Joseph Schumpeter and Dynamic Economic Change

Joseph Schumpeter (1883–1950) viewed capitalism as a dynamic engine of progress. In his view, mature economic systems find a regular and stable routine of supply, demand, and exchange; Schumpeter called this the “circular flow.” Entrepreneurs interrupt this circular flow with new ideas and visions about the economic future, recombining existing resources to create new and more valuable products and services.

Schumpeter called capitalism a process of “creative destruction” because it overthrows old routines and methods of production. But he recognized that this process is unstable, and therefore unsettling, for those who have become accustomed to established ways. Schumpeter predicted growing political opposition to capitalism and a corresponding growth in socialism in the twentieth century.

The Great Economic Thinkers Series is a collection of audio presentations that explain, in understandable language, the major ideas of history’s most important economists. Special emphasis is placed on each thinker’s attitude toward capitalism, revealing their influence in today’s debate on economic progress and prosperity.