“Capitalism, Socialism & Democracy,” J. Schumpeter (1942)

A Fine Theorem

A professor of mine once said that Schumpeter’s CSD is the most misunderstood book in economics. I think that’s probably right. I also think that, to the extent that Schumpeter has lately entered the economics Pantheon, his admirers ought not hang their hat on this particular book; there’s a story out there that Frank Knight called CSD good dinner-table conversation and nothing more, which also strikes me as pretty accurate. Schumpeter could also have used a bit more of the mathematization that he encouraged in students of his like Samuelson – his ideas about cycles of entrepreneurial activity being the cause of the business cycle seem mighty strange in retrospect (no surprise that Schumpeter was more or less a failure as a Finance Minister!). The book is not short, so I just want to expand here on a few points: Schumpeter on socialism, his ideas on education, and his argument…

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