Joseph Alois Schumpeter’s Theory of Economic Development and Social Change

Abstract

This study includes an accurate view of Joseph Schumpeter's concepts of the nature of capitalism, the driving forces behind economic logic, social-institutional structures, the relationship between society and the individual, and social and economic evolution. Schumpeter's economic sociology argues that the economy is primarily a part of the social-institutional system and that the qualified way to study the economy is to evaluate it within this framework. Schumpeter, who can be called the pioneer of institutionalist economists, argues that we can only understand economic activities, institutions and processes from a historically determined plane. Unlike most economists, Schumpeter analyzed the economy not only from a static but also from a dynamic perspective. For this reason, while explaining how economic developments will take shape in the future, Schumpeter examined the economic actions of individuals, technological innovations, the characteristics of the capitalist and the entrepreneur, and the institutions. According to Schumpeter, the entrepreneur emerges as the determinant of the conflict between the dynamism of capitalism and the gigantic bureaucratic structure of managerial capitalism and the destructive agent of the system. Schumpeter argued that as change continues, it becomes increasingly easier for individuals to initiate change and that entrepreneurial activities of individuals no longer need to be done by specific individuals with a high level of leadership. Schumpeter predicted that the evolution of capitalism into a new economic order would necessarily be a form of socialism, whatever the name.