He argues and analyzes in a way which he would readily recognize as infantile within the sphere of his real interests…”

Here is some more background on that quote.  It is certainly consistent with the overarching theme of Capitalism, Socialism and Democracy that capitalism might die out due to lack of enthusiasm from its principal beneficiaries.

The accompanying illustration is from the legendary political cartoonist, Herblock.  I snagged both the quote and the picture from the Spirit of Moderation blog.

Schumptoberfest a Success

The Schumptoberfest celebration was a smashing success, with at least one of us understanding the Williamson debt-equity financing argument a little better at the end than at the beginning.  Thanks to all those who participated, especially Professor Galambos, who took time out from his sabbatical leave to read “100” pages and keep me in line.

As per usual with these events, we received word that there were some items left behind.  Here is a partial accounting: a set of dentures, a hearing aid, “a leather whip, a live rabbit, a tuba, a ship in a bottle, 1,450 items of clothing, 770 identity cards, 420 wallets, 366 keys, 330 bags and 320 pairs of glasses, 90 cameras and 90 items of jewellery and watches.”

Thanks to Tom for the tip.

Schumptoberfest Readings: Galambos, Teece, and Blaug

Following up on Chapter VII of Capitalism, Socialism, & Democracy from last time, we move on to some rather more modern treatments of the economics of innovation.  We start with Professor Galambos’ and a slightly modified version of the primer he gives to his students in his excellent course, In Pursuit of Innovation (coming this winter).

Galambos wades through some basics of innovation policy and the industrial enlightenment before arriving at the question of allocative efficiency on pages 4 and 5. Again, the conventional treatment is that there is a tradeoff between the promise of monopoly profits and the efficiency properties of competitive industries.  And, recall, this is a tradeoff that Schumpeter explicitly rejects.

Continue reading Schumptoberfest Readings: Galambos, Teece, and Blaug

Schumptoberfest Mark VII, The Gales of Creative Destruction

In the second post here, I will simply concentrate on Chapter VII of Capitalism, Socialism, and Democracy, and try to tie together some themes for the weekend.  For our purposes, I have numbered the paragraphs 1-13.

As we proceed into this chapter, it is probably useful to keep in mind that at the time of this writing, the national income accounts and measurement of economic output were even more primitive than they are today.  So, one question is how did economists in 1942 think about “growth” and “output”?

The null hypothesis is immediately stated in the opening sentence of the chapter — that there is some question that “capitalist reality” stifles economic growth.  I take “capitalist reality” to mean the consolidation of firms and increasing concentration of industries as they mature.  This is going to get at the essence of a “Schumpeterian Hypothesis,” (see the last sentence of paragraph two for a germination of this idea — “big business may have had more to do with creating that standard of life than keeping it down.” We’ll get to the efficiency implications of this in a bit, but for the moment note that he offers two possible rationales for the antagonism toward large firms.   One is the idea that growth occurs despite the “managing bourgeoisie” (that is, monopolists restricting output and jacking prices).  The second is that this worked for a while, but it cannot proceed indefinitely.

Continue reading Schumptoberfest Mark VII, The Gales of Creative Destruction

Introduction to Schumptoberfest

This is a first in a series of short posts to guide the Schumptoberfest readings.  I included these readings literally to give you an introduction to Schumpeter and the “Schumpeterian Hypotheses.”

These introductory readings shouldn’t take terribly long to read — perhaps an hour.  I will carefully go through Chapter VII of Capitalism, Socialism, and Democracy in my next post.

Paul J. McNulty “Austrian Competition,” From The New Palgrave Dictionary of Economics, 2nd edition

The first reading from Paul McNulty on how Austrian economists view competition immediately invokes Schumpeter as a critic of the model of perfect competition.  As many of you know, the model of perfect competition that I love and teach in price theory, is essentially an equilibrium construct.  That is, we expect to be moving toward a long run competitive equilibrium, where price = average costs for the marginal firm in the industry.  (Incidentally, the way that firms compete in the fourth paragraph is largely what Industrial Organization is all about).  Schumpeter, in contrast, espouses a “disequilibrium” theory, and argues that competition isn’t about allocative efficiency as much as it’s about, that’s right, creative destruction.

Continue reading Introduction to Schumptoberfest

Schumptoberfest Sign Up Continues

I have logged several folks for the Schumptoberfest weekend weekend, October 22 to 24, at Björklunden.  If you are interested and would like IS credit, please sign up with me by Friday.  I have some IS forms tacked on the board outside my office.  it is best that you sign up by Friday.

Again, the requirements are:

  • Complete the assigned readings.
  • Travel to Björklunden over reading period (Friday evening until Sunday afternoon) and participate in our workshop.
  • Write a short response paper (3-5 pages) to the ideas and discussions from the weekend.

We would like to engage students who have a good understanding of micro theory and are interested in innovation and entrepreneurship. The readings dovetail nicely with my Economics 400 (IO) and 450 (theory of the firm) courses.

I am in the process of completing the reading list and will provide both PDFs and reading guides for the materials within the next week.

Schumptoberfest IS Coming

As an addition to the burgeoning I&E program, the inaugural Schumptoberfest is coming to Björklunden over reading period weekend, October 22-24.  If interested, you need to sign up with Professor Gerard.

What is Schumptoberfest ?  In short, it is a celebration of the ideas of economist Joseph Schumpeter, the subject of our first I&E Reading Group earlier this year.  Through reading and discussion, we will develop a better understanding of innovation and entrepreneurship generally, and particularly the importance of economic organization fomenting or retarding entrepreneurial activities.  Of course, we also hope to develop a rapport among the students and faculty interested in these topics.

To encourage and reward participation, we are offering a two-credit independent study.  The expectations for the IS are as follows:

  • Complete the required readings.
  • Travel to Björklunden over reading period (Friday evening until Sunday afternoon) and participate in our workshop.
  • Produce a short response paper (3-5 pages) to material and ideas discussed over the weekend.*

The target audience for Schumptoberfest is students who have a firm grasp of micro theory and have an interest in the scholarship on innovation and entrepreneurship. The course should be an exceptionally good fit for students who have taken or are planning to take Industrial Organization and The Economics of the Firm.

Those interested need to sign up with Professor Gerard as soon as possible.  Those interested in receiving the two independent study credits need to sign up with him by Friday, September 24.  We expect 10-15 students and 3-5 faculty members to participate.

*Professor Gerard will provide the readings and reading guides over the course of the next few weeks.  We will set the parameters of the writing assignment during the retreat.

Schumptoberfest design by K. Richter