Jerry Muller on Schumpeter

Monday, May 28th, 2007

Arnold Kling cites a number of a passages by Jerry Muller on Schumpeter:

He argued that it was precisely the dynamism injected into capitalist society by the entrepreneur that made him an object of antipathy. For the rise of a new entrepreneur…necessarily meant the relative economic decline of those ensconced in the status quo…

In attempting to account for the appeal of socialism, Schumpeter borrowed not only from Nietzsche but from the Italian political theorist Vilfredo Pareto…Pareto’s 1901 essay “The Rise and Fall of Elites,” conveys two themes to which Schumpeter would return time and time again: the inevitability of elites, and the importance of nonrational and nonlogical drives in explaining social action. Pareto suggested that the victory of socialism was “most probable and almost inevitable.” Yet, he predicted…the reality of elites would not change. It was almost impossible to convince socialists of the fallacy of their doctrine, Pareto asserted, since they were enthusiasts of a substitute religion. In such circumstances, arguments are invented to justify actions that were arrived at before the facts were examined, motivated by nonrational drives.

It should come as no surprise that academics and politicians often dislike capitalism:

It was no accident, Schumpeter thought, that capitalism had been so productive…For it appeals to, and helps create, a system of motives that is both simple and forceful. It rewards success with wealth and, no less over, it attracts the brightest and most energetic into market-related activity: as capitalist values come to dominate, a large portion of those with “supernormal brains” move toward business, as opposed to military, governmental, cultural, or theological pursuits.

I’m afraid Dan Klein lost me with his comment:

Nice stuff. What I like especially: They highlight how entrepreneurship can be significantly discoordinating in the Schelling sense of mutual coordination, while significantly coordinating in the Coase/Hayek sense of concatenate or extensive coordination.

On this matter, I find Kirzner, Boettke, Sautet, and many others frustrating, because they resist the distinction between the two coordinations. Once you embrace the distinction, it all becomes clear.

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