Joseph Schumpeter facts for kids
Quick facts for kids
Joseph Schumpeter
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| Born | February 8, 1883 |
| Died | January 8, 1950 (aged 66) |
| Nationality | Austrian and American |
| Institution | Harvard University, 1932–50 University of Bonn, 1925–32 Biedermann Bank, 1921–24 University of Graz, 1912–14 University of Czernowitz, 1909–11 |
| Field | Economics, econometrics |
| School or tradition |
Historical school of economics Lausanne School |
| Alma mater | University of Vienna (PhD, 1906) |
| Doctoral advisor |
Eugen Böhm von Bawerk |
| Doctoral students |
Ferdinand A. Hermens Paul Samuelson James Tobin Anne Carter |
| Other notable students | Nicholas Georgescu-Roegen Paul Sweezy Hyman Minsky |
| Influences | Bastiat · Walras · Schmoller · Pareto · Smith • Marx • Keynes • Menger · Weber · Sombart |
| Contributions | Business cycles Creative destruction Economic development Entrepreneurship Evolutionary economics |
Joseph Alois Schumpeter (born February 8, 1883 – died January 8, 1950) was an important Austrian economist. He briefly served as the Finance Minister of German-Austria in 1919. In 1932, he moved to the United States. He became a professor at Harvard University and stayed there for the rest of his career. In 1939, he became an American citizen.
Schumpeter was one of the most influential economists of the early 1900s. He made the term "creative destruction" famous. This idea was first thought of by another economist, Werner Sombart.
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Early Life and Education
Joseph Schumpeter was born in Triesch, which is now Třešť in the Czech Republic. At the time, it was part of Austria-Hungary. His family spoke German and were Catholic. Joseph's father owned a factory, but he passed away when Joseph was only four years old. In 1893, Joseph and his mother moved to Vienna.
After finishing school, Schumpeter studied law at the University of Vienna. He earned his PhD in 1906. In 1909, he became a professor of economics at the University of Czernowitz in Ukraine. In 1911, he moved to the University of Graz, where he taught until World War I.
Career Highlights
In 1919, Schumpeter was asked to be the Minister of Finance in German-Austria. He suggested a special tax to help pay off war debts. He also disagreed with the government taking over a large industrial plant. In 1921, he became the head of a private bank. However, problems at the bank led to him leaving the role in 1924.
From 1925 to 1932, Schumpeter taught at the University of Bonn in Germany. He also gave lectures at Harvard University in the U.S. In 1932, Schumpeter moved to the United States for good. He helped many European economists who were forced to leave their homes because of Nazism. Schumpeter was also known for disagreeing with Marxism and socialism. He even criticized President Franklin D. Roosevelt's "New Deal" programs. In 1939, he became a U.S. citizen.
At Harvard, Schumpeter was a popular and interesting professor. He cared a lot about his students and spent much time helping them. Some of his colleagues thought his ideas were old-fashioned compared to the new Keynesian ideas. Despite this, he worked hard. In 1942, he published his most famous book, Capitalism, Socialism and Democracy. This book was printed many times and in many languages.
Key Economic Ideas
Schumpeter's ideas were influenced by the historical school of economics. This group of thinkers focused on how economies change over time. Schumpeter's work on innovation and entrepreneurship continued these ideas.
Evolutionary Economics
Schumpeter believed that capitalism is always changing. He called this an "evolutionary process." He said it involves constant innovation and "creative destruction." This means that new ideas and businesses are always replacing old ones.
Business Cycles
Schumpeter studied how economies grow and shrink in cycles. He believed that these "business cycles" are caused by new inventions and innovations. When entrepreneurs introduce new ideas, it creates a boost in the economy. This leads to periods of growth, followed by slower times as the economy adjusts.
He thought that different cycles, like the long "Kondratiev waves" (about 50 years) and shorter cycles, all combine to create the overall economic ups and downs.
Demise of Capitalism
In his famous book, Capitalism, Socialism and Democracy, Schumpeter predicted that capitalism would eventually be replaced by socialism. However, he had a different idea than Karl Marx. Marx thought capitalism would end with a violent revolution. Schumpeter believed it would slowly weaken itself.
He argued that capitalism's success would lead to big companies and ideas that are actually against capitalism. He thought that intellectuals (people who think and write about society) would start to criticize capitalism, even though they benefit from it. He also believed that as more people got higher education, they might become unhappy if they couldn't find fulfilling jobs. This could lead to more criticism and protests.
Schumpeter thought that democratic governments would increasingly vote for rules that limit entrepreneurs. This would make it harder for new ideas and businesses to thrive. He saw this as a natural process where the "creative destruction" of capitalism would eventually destroy the capitalist system itself. He emphasized that he was just analyzing these trends, not saying they were good or bad.
Democratic Theory
Schumpeter also had a unique view on democracy. He disagreed with the idea that democracy is simply about people choosing what's best for everyone. He felt that people often don't have enough information and can be easily influenced by politicians.
Instead, he saw democracy as a way for different leaders to compete for power through elections. People vote to choose their representatives, which makes governments legitimate and accountable. But he thought that the actual policies and decisions would mostly come from the politicians, not directly from the public. Some people call his view "elitist" because he thought politicians were better at making decisions than voters.
Entrepreneurship
Schumpeter was one of the first to deeply study entrepreneurship. He believed that entrepreneurs are key to economic change. He said that new ideas and ways of doing things come from these "entrepreneur-spirits."
He also thought that large companies play a big role in innovation. They have the money to invest in new research and develop new products. This helps bring new things to customers more cheaply, which improves everyone's lives.
Innovation
Schumpeter saw innovation as the most important part of economic change. He argued that when new technologies or products are created, they can give companies a temporary advantage. This allows them to earn higher profits. These temporary advantages are important because they encourage companies to keep inventing new things.
Personal Life
Schumpeter was married three times. His third wife, Dr. Elizabeth Boody, was an economic historian. She helped him with his research and writing. She also edited his very large book, History of Economic Analysis, which was published after he passed away.
Schumpeter once joked that he had three goals in life: to be the best economist, the best horseman in Austria, and the greatest lover in Vienna. He said he achieved two of these goals, but he never said which two!
Later Life and Death
Joseph Schumpeter passed away at his home in Taconic, Connecticut, on January 7, 1950. He was 66 years old.
Legacy
Even after his death, Schumpeter's ideas continued to be very important. Many economists, especially in Europe, were influenced by his work on how industries are organized, how economies change, and how they develop. Many famous economists, like Paul Samuelson, Nicholas Georgescu-Roegen, and Hyman Minsky, were his students. Even Alan Greenspan, a former head of the U.S. central bank, was his student.
Today, Schumpeter's ideas are still used in many fields. These include economic policy, business management, and the study of innovation. For example, the European Union's plans for innovation have been influenced by his thinking. There is even a "Schumpeter Prize" awarded by the International Joseph A. Schumpeter Society.
In 2008, the Schumpeter School of Business and Economics opened in Germany. In 2009, The Economist magazine started a column about business and management called "Schumpeter." They praised him as a "champion of innovation and entrepreneurship." They said his writings showed he understood the good and bad sides of business, and that his ideas were far ahead of his time.
