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Source link: http://archive.mises.org/9572/schumpeter-vs-keynes/

Schumpeter vs. Keynes

March 9, 2009 by

Although he was of Austrian descent and was a student of Eugen von Böhm-Bawerk, Schumpeter cannot be considered part of the Austrian School. He never opposed government intervention like his classmate Ludwig von Mises. Schumpeter may not have been the strongest free-market advocate, but he would surely be dismayed by the current worship of Keynesian interventionism, which will ultimately stifle the entrepreneurial genius that drives capitalism and improved living standards. FULL ARTICLE

{ 7 comments }

fundamentalist March 9, 2009 at 9:03 am

Thanks for the insight into Schumpeter. He was an interesting person, if not a great economist. His business cycle theories leave a lot to be desired. He was stuck on deterministic cycles (Kondratiev-54 years, Kuznets-18 years, Juglar-9 years and Kitchin-about 4 years) which made business cycles an organic part of capitalism. Still, his history of economic thought is great as well as his focus on entrepreneurship.

To some degree, I think we give Keynes too much credit. Socialism predated Keynes and the “Progressives” has wanted the state to control the economy as far back as Teddy Roosevelt and Wilson. The Federal Reserve was born in 1912. Hoover initiated many of the programs that FDR gets credit for and both did their damage almost a decade before Keynes. It seems to me that all Keynes did was take popular ideas that economists opposed and dress them up in technical lingo to give them respectability.

Deefburger March 9, 2009 at 10:21 am

@fundamentalist

LOL! You are absolutely right! It’s easy enough to do, and it wins you favorable grants for your department and you get to rub elbows with the elite!

Is Krugman the new Keynes? They both start with a “K”. Hey, its as good a theory as either of them ever came up with!

Inquisitor March 9, 2009 at 1:37 pm

Is opposition to government intervention the sine qua non of being an Austrian? I thought it was certain methodological precepts and concepts. Lachmann is widely considered to be an Austrian though no doubt he was far more interventionist than Mises… so I am guessing Schumpeter differs in other ways besides being more pro-intervention than Mises, to be disqualified from being Austrian.

FTG March 9, 2009 at 2:59 pm

Fundamentalist,
To some degree, I think we give Keynes too much credit.

I always wondered about that. It may be that Keynes was simply an apologist for well established government interventions, using a lot of convoluted reasoning to mask the obvious defects behind the economic justifications for interventionism. He was certainly not clever enough to have invented Keynesianism, the same way Machiavelli was NOT clever enough to have invented cutthroat politics.

Miklos Hollender March 9, 2009 at 4:10 pm

There is something very funny about an Austrian Economist who wasn’t an Austrian Economist :-))) To avoid confusing, I suggest to use the word Österreicher when you are talking about nationality and Austrian when you are talking about the school.

Anyway. I like many of the ideas of Schumpeter – granted, he might have not been very good in the rigorous theory stuff, but had very good insights in some social dynamics.

I think his most important insight was that “the stock exchange is a poor substitute for the Holy Grail”. Meaning: Capitalism grew up under the ancient régime, of king, noblemen and clergy, and while that hindered it, it also protected it.

When the bourgeoisie got rid of the ancient regime, using rationalistic justifications, not so long after it had to realize that the growing Socialist movement is using exactly the same arguments against them than they used against the noblemen, the kings and clergy.

Meaning that Capitalism can survive only as long as it’s based on the morals, manners and aesthethics inherited from the pre-Capitalist system, it cannot survive as a pure ratonalistic ideology, because it only works in the long run, and in the long run we are all dead, in the short run it is always better to implement a comfy welfare state that wastes the resources in about 50 years and we are dead by than anyway, and devil take the next generation.

So it requires low time preferences to be pro-Capitalist and low time preferences are based on inherited values from not rationalistic pre-Capitalist sentiments: of life seen as duty and not as a party, of service to country, a view where our contract with the dead protects the rights of the unborn (Burke).

Thus I consider Schumpeter not quite as a good economist but rather one of the most important founders of political-economical Conservatism, similarly to Edmund Burke.

Do read Schumpeter’s Capitalism, Socialism, Democracy: even though most of you won’t agree with it it’s clearly a very bright work of a very bright mind.

Miklos Hollender March 9, 2009 at 4:32 pm

“To some degree, I think we give Keynes too much credit. ”

No, just the wrong kind of credit. Keynes almost diabolical achievement was luring Conservative politicians into highly statist left-wing policies for about until the Reagan-Thatcher era, by using a very Conservative-sounding ,very Burkean-sounding language. Read the last chapter of the General Theory, it’s full of Burkean-Aristotelean-sounding calls for common sense, moderation, sanity, and a practical middle way. The problem is that Capitalism is in itself a middle way, therefore his isn’t. Thus he managed to lure many who would otherwise be not Libertarian, but more or less freemarket-leaning Conservative politicians into highly statist policies f.e. De Gaulle.

Joel LeFevre March 9, 2009 at 5:27 pm

And for the view that Schumpeter was simply a socialist – Chapter 11 of the book Keynes At Harvard: Economic Deception as a Political Credo.

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