Wednesday, January 30, 2019

756: Who is Joseph Schumpeter.....?

It wouldn't surprise me, if you never have heard of Joseph Schumpeter. He died in 1950 in the US, while he was teaching at Harvard University.
Today, Schumpeter has a following outside standard textbook economics, in areas such as economic policy, management studies, industrial policy, and the study of innovation. 
Schumpeter was probably the first scholar to develop theories about entrepreneurship.  
When you're not an economist it isn't easy to understand all ins and outs of the theories of Schumpeter, but I'll give it a try.
"Can Capitalism survive? No. I do not think it can.” Thus opens Schumpeter’s prologue to a section 
of his 1942 book, "Capitalism, Socialism and Democracy" pg 61. One might think, on the basis of the quote, that Schumpeter was a Marxist.
But that is not the case. What generates profits? Production, consumption and exploiting the people who generate the profits, the workers.
Marx would say: that is the moment that the proletariat will revolt and take the means of production in their own hands and remove the exploiters.
That is not how Schumpeter looked at the economic process. His main thesis was that the capitalist system is essentially static: 
for employers and employees as well as for customers, the system is stable without gaining profit, and no investments can be made.
Employees earn just enough for their labor, and their wages are based on the costs of producing and selling goods. 
Profit can therefore only come from innovation so that the production costs go down for a short time,
until the competition overtakes the company, but then the profit can be used for further investments, c.q. innovations. 
Two conclusions follow from this. The first is that capitalists, the owners of the means of production, are not themselves the driving force of capitalism, 
but entrepreneurs who invent new techniques or machines through which goods can be produced more cheaply.
The second consequence of Schumpeter's thesis is that profit made by entrepreneurs are temporary. 
Any innovation would be followed by others in the same industry or trade sector, and eventually, stability would emerge again. 
For Schumpeter, this meant that capitalism was unavoidably marked by cycles of progress and stagnation.
The entrepreneur disturbs the equilibrium and is the prime cause of economic development, which proceeds in cyclic fashion along several time scales. 

Schumpeter believed, like some other economists, that the economy develops itself in cycles of Expansion (there is an innovation),
Boom ( the new product is selling with big profits), Recession (other companies market the same product), 
Depression (no one is making a profit anymore on the product) innovative....
It is as if I hear my Prime Minister talk about the economy and what we should do and so on and so on.
This is the perfect capitalist system, but it won't survive eventually Schumpeter said. We'll have a look at that next lecture....
Thank you for your attention again.....
The floor is yours.....:-)

The Discussion

[13:18] .: Beertje :. (beertje.beaumont): Thank you Herman
[13:19] Cegorach (epaphroditos): Many thanks Herman!
[13:19] herman Bergson: you're welcome :-)
[13:19] herman Bergson: If you have any questions or remarks...feel free
[13:20] herman Bergson: What I find interesting is his idea that economic growth is driven y innovation and not by increasing consumption
[13:21] .: Beertje :. (beertje.beaumont): isn't it all about consumption these days?
[13:21] Particle Physicist Bejiita (bejiita.imako): aa i think i agree with some of the theory, a combination maybe
[13:21] herman Bergson: not according to Schumpeter, Beertje...that is not driving our economy
[13:21] herman Bergson: of course you need consumers....
[13:21] CB Axel: The main reason, it seems to me, is the only real way to increase consumption is to increase the population.
[13:22] Cegorach (epaphroditos): It seems to me that Schumpeter is suggesting that economy; on both the small scale and the large scale has its ups and downs; and that short periods of depression eventually breed new era's of prosperity. Would you say this holds true for American at the end of the great depression; and that such an event might -need- to occur to bring about new economic growth for the country?
[13:22] Dien (djdien.bailey) is offline.
[13:22] Particle Physicist Bejiita (bejiita.imako): cause everything seems indeed today to be about what we call "wear and throw away" and buy new things alll time (with ever-increasing mountains of waste as result)
[13:23] herman Bergson: Well Cegorach....I have seen a timeline of economic cycles somewhere...
[13:23] Particle Physicist Bejiita (bejiita.imako): Apple for ex want everyone to throw away their iPhones as soon as the next model arrives even they work perfectly
[13:23] herman Bergson: and indeed this cycle seems to exist
[13:23] CB Axel: I think what he's saying is that continual economic growth isn't possible.
[13:23] Particle Physicist Bejiita (bejiita.imako): agree
[13:24] herman Bergson: Well... continual innovation is possible...
[13:24] Honorary Puddle (chastitydispute): Yes, but wouldn't iPhone exactly be the point for innovation? It is not that people tend to buy same old model. It is that they buy ''next'' generation model.
[13:24] CB Axel: Small ups and downs seem preferable to me than great increases in the economy followed by deep depressions.
[13:24] herman Bergson: We have an obsession with innovation indeed....always the newer model...
[13:24] Honorary Puddle (chastitydispute): Which.. Perhaps isn't huge innovation but consumption greatly relies on innovation these days, at least i would say. New flavours, new fashion trends, new models of same old electronics. Etc, etc
[13:25] Particle Physicist Bejiita (bejiita.imako): that's also true, its a combination of that inventive cycle and the strive for ever greater (and uneccesary) consumption
[13:25] Particle Physicist Bejiita (bejiita.imako): we need to find a balance and be happy there id say
[13:25] herman Bergson: I agree Charity....
[13:25] herman Bergson: Yes Bejiita :-)
[13:26] Cegorach (epaphroditos): Excellent, thank you Herman, that is most enlightening. I admit to being something of a poorly educated American- so out of curiosity what would examples of this cycle be from your own countries history, would you say?
[13:26] Particle Physicist Bejiita (bejiita.imako): however its indeed important to drive development forward
[13:26] herman Bergson: Where in history did it get us...the need of bigger, better, faster?
[13:26] Particle Physicist Bejiita (bejiita.imako): as long its for a good thing, technical innovations ect
[13:27] herman Bergson: We had this Golden Age in the 17th century
[13:27] herman Bergson: then the industrial development in the 19th century
[13:28] herman Bergson: There are differences of opinion about how long periods in these cycles last...
[13:28] roos Gartner is offline.
[13:29] herman Bergson: they range from 3 to 5 years (Kitchin) to 30 to50 years....
[13:29] herman Bergson: I have no detailed knowledge of Dutch economics through the ages :-))
[13:30] Cegorach (epaphroditos): Thank you! This is fascinating; not too many opportunities to study Dutch history in America, let alone its economic history.
[13:30] herman Bergson: Kondratiev even talks about a duration of 60 years per cycle
[13:31] CB Axel: I wonder how much the cycle was effective after plagues.
[13:31] herman Bergson: aren't pulling a leg, aren't you :-)
[13:31] Honorary Puddle (chastitydispute): In fact, if we're talking strictly about Dutch, there wasn't great impact of plague here.
[13:31] Cegorach (epaphroditos): I'm actually extremely serious... history isn't taught much in schools here.
[13:31] CB Axel: I've felt for a while that we're overdue for a good old-fashioned plague.
[13:32] Cegorach (epaphroditos): When it is its generally very American-centric and even then doesn't often do a good job of that.
[13:32] Honorary Puddle (chastitydispute): According to various science studies we kinda are CB haha
[13:32] CB Axel: European history isn't taught much in the US.
[13:32] herman Bergson: American history is taught over here as is about China and the rest of the world :-)
[13:33] CB Axel: We are taught nothing of Asian or African history.
[13:33] CB Axel: And South American.
[13:33] herman Bergson: I know about the Founding Fathers, General Lee...the way Indians were treated...we call it war crimes now and so on
[13:34] herman Bergson: But here we are going off topic...:-)
[13:34] CB Axel: I think if we were taught all that we'd have to admit how badly we've treated other countries and have messed up their governments.
[13:34] Particle Physicist Bejiita (bejiita.imako): the problem is that the US is just about yes Us and the rest of the world, i have heard many believe for ex Sweden and Switzerland to be the very same place
[13:35] herman Bergson: And your own native inhabitants, CB
[13:35] CB Axel nods
[13:35] CB Axel: Don't forget, though, our founding fathers who started all this were Europeans. :-)
[13:35] herman Bergson: topic....
[13:35] Particle Physicist Bejiita (bejiita.imako):
[13:36] herman Bergson: What strikes me the most about the inhabitants of the US is that they mainly believe in white supremacy....
[13:36] CB Axel: I don't
[13:36] herman Bergson: or at least poses like that
[13:37] herman Bergson: and what you never hear about is how these white land thieves marginalized the original inhabitants of that continent
[13:37] herman Bergson: I is all history....
[13:37] Cegorach (epaphroditos): That's a bit of a misconception; it's almost important to point out that Caucasians aren't the majority in every state. Their not in California anymore, for example.
[13:38] herman Bergson: But I don't see any reflection on it or respect for the truth
[13:38] CB Axel: I think we've lost a lot of wisdom by not listening to native Americans as well as Africans and Asians.
[13:38] CB Axel: Cegorach, I'm not sure white men have ever been in the majority in the US.
[13:38] herman Bergson: Yes Cegorach....that is a good thing
[13:39] CB Axel: if you add women in, then yes. Whites have been in the majority, but women only get counted when the men want to make a point. :-)
[13:39] herman Bergson: All that is happening in the US these days is the result of the white men's frustration, is my opinion
[13:39] Cegorach (epaphroditos): Also what you Europeans would generally perceive as White Supremacists more has its roots in Protestantism discrimination towards Catholic minorities. Groups like the KKK started in response to what they saw as an invading tide of White, Catholic Europeans afterall.
[13:39] herman Bergson: I vote for Kamla Harris.....Indian - Jamaican blood ! :-))
[13:39] herman Bergson: Kamala
[13:40] herman Bergson: True Cegorach!
[13:40] herman Bergson: Sorry...I let myself go....
[13:40] .: Beertje :. (beertje.beaumont): :)
[13:41] CB Axel: I don't vote for anyone based on their gender or race. I vote for policies and a candidates ability to deliver on those policies.
[13:41] herman Bergson: I watch too much MSNBC and other channels  these days :-))
[13:41] CB Axel: :-)
[13:41] Particle Physicist Bejiita (bejiita.imako): hehe
[13:41] herman Bergson: So agai..I apologize to go off topic too much for a moment
[13:41] Cegorach (epaphroditos): No worries! It was a good discussion.
[13:42] herman Bergson: It is just that it all worries me so much.....
[13:42] .: Beertje :. (beertje.beaumont): in what way Herman?
[13:42] .: Beertje :. (beertje.beaumont): way
[13:42] Particle Physicist Bejiita (bejiita.imako): aaa yes
[13:42] CB Axel: It's too early for me to be thinking about who to vote for in almost 2 years.
[13:42] herman Bergson: A president disrupting what has been created in more than 70 years of peace
[13:42] Particle Physicist Bejiita (bejiita.imako): it should go off topic a little at least
[13:42] Particle Physicist Bejiita (bejiita.imako): now and then
[13:42] Particle Physicist Bejiita (bejiita.imako) whispers:
[13:42] CB Axel: I'd like to see how the people we voted for a couple months ago do in their jobs.
[13:43] herman Bergson: Just the idea to leave NATO for instance Beertje!
[13:43] .: Beertje :. (beertje.beaumont): yes
[13:43] herman Bergson: an historical disaster and the best present ever to Putin
[13:43] Particle Physicist Bejiita (bejiita.imako): true
[13:43] .: Beertje :. (beertje.beaumont): Putin wants chaos in Europe
[13:44] Particle Physicist Bejiita (bejiita.imako): 2 assholes patting each others backs
[13:44] herman Bergson: Pelosi is already publicly wondering whether Putin has something on T., financialy, personally
[13:44] CB Axel: And in the US, Beertje.
[13:44] herman Bergson: Yes...that is the whole game
[13:44] CB Axel: It's looking more and more like that, Herman.
[13:44] CB Axel: Putin owns Trump.
[13:44] Cegorach (epaphroditos): Trump isn't as dangerous as most people make him out to be, he's not a warmonger at least. He's too self interest in his economic success for that.
[13:44] CB Axel: And would like to own the whole US.
[13:44] Cegorach (epaphroditos): Not that I support Trump mind you, but I don't really see him starting wars anytime soon.
[13:45] herman Bergson: I like to believe that too, Cegorach :-))
[13:45] .: Beertje :. (beertje.beaumont): he will
[13:45] CB Axel: He might provoke some other idiot to start one.
[13:45] Cegorach (epaphroditos): ^ True!
[13:45] CB Axel: Like Un
[13:45] herman Bergson: Now we have the Venezuela issue......
[13:45] CB Axel: I mean Kim.
[13:45] Particle Physicist Bejiita (bejiita.imako): well i hope for sure not, there are enough wars already
[13:46] herman Bergson: I really wait and wait for the Mueller report....
[13:46] Cegorach (epaphroditos): Wars are at an all-time low, historically speaking. Their becoming less and less profitable.
[13:46] herman Bergson: That will blow up the whole Trump family....
[13:46] CB Axel: The only reason anyone in the US cares about Venezuela is because they have oil. Right?
[13:47] herman Bergson: To small a production to really mean something
[13:47] Particle Physicist Bejiita (bejiita.imako): say the same, as long as there is oil they dont get a shit about the people living there but instead fully support their opressor
[13:47] herman Bergson: Indeed Cegorach!
[13:47] Particle Physicist Bejiita (bejiita.imako): awful
[13:47] herman Bergson: Except in poor countries....
[13:48] herman Bergson: so you can blow up the Middle East at low costs....onle bricks and cement needed for rebuilding :-)
[13:48] Particle Physicist Bejiita (bejiita.imako): - all the dead people
[13:48] herman Bergson: except for one or two more metropolitan cities
[13:48] herman Bergson: So no damage to Damscus please :-)
[13:49] herman Bergson: Damascus
[13:49] herman Bergson: Anyway :-)
[13:49] herman Bergson: Economics is driven by innovation...that is what bruings us our prosperity :-)
[13:50] Particle Physicist Bejiita (bejiita.imako): and i totally agree with that
[13:50] herman Bergson: That is for now our counclusion :-)
[13:50] Particle Physicist Bejiita (bejiita.imako): inovatio and development is important in general
[13:50] herman Bergson: And yet capitalism wont hold says Schumpeter.....
[13:50] herman Bergson: we'll see next Thursday what he means by that
[13:50] Particle Physicist Bejiita (bejiita.imako): ah
[13:50] CB Axel: I'll be interested to hear more about Schumpeter.
[13:50] Particle Physicist Bejiita (bejiita.imako): me too
[13:51] Honorary Puddle (chastitydispute): Dun dun dun. Looking forward to the next class!
[13:51] herman Bergson: Thank you all for your participation again...
[13:51] CB Axel: Thank you, Herman.
[13:51] Cegorach (epaphroditos): Excellent meeting you all; I'm looking forward to the next class.
[13:51] CB Axel: See you all on Thursday.
[13:51] herman Bergson: You were brilliant again today :-))
[13:51] Particle Physicist Bejiita (bejiita.imako):
[13:51] Particle Physicist Bejiita (bejiita.imako): aaa cu then
[13:51] herman Bergson: Class dismissed....
[13:51] .: Beertje :. (beertje.beaumont): thank you Herman
[13:51] Particle Physicist Bejiita (bejiita.imako): bye all for npw
[13:51] .: Beertje :. (beertje.beaumont): bye Bejiita
[13:51] Honorary Puddle (chastitydispute): Tot ziens!

[13:51] bergfrau Apfelbaum: thank you, world! It is always so interesting to follow the discussion. i like this class, danke Herman & Class

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