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Schumpeter and Schumpeterians on economic policy issues: re-reading Schumpeter through the lens of institutional and behavioral economics. An introduction to the special issue

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Abstract

We develop a critical interpretation of Schumpeter’s thinking that allows two alternative ‘operationalizations’ of his theoretical approach to economic development and institutions. We show that they are compatible with the two dominant neo-Schumpeterian economic dynamics approaches - one focused on the national economic and institutional conditions required for a commitment to an innovation based strategy for competing at the world technology frontier, and one that combines Schumpeter’s insights on technological change with Keynesian policies supporting demand for consumer goods and investment in the context of radical uncertainty and heterogeneous behavior. The implications for policy of these two perspectives are discussed in relation to Schumpeter’s ambiguous stance on economic policy issues. Finally, based on an articulation of institutions and individual behavior in light of recent developments in behavioral economics, we provide some implications for new perspectives on economic policy.

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Notes

  1. B. Eichengreen, “The Crisis in Financial Innovation”, remarks on the occasion of the award of the Schumpeter-Preis of the Schumpeter-Gesellschaft, Vienna, 20 January 2010.

    http://eml.berkeley.edu/~eichengr/crisis_finan_innov.pdf

  2. However, this point is disputed, as Shionoya (2007) reminds us. According to Schumpeter's wife, Elizabeth B. Schumpeter (Schumpeter 1954, p. vi), and Arthur Smithies, Schumpeter devoted much time to the study of mathematics and retained the hope that mathematics might produce the dynamic counterpart to Walrasian systems

  3. For a comparison of Schumpeter’s and Hayek’s stabilization policies, see Klausinger (1995).

  4. Thanks to Swedberg (1991) we know that Schumpeter wrote this paper for one of the meetings of an interdisciplinary group, referred to as the Harvard Seminar which Schumpeter initiated. This group included the sociologists Wilbert E. Morre and Talcott Parsons, the economists Wassily Leontief, Paul Sweezy and Gottfried Haberler, the psychologist McGrannahan and other Harvard scholars (Swedberg 1991: 23, and 337).

  5. ‘The old idea of a subconscious personality and its struggles with the conscious ego was elaborated and made operational with unsurpassable effectiveness by Freud. Again, I cannot—and perhaps need not—do more than point to the vast possibilities of application to sociology—political sociology, especially—and economics that seem to me to loom in the future’ (Schumpeter 1954: 766)

  6. In Walras’s pure economics, hedonistic egoism describes a rule or habit following rational behavior, whereas the notion of energetic egoism characterizes the voluntary and, therefore, more conscious rationality of leaders or Schumpeterian individual entrepreneurs in the development framework.

  7. Schumpeter uses as an illustration the historical case of the ruling class on English political society, deciding to abolish duties on foodstuffs when agrarian interests were dominant. This political action could be viewed as contrary to the economic interests of that class but, as Schumpeter states, ‘a ruling class’s first and foremost interest is to rule and from this angle that action was perfectly rational. The conflict of ends is well illustrated by the fact that the Conservative Party actually split on that issue’ (Schumpeter 1940 in Swedberg 1991: 324 - original emphasis). In another passage from a 1950 Schumpeter manuscript intended for a lecture to the Charles Walgreen Foundation in Chicago, Schumpeter writes that those ‘habits of mind and interests [of politicians, bureaucrats, and journalists] can be shown to be entirely different from those of the people for whom these groups speak’ (Schumpeter [1950] 1983: 192 – Jan 8, 1950).

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Authors and Affiliations

  1. University Nice Sophia Antipolis and GREDEG, Nice, France

    Agnès Festré

  2. University Picardie Jules Verne and CRIISEA, Amiens, France

    Odile Lakomski-Laguerre & Stéphane Longuet

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  1. Agnès Festré
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  2. Odile Lakomski-Laguerre
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  3. Stéphane Longuet
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Correspondence to Agnès Festré.

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Festré, A., Lakomski-Laguerre, O. & Longuet, S. Schumpeter and Schumpeterians on economic policy issues: re-reading Schumpeter through the lens of institutional and behavioral economics. An introduction to the special issue. J Evol Econ 27, 3–24 (2017). https://doi.org/10.1007/s00191-015-0442-4

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