It’s important to learn from intellectual giants like Ayn Rand and Murray Rothbard, but there are many unsung heroes that are also worth exploring. In thiseducational series, we hope to introduce students to such individuals. While not all of the figures profiled here explicitly identified as libertarian, they made great contributions to the cause of liberty that are worth acknowledging.
“There never has been anytime when the store of scientific knowledge has yielded all it could in the way of industrial improvement, and, on the other hand, it is not the knowledge that matters, but the successful solution of the task sui generis of putting an untried method into practice.” -Joseph Schumpeter
His Life: Professor Schumpeter was an Austrian-Hungarian Economist and Political Scientist, born February 8th, 1883 in what is now known as the Czech Republic. He studied at the University of Vienna, and his publications demonstrate Austrian and Mengerian roots.
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. He is presently known for his original ideas regarding entrepreneurship and creative destruction.
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.”
Why he matters: Though not a mathematical economist himself, Schumpeter was one of the founders of the Econometric Society, serving as its president 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.
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.
Schumpeter is considered relevant for founding and dispersing many theories in the United States, such as: the business cycle theory (originally Austrian and Russian) and Economic Development through innovation and growth. He concentrated his ideas mainly on entrepreneurship and risk-taking business.