Tune in to any discussion on economics, and you’ll likely be bombarded by the latest “groundbreaking theory” from a fashionable academic. Failing that, even someone who takes a casual interest in the topic will have heard of Stiglitz, Krugman, Piketty, or Ha-Joon Chang.

Ask someone who the great historical figures in economics are, and they’ll say Smith, Keynes, or even Hayek. But there’s one lesser-known person who encapsulates the true spirit and purpose of economics and that’s Joseph Schumpeter.

Joseph Schumpeter (1883-1950) was an Austrian economist and political scientist. Born in what is now the Czech Republic, he studied at the University of Vienna, and his publications were closely tied to the Austrian school of Economics.

Schumpeter moved to the United States after being invited by Harvard University in 1932, where he lectured for several years. His lectures were neither popular nor easy to follow, since his views clashed with the fashionable Keynesian economic thinking at the time. But inevitably he would become known for his original ideas regarding entrepreneurship and “creative destruction.”

Schumpeter emphasized the role of entrepreneurs in driving markets forward

The Library of Economics and Liberty immortalizes him thus: “Schumpeter pointed out that entrepreneurs innovate not just by figuring out how to use inventions, but also by introducing new means of production, new products, and new forms of organization. These innovations, he argued, take just as much skill and daring as does the process of invention.”

Though not a mathematical economist himself, Joseph Schumpeter was one of the founders of the Econometric Society, serving as its president during 1940-1941. He is considered a qualitative economist, famously coining the term “creative destruction,” which forms the basis for capitalist competition today.

His work venerated entrepreneurship and innovation, arguing that entrepreneurs improve our lives by developing new, unheard-of industries or improving existing goods and services. This foundation is important to remember, as his work does postulate that capitalism is bound to decay into socialism over time.

The innovative capitalist enterprise, he observes, is insulated from short term economic problems, but the new technology ages, turning businesses into institutions living on old ideas. This causes society to move away from entrepreneurial capitalism to statist socialism.

Without innovation, society would stagnate and decay

Schumpeter’s The Theory of Economic Development describes an evenly rotating economy of a stationary state. Within this imaginary state, there is no room for innovations and innovative activities, because these activities would disturb it, causing it to no longer be a stationary state. Innovation is the solution to this state.

While older economists focused on the micro level, fussing over how people act in relation to prices and how to create a functioning market, Schumpeter was groundbreaking in he analyzed the economy on a different plane.

Really, what drives economies forward is the dynamism of markets in how they serve their purpose, disintegrate, and renew. The fact we constantly stress test how fit economic arrangements are for purpose is a wonderful thing; it breeds the innovation and efficiency we all enjoy in the modern age, and it would be a catastrophe for human wellbeing if it stopped.

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A version of this article was originally published on the Students For Liberty website.

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