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The Austrian and American economist, political scientist, sociologist and historian of economic thought Joseph Alois Schumpeter (1883–1950) first began to study economic dynamics based on long Kondratiev cycles, in contrast to the static analysis of representatives of the neoclassical movement, and substantiated the main provisions of the theory of innovation.

Schumpeter talks about five cases of innovation:

• 1) introduction of either a new product unknown to consumers or a new type of product (consumer novelty);
• 2) introduction of a new production method;
• 3) opening a new market in which this industry was not previously represented;
• 4) discovery of a new source of raw materials;
• 5) introduction of a new organizational structure in any industry.

The scientist began to use the term “innovation” only in 1930. In the theory of economic development, J. Schumpeter viewed the economy as a specific system of combinations of production factors and resources, where each of them has an exclusively unique way of combining productive forces, with the help of which a new product is created.

Scientist's opinion

According to J. Schumpeter's definition, innovation is a new combination of production factors motivated by the entrepreneurial spirit.

He justified the need to implement innovations as a constant change of options (combinations) that promote economic development. He divided many combinations into two main subsets - new and old. Moreover, J. Schumpeter believed that each new combination of production factors (resources) should include the necessary means of production from one or another old combination, i.e. have continuity. At the same time, he connected the implementation of new combinations with the corresponding reorganization of production, for example, by ensuring a monopoly position (through the creation of a trust) or undermining the monopoly position of another enterprise. According to J. Schumpeter, new combinations appear discretely, at intervals of varying duration and, as a rule, in large numbers. It is the massive emergence of new combinations that explains the main features of the period of economic recovery, structural changes in society and the vector of innovative development.

In his theory, J. Schumpeter substantiated the leading role of innovation in the process of economic development, which occurs due not only to an increase in national reserves and means of production, but also to its own redistribution of production assets belonging to old combinations in favor of new ones. “By development we will understand only such changes in economic life that do not influence him from the outside, but come from his own initiative, i.e. from within.” Development is a process of discontinuous change and imbalance caused by innovation. J. Schumpeter introduced into economics the distinction between economic growth and economic development. By his definition the economic growth - is the increase in production and consumption of the same goods and services over time. Economic development – this is, first of all, the emergence of something new, previously unknown, in other words, innovation.

J. Schumpeter identified five typical changes in economic development based on innovation:

• 1) the use of new equipment, new technological processes or new market support for production (purchase and sale);
• 2) introduction of products with new properties;
• 3) use of new raw materials;
• 4) changes in the organization of production and its logistics;
• 5) the emergence of new markets.

J. Schumpeter considered innovation as a means of overcoming economic crises. Based on the theory of “long” opportunistic waves of business activity, he identified a new opportunity to bring the production system out of crisis, associated not with an increase in the scale of activity, a reduction in costs or an increase in the price of previous products, but with a change in the economic process through the creation and implementation of innovations. In his opinion, with the help of innovations, an enterprise can use new competitive methods that differ from previous price forms of competition.

The scientist called new competitive methods based on innovative activity effective competition, and the exclusive position of a firm (enterprise), created on the basis of a non-price form of competition, effective monopoly. According to the concept of J. Schumpeter, effective monopoly - this is the position of a company in the market in which it derives additional benefits and profits from implementing innovative changes in its own economic system. For example, the release of new products; application of new technologies of production, organization and management, etc.

In his work “Cycles of Conjuncture” (1939), J. Schumpeter introduced the concepts of basic and secondary innovations. Basic innovation implements the created invention and contributes to the formation of new technologies and the emergence of a number of less significant (secondary) innovations that form the so-called innovation bundles - clusters.

Innovation Cluster – a set of basic innovations (package) implemented at a single point in time. According to the scientist, innovations do not appear evenly, but in certain groups - clusters. Moreover, it is new scientific discoveries that lead to the emergence of such innovation clusters. Today, the concept that describes the unevenness of innovation activity is the basis of almost all modern concepts of scientific and technological development.

Each basic innovation contributes to the creation of a new field of production, which successively goes through development cycles from an initial period of sharp growth through a stage of maturity to gradual decline.

At the beginning of the 20th century. J. Schumpeter developed the “innovative theory of entrepreneurship”, on the basis of which already in the 1930s. developed the "Kondratiev cyclical paradigm" in the direction of the innovative concept of "long waves", set out in the fundamental two-volume book "Business Cycles". In the implementation of innovative activities, he paid special attention to entrepreneurs - innovators who strive to make large profits through innovation and who are an active element in the process of economic development of the country. I. Schumpeter called people who conceive and implement innovations entrepreneurs. By making innovative decisions, entrepreneurs create new, previously unknown combinations of production factors. That is why J. Schumpeter believed that entrepreneurial ability is the fourth factor of production, which is not taken into account by the classical theory of economics.

An entrepreneur is an economic entity whose defining function is the direct implementation of innovation. Entrepreneurship is not a profession. J. Schumpeter separated the innovative function of an entrepreneur from the function of an owner, since an entrepreneur does not necessarily have the right of an owner. The business owner only provides the necessary funds and risks losing them. An entrepreneur is not an inventor, he only implements the results of scientific discoveries and inventive activities.

He is an innovator. Entrepreneurs should be distinguished from managers (executives), who do not implement innovations, but only perform work to manage economic processes. Subsequently, the idea of ​​the relationship between entrepreneurship and innovation was developed by the American economist P. Drucker, who emphasized that innovation is a special tool of entrepreneurship. In the process of innovation, new resources are created, and existing ones find new areas of application.

Scientist's opinion

According to Drucker, “innovation is a special tool that allows an entrepreneur to take advantage of change and turn it into new opportunities, for example, opening a new business or providing new services.”

J. Schumpeter proved that the process of introducing innovations does not proceed evenly, it is characterized by leaps and jerks. Once one innovative entrepreneur overcomes technological and financial challenges and discovers new ways to make a profit, others quickly follow.

Practice issues

An example is the American entrepreneur Mark Zuckerberg, who created the innovative Internet project Facebook. Entrepreneurs from different countries followed his example. One of these clones is the Russian site Vkontakte.com, which subsequently developed into an original and unique software and innovative product, which currently occupies a leading position in terms of audience in Russia and some Eastern European countries.

Towards the end of such a period of prosperity, the national economy begins to experience depression, and making a profit in the future becomes difficult, the rate of profitability drops significantly. Many market participants cannot withstand competition and do not repay loans. There is a temporary decline. As a result, a new equilibrium circulation of resources is established. At the same time, the economy does not return to its previous state of equilibrium. Production is at a new level of development, the composition and quality of products produced by society are changing. Thus, J. Schumpeter described options for cyclical changes in business activity, which are known as phases of prosperity, recession, depression and recovery, and believed that innovative activity is the main factor causing dynamic wave changes in the economy, i.e. its development.

The significance of J. Schumpeter's works is especially relevant at the present stage of reform of economic science after the global crisis. Nobel Prize winner in economics Joseph Stirling (2001) notes that an important point in J. Schumpeter’s theory of innovation is the statement about the development of competition for innovation: “There was competition Drucker P. Business and innovation: trans. from English – M.: Publishing House "Williams", 2007.

Joseph Alois Schumpeter(German: Joseph Alois Schumpeter; February 8, 1883 - January 8, 1950) - Austrian and American economist, political scientist, sociologist and historian of economic thought. Popularized the term “creative destruction” in economics, and the term “Elite democracy” in political science.

In 1986, in honor of the economist’s merits and to study his work, the International Joseph Schumpeter Society was created; In 2001, the Schumpeter Institute was founded in Berlin. Part of the scientist’s personal library is kept in Tokyo’s Hitotsubashi University (Schumpeter Library).

Biography

Joseph Schumpeter was born on February 8, 1883 into a German family in the small town of Tresti in Moravia, which at that time was part of the Austro-Hungarian Empire. Josef's father, also Josef, owned a textile factory. He died when Schumpeter was only 4 years old. In 1893, he and his mother Johanna Schumpeter (nee Grüner) moved to Vienna. Soon his mother married Field Marshal-Lieutenant Sigmund von Köhler, who was 33 years older than her. The marriage of his mother to a high-ranking military man allowed Schumpeter to enter the most elite school in Vienna at that time, Theresianum. From Theresianum, Schumpeter took away an excellent knowledge of ancient Greek, Latin, French, English and Italian, which was very useful to him in the future.

After graduating from school in 1901, he entered the Faculty of Law at the University of Vienna. Among his teachers were the founders of the Austrian economic school F. von Wieser and O. von Böhm-Bawerk. In 1906 he defended his dissertation for the title of Doctor of Law.

After graduating from the University of Vienna, he continued his studies in Berlin, where, in particular, he attended lectures by Gustav von Schmoller, and then in London. In 1907 he married an Englishwoman, Gladys Seavers. The marriage was unhappy, and Schumpeter divorced in 1920. In 1907-1908 he worked as a lawyer in Cairo.

In 1908, his first major monograph, “The Essence and Main Content of Theoretical National Economy,” was published in Leipzig. The book met with a very cool reception from both German and Austrian economists. Among the two scientific schools of that time - historical and Austrian - there was a very intense discussion, which went down in history as a “dispute about methods.” Its result was a ban at the state level for representatives of the Austrian school to teach at universities in the German Empire. Schumpeter's work contained both a description of the theoretical achievements of marginalists, which were denied by the historical school, and mathematical techniques in economic analysis, which were skeptical of representatives of the Austrian school. As a result, Schumpeter was unable to obtain a place at the University of Vienna.

Returning from Cairo, he received the position of privatdozent at the University of Vienna, and then in 1909 - professor of political economy at the University of Chernivtsi, which was part of the Austro-Hungarian Empire. In 1911 he took up the post of professor of political economy at the University of Graz. He received this position only with the help of his teacher, President of the Academy of Sciences and ex-Minister of Finance Böhm-Bawerk, despite the fact that the faculty voted against his candidacy.

In 1913-1914 he worked as an exchange student at Columbia University in New York. In 1916, he participated in the preparation for publication of the scientific journal “Archive of Social Science and Social Policy” (German: Archiv fr Sozialwissenschaft und Sozialpolitik). In the same year he was elected dean of the Faculty of Law at the University of Graz. From 1917 until the end of World War I in 1918, he worked as an employee of the Wartime Economic Commissariat (German: Generalkommissariats fr Kriegs- und bergangswirtschaft).

From March 15 to October 17, 1919, he served as Minister of Finance of Austria. In this post he signed a decree, according to which debts incurred in full pre-war crowns could be legally paid in an equal amount of depreciated crowns. As a result, according to the memoirs of Nobel laureate in economics F. von Hayek, he became extremely unpopular. After leaving the post of Minister of Finance, he became the president of one of the banks, which initially flourished, but soon went bankrupt.

Joseph Alois Schumpeter (German) Joseph Alois Schumpeter; February 8, 1883 – January 8, 1950) was an Austrian and American economist, sociologist and historian of economic thought. Popularized the term "Creative Destruction" in economics.

In 1986, in honor of the economist’s merits and to study his work, the International Joseph Schumpeter Society was created; In 2001, the Schumpeter Institute was founded in Berlin. Part of the scientist’s personal library is kept in Tokyo’s Hitotsubashi University (Schumpeter Library). In 2004, in the house where the economist was born (in the city of Tresti), the President of the Czech Republic V. Klaus opened the Schumpeter Museum (Rodny dum J. A. Schumpetera).

From 1893 he studied at the Theresianum, and from 1901 to 1906 at the University of Vienna.

In 1909-1911 professor at Chernivtsi University.

In 1919-1920 he served as Minister of Finance of Austria.

Professor at Rhine University (Bonn, 1925-1932) and Harvard University. President of the Econometric Society (1940-1941). President of the American Economic Association in 1948. "History of Economic Analysis" (" History of Economic Analysis", 1954) was published after the death of the author, edited by the widow of the scientist Elisabeth Schumpeter, also a qualified economist, author of the work "Statistics of English Overseas Trade from 1697 to 1808." (" English Overseas Trade Statistics, 1697-1808", 1960).

Scientific achievements

Schumpeter assigns a central place in the dynamics of economic processes to the entrepreneurial function. To reflect the realities of the late 19th - early 20th centuries, he put forward the theory of “effective competition” - the fruitful interaction of the forces of monopoly and competition, based on innovation and ensuring economic development.

In the dynamic concept of the cycle, he considers cyclicality as a pattern of economic growth. According to Schumpeter, the driving force of prosperity is investment in fixed capital, which serves to implement innovation.

Scientific works

Joseph Alois Schumpeter (1883-1950), economist and sociologist, was born in Austria, where he gained fame as a theorist with the publication of one of his most famous works, The Theory of Economic Development (1912). Since 1932, Schumpeter lived and worked in the United States, being a professor at Harvard University, where he published his famous works “Economic Cycles” (1939) and “Capitalism, Socialism and Democracy” (1942).

Already in his work “The Theory of Economic Development,” Schumpeter, unlike Walras, who studied the conditions of static equilibrium, develops a theory of economic development, putting at the forefront those internal factors that cause the economic development of the system. The very word “development” is already news for neoclassical theory, since, as is known, it tended to consider static problems. Its focus was on two fundamental ideas: the best use of available resources and equilibrium (partial - in Marshall, general - in Walras). And Schumpeter first, completely in the spirit of neoclassical theory, begins his analysis with a static model, where all parameters of production, exchange, distribution and consumption remain unchanged. Everything seems to be moving in a circle. Schumpeter calls this state the economic circuit. Considering Walras' model, we noted that in such an equilibrium, all income is equal to costs and the value of any production product is equal to the value of the factors of production used, where the formation of values ​​is subject to the law of opportunity costs. There is no entrepreneurial profit (the excess price over payment for factors of production purchased externally represents the lost opportunity costs of the direct organizer of production). This is a pure neoclassical model. Schumpeter adds that it lacks not only profit, but also interest, since (since we have a process of constant economic circulation) there is no reason to make a distinction between present income and future income. (The zero interest assumption is highly controversial, since individuals always have time preferences...)

But Schumpeter's contribution to economic theory lies precisely in the fact that he explores those factors that “explode” the equilibrium of the market system from the inside. These internal factors become new production combinations, which determine dynamic changes in the economy. Schumpeter identifies several types of fundamentally new combinations of production factors:

creation of a new product,

use of new production technology,

use of a new production organization,

opening new markets and sources of raw materials.

New combinations of production factors are called “innovations” (innovations). It should be emphasized that in Schumpeterian terminology, “innovation” is not synonymous with the word “invention.” Entrepreneurial activity is associated with the use of existing funds, and not with the creation of new ones. The possibilities for new uses of funds are in abundance and can be known. But, as Schumpeter believes, these are “dead” possibilities. The entrepreneur implements them in practice, overcoming technological and financial difficulties, as well as risks, and opens up new ways of generating profit, which should be considered as an excess over the income that was established in the process of circulation. And it is the entrepreneur, the person whose function includes the implementation of a new combination of production factors, who is assigned a particularly important role in Schumpeter’s concept of economic development. It should be emphasized that entrepreneurship, according to Schumpeter, is a special gift, a property of human character, in no way dependent on class or social affiliation. This type of character is distinguished by the following features:

self-reliance,

risk preference

the value of one's own independence,

focus on one's own opinion,

the need to achieve success, despite the fact that the intrinsic value of money for him is small,

and as a key quality of an entrepreneur - the desire for innovation.

The entrepreneur is the main subject of the economic development process. Thanks to his activity, technical progress is carried out, an excess of value is created, a stationary situation is “hacked” and the economy receives an impetus for development. It is interesting to see how, in the theory of entrepreneurship, Schumpeter reconciles the concept of rational (“economic”) and real (“irrational”) man, the object of study of institutional economists. Considering the motives of economic activity in a static state, Schumpeter identifies the motive of satisfying needs on the basis of rational behavior (maximizing utility or benefit). Considering the dynamic model, Schumpeter believes that the motives of entrepreneurial activity are irrational, because the main motives are personal self-development, success, and the joy of creativity. An entrepreneur is driven by a thirst for activity and a will to win. It is interesting to note that an entrepreneur, according to Schumpeter, is not burdened with an excess of intelligence and in this case this is a positive quality. It is the relative limitation of his horizons that does not give him the opportunity to compare many different options for achieving a goal and indulge in long hesitation. The identification of irrational motives in the behavior of an entrepreneur led to the recognition that the theory of entrepreneurship is precisely the area where economic science and psychology found a common language, which contributed to the emergence of such a science as “economic psychology.”

Capitalist production, according to Schumpeter, cannot exist without constant revolutionary changes in technology and production technology, the development of new markets, and the reorganization of market structures. Such constant innovations carried out in the production process are the main source of profit, which does not exist in a situation of simple reproduction (or, according to Schumpeter, economic circulation). Profit occurs only when the economy is in constant motion, in the process of dynamic development. (Simplying the economic model, J. Schumpeter ignored the emergence of profit with an insufficient level of competition, the use of unique resources or human capital.)

In connection with the development of a dynamic model of economic development, Schumpeter introduced the concepts of “effective competition” and “effective monopoly”, linking them with the process of innovation and the function of entrepreneurship. Innovation, according to Schumpeter, is the core of a new type of competition, much more effective than price competition. Innovations open up the opportunity to change not only technology and products, but also influence the structure of demand, the conditions for the formation of costs and prices. And competition, stimulated by the desire to make a profit due to advantages in production costs and the quality of the product itself, Schumpeter called “effective competition.” In Schumpeter's concept, innovation is also associated with a new type of monopoly, which differs from those forms of monopoly that are based on special rights and privileges, ownership of limited resources or scarce goods. Schumpeter called monopoly, which is a consequence of innovation, effective, because it is formed in conditions of active competition, and, in his opinion, is incompatible with stagnation and exploitation through the price mechanism. The monopoly profit received by the innovator is an incentive and reward for innovation. At the same time, it is a transitory phenomenon for a particular company, since it disappears under the influence of the same mechanism of competition to which the monopoly owes its existence, that is, as a result of specific innovations. Thus, in Schumpeter's theory, "effective monopoly" is a natural element of economic development.

Schumpeter gave credit an important role in the study of internal factors of economic growth, considering it as the most important condition for using existing factors to create new production combinations. In order for innovative entrepreneurs to obtain the means of production at their disposal, they must use bank credit. Banks “create” money for innovators, and this begins the redistribution of the flow of resources, that is, social capital. Thus, banks, according to Schumpeter, are a special phenomenon of development, which, speaking on behalf of the national economy, issue powers to implement new production combinations. They act as necessary intermediaries between the desire to implement innovation and the ability to do so. The payment for providing such opportunities is a percentage, which is the price paid for the acquisition of new productive forces. According to Schumpeter, it is development in the true sense of the word (and not circulation) that in principle needs credit. But let's return to the entrepreneur. Having received a loan, he goes to the factor of production market, where, according to our assumption, a complete equilibrium of supply and demand reigns and disrupts it. He requires additional resources and offers an increased price for them. The system of equilibrium prices is disrupted, the direction of resource flows, and therefore the flows of consumer goods, changes. The entire rhythm of circulation, the entire system of prices, costs and incomes, breaks down. Some people go bankrupt, but the majority of entrepreneurs follow the innovator - and such “disturbance” of the system occurs constantly. It is this that is the usual state, and not the equilibrium circulation. And that is why entrepreneurial profit constantly exists, and for these reasons capitalism does not stand still, but is constantly developing.

Schumpeter is aware that an increase in the mass of money in circulation thanks to loans provided by banks causes a general increase in prices, primarily for production resources, including wages. But, according to Schumpeter, this is not just inflation, as seen in quantity theory. As a result of this initial inflation, the flow of economic circulation is disrupted: enterprises that operate traditionally suffer bankruptcy (since in the new conditions, income does not cover expenses), innovative entrepreneurs, on the contrary, make a profit. There is not just an increase in prices, but also a parallel change in the economic structure, a transition to a new round of the development spiral. Thus, bank credit turns out to be closely related to the phenomenon of economic development, and money functions not just as a means of circulation and a measure of values, but plays the role of a catalyst for economic growth, including through profit and interest.

Schumpeter also associates the cyclical form of economic development with innovative activity. He devotes his work “Economic Cycles” (1939) to the study of this problem. Having identified and established the connection between three types of cycles (long, classical and short), Schumpeter deduces the existence of economic cycles from periods of introduction of inventions. The latter are carried out in spurts, when one invention “pulls” behind it a bunch of innovations. As Schumpeter writes, every innovation causes a wave of imitation, spreading in all directions. Many such waves diverge simultaneously, they overlap each other, and such movement (when summing up all the waves) cannot be smooth and uniform. It gives rise to periods of general growth, which can be followed by periods of general decline. This is the essence of Schumpeter's approach to the analysis of business cycles. In general, this approach perfectly illustrates the mechanism of long waves in the economy, but hardly explains what happens during short cycles. He saw the cause of economic crises in the panic associated with the cessation of the economic boom, highlighting the psychological motive as central in explaining this economic phenomenon.

Schumpeter was not only an economist, but also a sociologist who was interested in the prospects for the development of capitalism. Let me remind you that the driving force behind Schumpeter’s development is the entrepreneur, the innovator. That is why Schumpeter saw the basis for the existence of capitalism in a private enterprise system of the classical type, based on small and medium-sized property. With the accumulation of wealth, its institutionalization, and the emergence of corporations, innovation activity becomes depersonalized, and the culture and nature of thinking changes. The main figures in the business world are managers and managers of large corporations. But a manager has completely different traits than an entrepreneur, and instead of striving for innovation, risk and independence, we see caution, a desire for promotion and power, and consistency in decision-making at all levels. And this is not accidental, since the hierarchical (bureaucratic) structure of a large corporation gives rise to both relatively weak incentives for activity, which are inadequate to the risk incentives of entrepreneurs, and a certain loss of responsibility for running a business. And the very behavior of a “man of the organization,” which presupposes loyalty, obedience, and reliability, has nothing in common with the behavior of an entrepreneur. As the figure of the entrepreneur disappears, the possibility of economic development also disappears. Moreover, the departure from the scene of the entrepreneur also means the imminent death of the bourgeoisie, since the interest is paid from his profits.

In addition, the disappearance of the figure of the entrepreneur will lead to the destruction of the social basis of capitalism, the basis of which is the individual owner. But the main reason for the imminent death of capitalism, according to Schumpeter, lies not in the sphere of economics, but in the sphere of the cultural superstructure, since a hostile attitude towards entrepreneurs on the part of other social groups is being formed in society. Schumpeter blames this on radical intellectuals with their exorbitant ambition. He notes that one of the characteristic features of the civilization of late capitalism is the growing availability of education, including higher education. The number of highly educated people is growing, but there is no adequate growth in jobs to match their aspirations. And then a large army of intellectuals begins to look for the reasons for their unsatisfactory position in the shortcomings of the existing social system, realizing themselves in its fierce criticism. Thus, according to Schumpeter, an environment is being formed that is unsuitable for entrepreneurship and it will disappear, and along with its disappearance, social and public progress will cease. A paradoxical conclusion arises that capitalism will wither away under the burden of its own successes - high rates of economic development, leading to the dominance of “big business” and the accessibility of education.