Entrepreneurship, Economic Evolution, and the End of Capitalism: Reconsidering Schumpeter's Thesis
Quarterly Journal of Austrian Economics, Vol. 12, No. 4, pp. 3-21.
19 Pages Posted: 26 Aug 2014 Last revised: 15 Sep 2014
Date Written: 2009
This paper seeks to explore and to critically evaluate, from an economic standpoint, Joseph Schumpeter’s theory of the decline of capitalism, as put forward in his Capitalism, Socialism, and Democracy. It begins by exploring and criticizing Schumpeter’s entrepreneurial theory, and then explains how this flawed theory led to Schumpeter’s conclusion vis-à-vis capitalist evolution into socialism. It then introduces into the theory of capitalist evolution an uncertainty-bearing entrepreneur, and re-examines the theory on this basis, both in general and, in the appendix, for the specific case of artificial increases in the supply of bank credit. The conclusion reached is that Schumpeter’s argument cannot hope to explain the decline of capitalism into socialism. However, while not valid for a truly capitalist system, Schumpeter’s theory is nevertheless applicable to an interventionist economy.
Keywords: Joseph Schumpeter, Capitalism, Socialism, Economic Evolution, Entrepreneurship, Ludwig von Mises
JEL Classification: L26, B25, E42, P17, P26
Suggested Citation: Suggested Citation