Joseph Schumpeter

Schumpeter on Why People Are Bad at Arguing

by Ryan Young on July 8, 2011

in Politics as Usual, Zeitgeist

It’s because people rely on ad hominems and straw-man arguments. These leave the opponents’ actual arguments untouched, and resolve nothing.

So true is it that, in science as elsewhere, we fight for and against not men and things as they are, but for and against the caricatures we make of them.

–Joseph Schumpter, History of Economic Analysis, p. 90.

Schumpeter on Ideology

by Ryan Young on July 5, 2011

in Sanctimony

The great economist Joseph Schumpeter believed that people are fallible creatures. Because of our fallibility, even the scientific method isn’t entirely objective. Ideology is reflected in, say, a scientist’s (or an economist’s) choice to research one topic instead of another, or the patterns they find (or miss) while interpreting the data:

It embodies the picture of things as we see them, and wherever there is any possible motive for wishing to see them in a given rather than another light, the way in which we see things can hardly be distinguished from the way we wish to see them.

–Joseph Schumpeter, History of Economic Analysis, p. 42

Setting a New Tone

by Ryan Young on March 9, 2011

in Politics as Usual, Sanctimony

People complain that the level of political discourse in America is lower than ever. That isn’t actually true if you look at the historical record. But ratio of heat to light is still far too high.

Over at the Daily Caller, I share a bit of wisdom from the economist Joseph Schumpeter about how people can have a more constructive dialogue about the direction of the country.

Thoughts on David Frum’s AEI Exit

by Fred Smith on March 29, 2010

in Odds & Ends, Politics as Usual, Zeitgeist

Frum, like many intellectuals, suffered from the desire to gain respect from his fellow intellectuals. But, as Schumpeter noted long ago, the class interest of intellectuals is statism.

Schumpeter’s reasoning in “Can Capitalism Survive?” is rooted in envy. Intellectuals would grow envious of the entrepreneurial class – “If we’re so smart and moral, why are they so rich? – and seek to transform envy into theories of de-legitimization. Racism, sexism, environmental destruction, inequalities, exploitation of the developed world along with other associated Robber Baron style rewritings of history are the narratives they develop.

Since the narratives that inform the citizenry of most policy issues are devised and disseminated by intellectuals, the dominant narratives will be anti-capitalist, anti-business, and especially anti-entrepreneurial. That sets the stage for the growth of the state which creates many well-paying niches for intellectuals – mostly on the left, with a few on the right.

That combination of psychological and economic incentives means that most intellectuals see a large and growing government as key to their class interest.

Even conservative intellectuals seek respect from their fellow intellectuals. Intellectuals – having no obvious product save words and media appearances – are often insecure. Since most intellectuals are statists, the David Frums of the world are drawn into that ideology. AEI is not a statist institution – why they put up with him is unclear.

That point is made clear when one considers his defenders. Anne Applebaum’s “he was right” viewpoint is typical. She would have the Republican party follow the lead of David Cameron of the Tory party, endorsing European values, carbon energy rationing, redistribution policies – the whole non-sustainable welfare, regulatory state.

That would be insane.

Nanotech: Innovation or Stagnation?

by Ryan Young on August 26, 2009 · 1 comment

in Economy, Nano & Biotech, Regulation, Tech & Telecom

Over at the Washington Examiner‘s Opinion Zone, I give nanotechnology a Schumpeterian treatment. In the long run, a competitive, cut-throat market process driven by innovation is better for consumers than if government were to fund and direct research:

A nanotech firm that lives mostly off of government grants lives a sheltered, more docile existence. It doesn’t need to come up with new products that save peoples’ lives, or make them better. They just have to be good at getting grants.

New Schumpeter Book

by Ryan Young on August 20, 2009 · 1 comment

in Bailout Watch, Culture, Economy, Stimulus to Nowhere

In the tradition of the Reader’s Digest condensation of F.A. Hayek’s The Road to Serfdom, Joseph Schumpeter’s Can Capitalism Survive? Creative Destruction and the Future of the Global Economy is coming out on September 1.

Can Capitalism Survive? is a condensation of Schumpeter’s 431-page masterwork of 1942, Capitalism, Socialism, and Democracy. The timing couldn’t be better. With economic crisis and recession dominating the news, people are as interested in the topic as ever. The trouble is, they don’t understand it very well. This book should help.

In this age of bailouts and cash-for-clunkers, Schumpeter’s theory of creative destruction is crucial for understanding why some policies will work and others will fail.

Putting Schumpeter’s ideas in a more accessible format does not dilute them, as some ivory tower types will no doubt allege. It increases their impact. Economic literacy is a good thing. The economic way of thinking badly needs to be popularized. May many more distillations of major economic works follow this one.

Lehman bankruptcy: In capitalism, failure is not a dirty word

by John Berlau on September 15, 2008 · 6 comments

in Economy, Legal, Nanny State, Politics as Usual, Precaution & Risk

My reaction to Lehman Brothers’ declaring of Chapter 11 bankruptcy and the refusal of Treasury Secretary Hank Paulson and others to take extraordinary Bear Stearns-like measures for the government to prop the firm up can be summed up in three words: It’s about time!

Business failure is not only a permissible outcome of capitalism, it’s a necessary one. As the great economist Joseph Schumpeter has written, the process of “creative destruction” is essential for the market to function. For innovation to flourish and the standard of living of the populace to improve, the market must be free to reward success and punish failure.

As Schumpeter wrote in his 1942 book Capitalism, Socialism and Democracy, there is an ongoing “process of industrial mutation — if I may use that biological term — that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in, and what every capitalist concern has got to live in.”

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