Money and Development in Schumpeter

Abstract

In Schumpeter's model of economic development money plays an essential role and capitalism is seen as a structurally unstable process. These distinctive features of Schumpeterian theory are due to the endogeneity of innovations and, as a consequence, of money supply. The endogenous nature of technical change and the picture of the capitalist process as a monetary circuit are also important elements in the Marxian critique of political economy. This paper reviews the Schumpeterian system, confronts it with Marx's theory, and proposes Schumpeter (as well as the heterodox stream in monetary analysis in which he must be placed) as a more appropriate critical reference for a renewal of Marxian theory of value, money and capital than Ricardian or neo-Ricardian theories.