Schumpeter and the Obsolescence of the Entrepreneur

The English-language literature of technological change is one of the few areas of economic writing in which Joseph Schumpeter has maintained a following and in which he has been accorded some modicum of the attention he deserves. There has grown up within this literature a standard interpretation of Schumpeter's famous assertion that progress will eventually come to be 'mechanized'. The conventional wisdom goes something like this. The argument in Schumpeter's early writings by which writers invariably mean the 1934 English translation of The Theory of Economic Development -- is really quite different from that in Capitalism, Socialism, and Democracy. There are, in effect, two Schumpeters: an 'early' Schumpeter and a 'later' Schumpeter. It was the former who believed in the importance of bold entrepreneurs, while the latter envisaged their demise and replacement by a bureaucratized mode of economic organization. Moreover, the reason Schumpeter changed his views is that he was reacting to the historical development of capitalism as he saw it taking place around him. As he moved from the world of owner-managed firms in early twentieth-century Europe to the world of large American corporations in the 1930s and 1940s, his opinions changed appropriately. The paper attempts to make two points. The first is that, as a doctrinal matter, the 'two Schumpeters' thesis, as it is understood in the Anglo-American literature on technological change, is clearly wrong. Equally wrong is the idea that the fundamentals of Schumpeter's thought on entrepreneurship were influenced importantly by any observation of large firms in the United States after 1931. Schumpeter's ideas were remarkably consistent from at least 1926 (five years before he came to the U. S.) until his death. The obsolescence thesis speaks to a distinction between early capitalism and later capitalism, perhaps, but not to an earlier and later Schumpeter. The second, and more important, point is that the obsolescence thesis is wrong. It rests on a confusion -- or perhaps a bait-and-switch -- between two quite different kinds of economic knowledge.