Abstract
This paper compares Joseph Schumpeter and Emil Lederer with respect to their visions concerning the notions of economic growth, technology and business cycles. Their theoretical investigations in a number of thematic areas seem to converge to similar views. More precisely, both Schumpeter and Lederer regard the capitalist economy as a dynamic system where the introduction of innovations is its distinctive characteristic. In such a system, static analysis based on the concept of equilibrium is useful as an expository device to describe the adjustment mechanisms of the economic system. They also paid attention to the emergence of large oligopolistic firms and considered this development as being interwoven with technological progress. Both economists used similar arguments to emphasize the link between economic development and technological change. In their analyses, Schumpeter and Lederer referred to psychological factors motivating the entrepreneur, in order to explain the forces that set in motion the process of innovation and thus economic development. The concept of technological unemployment is also described in a similar manner by both of them. Regarding the issue of business cycles, Schumpeter and Lederer considered them to be a result of endogenous processes within a capitalist economy. Lederer in his late works, argued in a way analogous to Schumpeter, that economic fluctuations are caused from the disruptions created by innovations, which are introduced discontinuously into the economic system. Conclusively, Schumpeter and Lederer delivered theses which are similar in scope and conclusions probably because they were developed in the same social, political, theoretical and ideological environment and were also well acquainted with each other’s ideas.
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Notes
McCraw (2007, 345), by making full use of Schumpeter's diaries, argued that Schumpeter’s prodigious output was due to his “isolation and self-doubt”, which was later enhanced by the death of his beloved ones that made him use academic work “as a means of harnessing his personal grief” (ibid, 160). This attitude of his certainly was not evident in his public manner.
At this point it is interesting to note that despite the fact that he was world famous by that time, he was also penniless. As McCraw (2007, 4) emphatically stressed, Schumpeter had to make paid speeches in order to be able to buy his transatlantic ticket.
This journal published path-breaking articles such as Weber’s “The Protestant ethic and the ‘spirit’ of capitalism” (1905) and Kondratieff’s “The Long Waves in Economic Life” (1926). See Hagemann (2005).
For Lederer’s attempt to sociologically understand the main features of war, especially World War I, see Lederer (2006).
In his History of Economic Analysis he wrote: “[S]o far as pure theory is concerned Walras is in my opinion the greatest of all economists” and suggested that Walras’s work “will stand comparison with the achievements of theoretical physics” (Schumpeter 1954, 827).
According to Shionoya (1997, 38), for Schumpeter the essential feature is the type of man which is defined as a “leader”, who overthrows the existing order by creating a new direction.
Lederer noted that “the low wages are due to the oversupply of workers, and as a result of mechanization and improving efficiency they are not likely to find employment easily” (Lederer and Lederer-Seidler 1938, p. 255)
Here Mongiovi (2005) rightfully stressed that one of Lederer’s main criticisms on Keynes’ General Theory was exactly Keynes’s neglect of the phenomenon of technological unemployment.
Here Schumpeter refers to: (1) the construction of new plants and the rebuilding of old plants, (2) new firms which are founded for the purpose of capitalising on specific innovations, and (3) the rise to leadership of new men (Schumpeter 1939, 68–71).
According to Schumpeter, economic systems do not achieve equilibrium but move into “neighborhoods of equilibrium […] in which the system approaches a state which would, if reached, fulfill equilibrium conditions” (Schumpeter 1939, 45).
For a discussion on entrepreneur’s motives and personality in Schumpeter’s works see de Vecchi (1995, 16–19).
As is well known, in the subsequent editions of his Theory of Economic Development, Schumpeter omitted the seventh chapter and rewrote the second chapter. It is argued (e.g. Shionoya 1997, 167–71) that these changes signify important shifts regarding the role of the entrepreneur.
Disproportional developments in the producer and consumer goods sectors in the course of the business cycle constitute a common point between Lederer’s 1925 analysis and Schumpeter’s work on business cycles (Allgoewer 2003, 333). While Schumpeter acknowledged the importance of disproportionality (“[T]his idea […] is moreover easy to substantiate from certain very obvious facts” [Schumpeter 1954, 1133]) he avoided attributing a causative role to them. He stressed the importance of looking for “the definite factors that are to account for it” and concluded that “those factors and not disproportionality per se will individuate an author’s theory” (ibid, 1133).
For an insightful discussion of whether Lederer should be classified as an underconsumptionist see Allgoewer (2003, 342–3)
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Feedback from participants of the 9th Conference of Greek Historians of Economic Thought in May 2007, the participants of an International Research Workshop on Political Economy organized by the University of London (International Initiative for Promoting Political Economy) and the University of Crete in September 2007 and the participants of the 19th Annual International Conference of the European Association for Evolutionary Political Economy (EAEPE) in November 2007 is gratefully acknowledged. Also, the authors are indebted to Claude Diebolt and Elisabeth Allgoewer for kindly providing useful material. Finally, we would like to thank the two anonymous referees for their helpful comments and suggestions.
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Michaelides, P.G., Milios, J., Vouldis, A. et al. Emil Lederer and Joseph Schumpeter on Economic Growth, Technology and Business Cycles. For Soc Econ 39, 171–189 (2010). https://doi.org/10.1007/s12143-009-9032-2
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DOI: https://doi.org/10.1007/s12143-009-9032-2