Lectures on Schumpeterian Economics: Schumpeter Centenary Memorial Lectures, Graz 1983 PDF
Preview Lectures on Schumpeterian Economics: Schumpeter Centenary Memorial Lectures, Graz 1983
Lectures on Schumpeterian Economics Schumpeter Centenary Memorial Lectures Graz 1983 Edited by Christian Seidl With Contributions by Karl Acham Lutz Beinsen Peter Hammond Peter Schachner-Blazizek Christian Seidl Peter Swoboda Gunther Tichy Springer-Verlag Berlin Heidelberg New York Tokyo 1984 Professor Dipl.-Kfm. Dr. Christian Seidl Institut fur Finanzwissenschaft und Offentliche Wirtschaft der Universitat Graz SchubertstraBe 6a, A-80l0 Graz ISBN-13:L 978-3-642-69658-9 e-ISBN-13: 978-3-642-69656-5 DOl: 10.1007/978-3-642-69656-5 Library of Congress Cataloging in Publication Data Main entry under title: Lectures on Schumpeterian Economics. Bibliography: p. 1. Schumpeter, Joseph Alois, 1883-1950-Addresses, essays, lectures. 2. Economics-Adresses, essays, lectures. 3. Entrepreneur-Adresses, essays, lectures. 4. Business cyc\es-Adresses, essays, lectures. I. Seidl, Christian. II. Acham, Karl. HB10l.S3IA3 1984 330'.092'4 84-1409 ISBN-13: 978-3-642-69658-9 This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically those of translation, reprinting, re-use of illustrations, broadcasting, reproduction by photocopying machine or similar means, and storage in data banks. Under § 54 of the German Copyright Law where copies are made for other than private use, a fee is payable to "Verwertungsgesellschaft Wort," Munich. © by Springer-Verlag Berlin Heidelberg 1984 Softcover reprint of the hardcover 1s t edition 1984 Typesetting and bookbinding: Appl, Wemding. Printing: aprinta, Wemding 2142/3140-543210 Preface Nobel laureate Sir John Hicks has with good reason called the third quarter of the twentieth century the age of Keynes1• Sir John nevertheless diagnosed a crisis of Keynesian economics even before this period had expired. But if only a few gifted scholars had foreseen the crisis of Keynesian economics before 1975, this year at least marked the ultimate disenchantment of Keynesian economics. Keynesian economic policy proved ineffective to cope with the economic challenges of the late seventies: unemployment, inflation, and stagnation of economic growth. Alarmed governments resorted to more and more intense remedies out of the Keynesian box of Pandora. But all they got was the creation of additional difficulties, aggravating the situation still more: soaring public debt, extraordinary balance-of-payments deficits, and economic instability. It had been argued until quite recently that capi talism could have survived only "in the oxygen tent of government deficit spend ing2 ". But it has become patent since the mid-seventies that it is first and foremost the Keynesian oxygen tent that has produced the present embarrassment of capital ist economies. The present economic malaise in nearly all Western countries has accordingly led to considerable unrest in the economics profession. Somewhat reminiscent of the thirties, a feverish search for alternatives to the prevailing but insufficient econ omic doctrine has begun. Among the candidates to be screened, Schumpeterian economics takes a prominent place. Schumpeter, if he were to be labelled by a single word, was a supply-sider. His economics contains a treasure of important findings that are now being re-discovered by supply-side economists. When nearly all econ omists were convinced that only public demand management could secure continu ous economic well-being, it was Schumpeter who stuck firmly to his conviction that it is the innovative entrepreneurs who propel the economic engine. But, on the other hand, it was the same Schumpeter who, after having ex pounded the merits of capitalism in an unrivalled manner, eventually became the prophet of its decay. Notwithstanding its overwhelming economic successes, capi talism is doomed to failure because its merits emerge only in the very long run3 and cannot be understood by the impatient general public, bewitched only by the imme diate present. The "performance [of capitalism] stands out only if we take a long-run view; any pro-capitalist argument must rest on long-run considerations. In the short run, it is profits and inefficiencies that dominate the picture4". In order to under- 1 Hicks (1974) 1. 2 Frisch (1982) xvi referring to Scitovsky (1980). 3 Note that Keynes used to cut short any argument considering long-term effects with the dictum "in the long run we are all dead". 4 Schumpeter, Capitalism, Socialism and Democracy, 144f. VI Preface stand and appreciate this, "people at large would have to be possessed of an insight and a power of analysis which are altogether beyond thems". "So capitalism stands its trial before judges who have the sentence of death in their pockets.6" - But is this Schumpeterian fatalism justified? Are we really destined to despair of the task of communicating the merits of a free capitalist economy, taking for granted that our arguments are being reinforced by the existence of rather long socialist experiments in Eastern countries which exhibit the economic inability of socialism day by day? No doubt, Schumpeter has put his finger on a rather sensitive spot, i.e. the discrep ancy between a good performance of an economic system on the one hand, and the general consciousness of its good performance on the other. It seems that capitalism has so successfully solved the former task as it had neglected the latter. The above should give some flavour of Schumpeterian economics; it is just in tended to whet the reader's appetite. I do not dare say that the last quarter of the twentieth century will eventually emerge as the age of Schumpeter7, but we un doubtedly witness a growing interest in his economics in the eighties. Books on Schumpeterian economics have mushroomed recently, to mention only those edited by Heertje (1981) and Frisch (1982), further the book by Mlirz (1983), the present book (1984) and a voluminous study by Loring Allen, forthcoming probably in 1985. Two more books are scheduled for 1984, the first will be a supplementum of the ZeitschriJt for NationalOkonomie on Entrepreneurship edited by Bos, Bergson, and Meyer, the second are proceedings edited by Bos and Stolper on Schum peter oder Keynes - Zur politischen Okonomie der neunziger Jahre at Springer-Verlag. Schumpeter was Austrian, perhaps not the most prominent among Austrian economists, but doubtlessly the most remarkable and original of Austrian econ omists. He was brought up in an atmosphere when Austrian economics thrived and was on the frontier of the economics science. This gives rise to a reflection on the situation of economics in Austria after the high lights of the past. It is simply lamen table. A whole generation of gifted scholars (Fritz Machlup, Gottfried Haberler, Os kar Morgenstern, Friedrich von Hayek, Gerhard Tintner, Ludwig von Mises) had either been expelled or chose to leave Austria because of better working conditions elsewhere. Like carrying coal to Newcastle they enriched the American economics profession, as Schumpeter had done several years before. World War II left Austria largely devoid of renowned economists. Due to these circumstances any injection of fresh blood into the Austrian eco nomics profession is highly welcome, notwithstanding that some effort has been done within Austria herself which has considerably improved the situation since then. We have very much benefitted from the generosity of the Oste"eichische Liinderbank which had sponsored a Schumpeter professorship for Austrian univer sities and endowed the University of Graz with this professorship for 1983, thus celebrating Schumpeter's one hundredth birthday. When Schumpeter came to Graz as a full professor of political economy in 1911, he was a young, ambitious and very promising scientist. So our intention was also to invite a young, ambitious and very 5 Schumpeter, Capitalism. Socialism and Democracy. 144. 6 Ibid. 144. 7 Only recently, Giersch (1983) has expressed confidence that the last quarter of our century will become the age of Schump eter. Preface VII promising scientist for 1983. Our first best choice was Professor Peter Hammond from Stanford University who lectured in Graz in the Summer Term 1983 on "Sec ond-Best Welfare Economics". In addition to the Schumpeter professorship, Schumpeter Centenary Memorial Lectures took place at the University of Graz on May 5th and 6th, 1983. These lec tures covered the major aspects of Schumpeterian economics and sociology. I should like to express my gratitude to my faculty colleagues who readily shared in these lectures and made them a success. I am also very much indebted to Professors Freisitzer, President of the University of Graz, HUlsmann, Dean of the Faculty of Social and Economic Sciences of the University of Graz, and Weber, Dean of the Faculty of Social and Economic Sciences of the University of Vienna, as well as to the General Manager of the Osterreichische Uinderbank Dr. Vranitzky. They did excellent jobs as chairmen of the four sessions of the Schumpeter Lectures. Of all the others who helped to make the Schumpeter Memorial Lectures a success I should like to single out the Governor of Styria Dr. Josef Krainer who did the par ticipants at the Symposion the honour of a wonderful reception at the marvellous castle of Eggenberg and showed much personal interest and support for these lec tures. Nine of the thirteen lectures of this volume were actually given as Schumpeter Centenary Memorial Lectures. It was Peter Hammond's obligation to deliver also three lectures at the three Viennese universities. He gave his lecture "Is Entrepre neurship Obsolescent?" at the Vienna University of Economics, his lecture "Must Monopoly Power Accompany Innovation?" at the University of Vienna, and his lecture "What to do about Business Cycles?" at the Vienna University of Technolo gy. My own lecture on "Schumpeter versus Keynes" was originally published in a somewhat shortened version in Austria Today (1983). By courtesy of Austria Today, it is included in this volume. Schachner-Blazizek's lecture was translated into English by Bill Templer, Dept. of Linguistics of the University of Graz. The English versions of all but Hammond's lectures were kindly checked and corrected by Pro fessor Loring Allen from the University of Missouri-St. Louis. The publication of these lectures has been made possible by financial support of the Alfred Schachner-Gediichtnisfonds, the Osterreichische Liinderbank, the Kammer der gewerblichen Wirtschaft for Steiermgrk, the Steiermiirkische Sparkasse, and of the Kammer for Arbeiter und Angestellte for Steiermark. This financial support of these benefactors is very gratefully acknowledged. It is finally a pleasure to thank my collaborators at the Institute of Public Eco nomics of the University of Graz for their cooperation and support that made the editorial task possible. My secretary Miss Irene Ploder has patiently typed several versions of Peter Hammond's and my own manuscripts and has corrected and re typed parts of other manuscripts. She has also helped with the references. My re search assistants Miss E. Winkler and Mr. R. Sturn have corrected the manuscripts and the proofs. Miss Winkler provided also invaluable help, as she bore much of the work in the archives and found interesting material which entered my bio graphic lecture on Schumpeter. Graz, December 20th, 1983 Christian Seidl Contents Part I Schumpeterin our Time . . . . . . . . . . . . . . . . . . . . . . . 1 Schumpeter and the Economic Problems of Today Peter J. Hammond. . . . . . . . . . . . . . . . . . . . . .. . ..... 3 Part 0 Entrepreneurship . . . . . . . . . . . . . . . . . .. ....... . 15 Schumpeter's Entrepreneur in Modern Economic Theory Peter Swoboda ................... . . . . . . 17 Is Entrepreneurship Obsolescent? Peter J. Hammond. . . . . . . . . . . . . . . . . . 31 Must Monopoly Power Accompany Innovation? Peter J. Hammond. . . . . . . . . . . . .... 45 Part 01 Cycles and Crises ... 57 What to do About Business Cycles? PeterJ. Hammond. . . . . . . . . . . 59 Schumpeter's Business Cycle Theory. Its Importance for our Time Gunther Tichy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 77 The Tax State in Crisis: Can Schumpeterian Public Finance Claim Modern Relevance? Christian Seidl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 89 The Current Relevance of Schumpeter's Theory of the Decay of Capitalism Peter Schachner-Blazizek . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 Part IV Money and Economic Policy. . . . . . . . . . . . . . . . . . . . . . . . 123 Schumpeter's Monetary Theory: An Unjustly Neglected Part of his Work Gunther Tichy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Schumpeter Versus Keynes: Supply-Side Economics or Demand Management? Christian Seidl. . . . . . . . . . . . . . .139 Part V Schumpeter - Social Scientist . . 153 Schumpeter - The Sociologist KarlAcham ............... . . 155 Schumpeter as an Historian of Economic Doctrine Lutz Beinsen. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 Joseph Alois Schumpeter: Character, Life, and Particulars of his Graz Period Christian Seidl. . . . . . . . . . . . .. . .. 187 References .... . .. 207 List of Contributors Dekan Prof. Dr. Karl Acham Institut ffir Soziologie, Universitiit Graz Mariengasse 24/11, A-8020 Graz Prof. Dr. Lutz Beinsen Institut fUr Volkswirtschaftslehre, Universitiit Graz SchubertstraBe 6a, A-80l0 Graz Prof. Dr. Peter Hammond Institute for Mathematical Studies in the Social Sciences, Economics Section, Stanford University 4th Floor, Encina Hall, Stanford, California 94305, U.S.A. Prof. DDr. Peter Schachner-Blazizek Institut ffir Finanzwissenschaft, Universitiit Graz SchubertstraBe 6a, A-80l0 Graz Prof. Dipl.-Kfm. Dr. Christian Seidl Institut fUr Finanzwissenschaft, Universitat Graz SchubertstraBe 6a, A-80l0 Graz Prof. Dipl.-Kfm. Dr. Peter Swoboda Institut ffir Industrie und Fertigungswirtschaft, Universitat Graz Hans Sachs-Gasse 3/111, A-80l0 Graz Prof. Dr. Gunther Tichy Institut ffir Volkswirtschaftslehre, Universitat Graz SchubertstraBe 6a, A-80l0 Graz Part I Schumpeter in our Time Schumpeter and the Economic Problems of Today Peter J. Hammond, Stanford 1 The Year 1883: Marx, Keynes and Schumpeter The year 1883 now seems in the rather remote past. Yet it saw the death and two births of economists whose works were so significant that some of them still condi tion the way economists think today. The year 1883 saw the death of Karl Marx, whose economic and other teachings have obviously had an enormous and continu ing impact on world history, though not always in the way he had intended. The year of 1883 also saw the birth of John Maynard Keynes, whose economic teach ings helped found the whole new subject of "macroeconomics", and also influ enced the making of economic policy in much of the world for at least forty years, with its concentration on achieving full employment. Nor is this Keynesian e~pha sis yet dead, despite the reversion to monetarist doctrines in the late 70's and early 80's when it seemed that the inflationary cost of full employment policies was be coming unbearable in much of the world. Finally, of course, we are all here today because 1883 also saw the birth of Joseph Alois Schumpeter. It really cannot be said that Schumpeter's influence on world events or even on the economics profession matches that of Marx or Keynes. Moreover, whereas any moderately knowledgeable person will know something of Marx or Keynes, rather few outside the economics profession have heard of Schumpeter. Not that we should think much the less of him for that; very few econ omists indeed will stand the comparison with Marx or with Keynes. Anyway, what counts is Schumpeter's legacy, not his fame among the general public. In fact, the question I shall toy with in this talk is whether Schumpeter's legacy might not be greater than the economics profession as a whole has seen fit to recognize. I shall consider whether some of Schumpeter's key ideas have been unduly neglected, and whether in fact the time for these ideas may yet lie ahead of us. These are not espe cially important questions; after all, what matters is that we progress by making new discoveries, and those who make the discoveries may even manage without ever reading Schumpeter's original work. Nevertheless, they are suitable questions for an occasion such as this.
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