Schumpeter - Revision history

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Erasmuse: Created page with "[https://archive.org/stream/in.ernet.dli.2015.275081/2015.275081.Harvard-Economic_djvu.txt ''The THeory of Economic Development''], English edition, Internet Library (1934)...."

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Created page with "[https://archive.org/stream/in.ernet.dli.2015.275081/2015.275081.Harvard-Economic_djvu.txt ''The THeory of Economic Development''], English edition, Internet Library (1934)...."

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[https://archive.org/stream/in.ernet.dli.2015.275081/2015.275081.Harvard-Economic_djvu.txt ''The THeory of Economic Development''], English edition, Internet Library (1934).

==The Entrepreneur==

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 ==The Entrepreneur==
 <q>Chapter 2: The Fundamental Problem of Economic Development</q>
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-[https://archive.org/stream/in.ernet.dli.2015.275081/2015.275081.Harvard-Economic_djvu.txt ''The THeory of Economic Development''], English edition, Internet Library (1934).
+[https://archive.org/stream/in.ernet.dli.2015.275081/2015.275081.Harvard-Economic_djvu.txt ''The Theory of Economic Development''], English edition, Internet Library (1934).
 ==The Entrepreneur==
 <q>Chapter 2: The Fundamental Problem of Economic Development</q>
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 We can assume that every healthy man can sing if he will. Perhaps half the individuals in an ethically homogeneous group have the capacity for it to an average degree, a quarter in progressively diminishing measure, and, let us say, a quarter in a measure above the average; and within this quarter, through a series of continually increasing singing ability and continually diminishing number of people problem, the motive power of a great number of significant phenomena... We come finally to the Carusos. Only in this quarter are we struck in general by the singing ability, and only in the supreme instances can it become the characterising mark of the person. Although practically ail men can sing, singing ability does not cease to be a distinguishable characteristic and attribute of a minority, indeed not exactly of a type, because this characteristic — unlike ours — affects the total personality relatively little.
 Let us apply this; Again, a quarter of the population may be so poor in those qualities, let us say here provisionally, of economic initiative that the deficiency makes itself felt by poverty of their moral personality, and they play a wretched part in the smallest affairs of private and professional life in which this element is called for. We recognise this type and know that many of the best clerks, distinguished by devotion to duty, expert knowledge, and exactitude, belong to it. Then comes the "half,” the “normal.” These prove themselves to be better in the things which even within the established channels cannot simply be “dispatched” (erledigen) but must also be “decided” (entscheiden) and “carried out” (durchsetzen), Practically all business people belong here, otherwise they would never have attained their positions; most represent a selection — individually or hereditarily tested. A textile manufacturer travels no “new” road when he goes to a wool auction. But the situations there are never the same, and the success of the business depends so much upon skill and initiative in buying wool that the fact that the textile industry has so far exhibited no trustification comparable with that in heavy manufacturing is undoubtedly partly explicable by the reluctance of the cleverer manufacturers to renounce the advantage of their own skill in buying wool. From there, rising in the scale we come finally into the highest quarter, to people who are a type characterised by supernormal qualities of intellect and will. Within this type there are not only many varieties (merchants, manufacturers, financiers, etc.) but also a continuous variety of degrees of intensity in “initiative.” In our argument types of every intensity occur. Many a one can steer a safe course, where no one has yet been; others follow where first another went before; still others only in the crowd, but in this among the first. So also the great political leader of every kind and time is a type, yet not a thing unique, but only the apex of a pyramid from which there is a con- tinuous variation down to the average and from it to the subnormal values. And yet not only is “leading” a special function, but the leader also something special, distinguishable — wherefore there is no sense in our case in asking: “Where does that type begin then?” and then to exclaim: “This is no type at alll”
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 The third point consists in the reaction of the social environment against one who wishes to do something new. This reaction may manifest itself first of all in the existence of legal or political impediments. But neglecting this, any deviating conduct by a member of a social group is condemned, though in greatly varying degrees according as the social group is used to such conduct or not. Even a deviation from social custom in such things as dress or manners arouses opposition, and of course all the more so in the graver cases. This opposition is stronger in primitive stages of culture than in others, but it is never absent. Even mere astonishment at the deviation, even merely noticing it, exercises a pressure on the individual. The manifestation of condemnation may at once bring noticeable consequences in its train. It may even come to social ostracism and finally to physical prevention or to direct attack. Neither the fact that progressive differentiation weakens this opposition — especially as the most important cause of the weakening is the very development which we wish to ex- plain — nor the further fact that the social opposition operates under certain circumstances and upon many individuals as a stimulus, changes anything in principle in the significance of it. Surmounting this opposition is always a special kind of task which does not exist in the customary course of life, a task which also requires a special kind of conduct. In matters economic this resistance manifests itself first of all in the groups threatened by the innovation, then in the difficulty in finding the necessary cooperation, finally in the difficulty in winning over consumers. Even though these elements are still effective to-day, despite the fact that a period of turbulent development has accustomed us to the appearance and the carrying out of innovations, they can be best studied in the beginnings of capitalism. But they are so obvious there that it would be time lost for our purposes to dwell upon them...
+The specific problem of leadership arises and the leader type appears only where new possibilities present themselves. That is why it is so strongly marked among the Normans at the time of their conquests and so feebly among the Slavs in the centuries of their unchanging and relatively protected life in the marshes of the Pripet. Our three points characterise the nature of the function as well as the cmditci or behavior which constitutes '''the leader type. It is no part of his function to “find” or to “create” new possibilities. They are always present, abundantly accumulated by all sorts of people. Often they are also generally known and being discussed by scientific or literary writers. In other cases, there is nothing to discover about them, because they are quite obvious.''' To take an example from political life, it was not at all difficult to see how the social and political conditions of France at the time of Louis XVI could have been improved so as to avoid a breakdown of the ancien regime. Plenty of people as a matter of fact did see it. But nobody was in a position to do it. Now, it is this “doing the thing,” without which possibilities are dead, of which the leader’s function consists. This holds good of all kinds of leadership, ephemeral as well as more enduring ones. The former may serve as an instance. '''What is to be done in a casual emergency is as a rule quite simple. Most or all people may see it, yet they want someone to speak out, to lead, and to organise.''' Even leadership which influences merely by example, as artistic or scientific leadership, does not consist simply in finding or creating the new thing but in so impressing the social group with it as to draw it on in its wake. '''It is, therefore, more by will than by intellect that the leaders fulfil their function, more by “authority,” “personal weight,” and so forth than by original ideas.'''
-Economic leadership in particular must hence be distinguished from “invention.” As long as they are not carried into practice, inventions are economically irrelevant. And to carry any improvement into effect is a task entirely different from the inventing of it, and a task, moreover, requiring entirely different kinds of aptitudes. Although entrepreneurs of course may be inventors just as they may be capitalists, they are inventors not by nature of their function but by coincidence and vice versa. Besides, the innovations which it is the function of entrepreneurs to carry out need not necessarily be any inventions at all It is, therefore, not advisable, and it may be downright misleading, to stress the element of invention as much as many writers do.
+Economic leadership in particular must hence be distinguished from “invention.” '''As long as they are not carried into practice, inventions are economically irrelevant. And to carry any improvement into effect is a task entirely different from the inventing of it, and a task, moreover, requiring entirely different kinds of aptitudes.''' Although entrepreneurs of course may be inventors just as they may be capitalists, they are inventors not by nature of their function but by coincidence and vice versa. Besides, the innovations which it is the function of entrepreneurs to carry out need not necessarily be any inventions at all. It is, therefore, not advisable, and it may be downright misleading, to stress the element of invention as much as many writers do.
-...  It has none of that glamour which characterises other kinds of leadership. It consists in fulfilling a very special task which only in rare cases appeals to the imagination of the public. For its success, keenness and vigor are not more essential than a certain narrowness which seizes the immediate chance and nothing else. ‘Personal weight’ is, to be sure, not without importance. Yet the personality of the capitalistic entrepreneur need not, and generally does not, answer to the idea most of us have of what a ‘Teader looks like, so much so that there is some difficulty in realizing that he comes within the sociological category of leader at all. He  Teads ” the means of production into new channels. But this he does, not by convinc- ing people of the desirability of carrying out his plan or by creat- ing confidence in his leading in the manner of a political leader — the only man he has to convince or to impress is the banker who is to finance him — but by buying them or their services, and then using them as he sees fit. He also leads in the sense that he draws other producers in his branch after him. But as they are his competitors, who first reduce and then annihilate his profit, this is, as it were, leadership against one’s own will. [ Finally , he ren- ders a service, the full appreciation of which takes a specialist’s knowledge of the case. It is not so easily understood by the pub- lic at large as a politician’s successful speech or a general’s victory in the field, not to insist on the fact that he seems to act — and often harshly — in his individual interest alone. We -shall under- stand, therefore, that we do not observe, in this case, the emer- gence of all those affective values which are the glory of all other kinds of social leadership. Add to this the precariousness of the economic position both of the individual entrepreneur and of entrepreneurs as a group, and the fact that when his economic success raises him socially he has no cultural tradition or attitude to fall back upon, but moves about in society as an upstart, whose ways are readily laughed at, and we shall understand why this type has never been popular, and why even scientific critique often makes short work of it.
+...  '''It has none of that glamour which characterises other kinds of leadership. It consists in fulfilling a very special task which only in rare cases appeals to the imagination of the public. For its success, keenness and vigor are not more essential than a certain narrowness which seizes the immediate chance and nothing else.''' ‘Personal weight’ is, to be sure, not without importance. Yet the personality of the capitalistic entrepreneur need not, and generally does not, answer to the idea most of us have of what a ‘Teader looks like, so much so that there is some difficulty in realizing that he comes within the sociological category of leader at all. He  Teads ” the means of production into new channels. But this he does, not by convincing people of the desirability of carrying out his plan or by creating confidence in his leading in the manner of a political leader — the only man he has to convince or to impress is the banker who is to finance him — but by buying them or their services, and then using them as he sees fit. He also leads in the sense that he draws other producers in his branch after him. But as they are his competitors, who first reduce and then annihilate his profit, this is, as it were, leadership against one’s own will. [ Finally , he ren- ders a service, the full appreciation of which takes a specialist’s knowledge of the case. It is not so easily understood by the public at large as a politician’s successful speech or a general’s victory in the field, not to insist on the fact that he seems to act — and often harshly — in his individual interest alone. We -shall under- stand, therefore, that we do not observe, in this case, the emer- gence of all those affective values which are the glory of all other kinds of social leadership. Add to this the precariousness of the economic position both of the individual entrepreneur and of entrepreneurs as a group, and the fact that when his economic success raises him socially he has no cultural tradition or attitude to fall back upon, but moves about in society as an upstart, whose ways are readily laughed at, and we shall understand why this type has never been popular, and why even scientific critique often makes short work of it.
 ... Within given social circumstances and habits, most of what people do every day will appear to them primarily from the point of view of duty carrying a social or a superhuman sanction. There is very little of conscious rationality, still less of hedonism and of individual egoism about it, and so much of it as may safely be said to exist is of comparatively recent growth. Nevertheless, as long as we confine ourselves to the great outlines of constantly repeated economic action, we may link it up with wants and the desire to satisfy them, on condition that we are careful to recognise that economic motive so defined varies in intensity very much in time; that it is society that shapes the particular desires we observe; that wants must be taken with reference to the group which the individual thinks of when deciding his course of action — the family or any other group, smaller or larger than the family; that action does not promptly follow upon desire but only more or less imperfectly cor- responds to it; that the field of individual choice is always, though in very different ways and to very different degrees, fenced in by social habits or conventions and the like: it still remains broadly true that, within the circular flow, everyone adapts himself to his environment so as to satisfy certain given wants — of himself or others — as best he can. In all cases, the meaning pi economic action is the satisfaction of wants in. the sense that there would be no economic action if there were no wants. In the case of the circular flow, we may also think of satisfaction of wants as the noi-

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 <q>Chapter 2: The Fundamental Problem of Economic Development</q>
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 While in the accustomed circular flow every individual can act promptly and rationally because he is sure of his ground and is supported by the conduct, as adjusted to this circular flow, of all other individuals, who in turn expect the accustomed activity from him, he cannot simply do this when he is confronted by a new task.
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 Only with the first groups of motives is private property as the result of entrepreneurial activity an essential factor in making it operative. With the other two it is not. Pecuniary gain is indeed a very accurate expression of success, especially of relative success, and from the standpoint of the man who strives for it, it has the additional advantage of being an objective fact and largely inde- pendent of the opinion of others. These and other peculiarities incident to the mechanism of ‘acquisitive” society make it very difficult to replace it as a motor of industrial development, even if we would discard the importance it has for creating a fund ready for investment. Nevertheless it is true that the second and third groups of entrepreneurial motives may in principle be taken care of by other social arrangements not involving private gain from economic innovation. What other stimuli could be provided, and how they could be made to work as well as the “capitalistic” ones do, are questions which are beyond our theme. They are taken too lightly by social reformers, and are altogether ignored by fiscal radicalism. But they are not insoluble, and may be answered by detailed observation of the psychology of entrepreneurial activity, at least for given times and places.

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 [https://archive.org/stream/in.ernet.dli.2015.275081/2015.275081.Harvard-Economic_djvu.txt ''The THeory of Economic Development''], English edition, Internet Library (1934).
 ==The Entrepreneur==
 <q>Chapter 2: The Fundamental Problem of Economic Development</q>
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 While in the accustomed circular flow every individual can act promptly and rationally because he is sure of his ground and is supported by the conduct, as adjusted to this circular flow, of all other individuals, who in turn expect the accustomed activity from him, he cannot simply do this when he is confronted by a new task.
- While in the accustomed channels his own ability and experience suffice for the normal individual, when confronted with innovations he needs guidance. While he swims with the stream in the circular flow which is familiar to him, he swims against the stream if he wishes to change its channel. What was formerly a help becomes a hindrance. What was a familiar datum becomes an unknown. Where the boundaries of routine stop, many people can go no further, and the rest can only do, so in a highly variable manner. The assumption that conduct is prompt and rational is in all cases a fiction. But it proves to be sufficiently near to reality, if things have time to hammer logic into men. Where this has happened, and within the limits in which it has happened, one may rest content with this fiction and build theories upon it. It is then not true that habit or custom or non-economic ways of thinking cause a hopeless difference between the individuals of different, classes, times, or cultures, and that, for example, the  'economics of the stock exchange’  would be inapplicable say to the peasants of today or to the craftsmen of the Middle Ages. On the contrary the same theoretical picture    in its broadest contour lines fits the individuals of quite different cultures, whatever their degree of intelligence and of economic rationality, and we can depend upon it that the peasant sells his calf just as cunningly and egotistically as the stock exchange member his portfolio of shares. But this holds good only where precedents without number have formed conduct through decades and, in fundamentals, through hundreds and thousands of years, and have eliminated unadapted behavior. Outside of these limits our fiction loses its closeness to reality...
+While in the accustomed channels his own ability and experience suffice for the normal individual, when confronted with innovations he needs guidance. While he swims with the stream in the circular flow which is familiar to him, he swims against the stream if he wishes to change its channel. What was formerly a help becomes a hindrance. What was a familiar datum becomes an unknown. Where the boundaries of routine stop, many people can go no further, and the rest can only do, so in a highly variable manner. The assumption that conduct is prompt and rational is in all cases a fiction. But it proves to be sufficiently near to reality, if things have time to hammer logic into men. Where this has happened, and within the limits in which it has happened, one may rest content with this fiction and build theories upon it. It is then not true that habit or custom or non-economic ways of thinking cause a hopeless difference between the individuals of different, classes, times, or cultures, and that, for example, the  'economics of the stock exchange’  would be inapplicable say to the peasants of today or to the craftsmen of the Middle Ages. On the contrary the same theoretical picture    in its broadest contour lines fits the individuals of quite different cultures, whatever their degree of intelligence and of economic rationality, and we can depend upon it that the peasant sells his calf just as cunningly and egotistically as the stock exchange member his portfolio of shares. But this holds good only where precedents without number have formed conduct through decades and, in fundamentals, through hundreds and thousands of years, and have eliminated unadapted behavior. Outside of these limits our fiction loses its closeness to reality...
 We can assume that every healthy man can sing if he will. Perhaps half the individuals in an ethically homogeneous group have the capacity for it to an average degree, a quarter in progressively diminishing measure, and, let us say, a quarter in a measure above the average; and within this quarter, through a series of continually increasing singing ability and continually diminishing number of people problem, the motive power of a great number of significant phenomena... We come finally to the Carusos. Only in this quarter are we struck in general by the singing ability, and only in the supreme instances can it become the characterising mark of the person. Although practically ail men can sing, singing ability does not cease to be a distinguishable characteristic and attribute of a minority, indeed not exactly of a type, because this characteristic — unlike ours — affects the total personality relatively little.

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	==The Entrepreneur==		==The Entrepreneur==
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		+	"Chapter 2: The Fundamental Problem of Economic Development"
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		+	While in the accustomed circular flow every individual can act promptly and rationally because he is sure of his ground and is supported by the conduct, as adjusted to this circular flow, of all other individuals, who in turn expect the accustomed activity from him, he cannot simply do this when he is confronted by a new task.
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		+	While in the accustomed channels his own ability and experience suffice for the normal individual, when confronted with innovations he needs guidance. While he swims with the stream in the circular flow which is familiar to him, he swims against the stream if he wishes to change its channel. What was formerly a help becomes a hindrance. What was a familiar datum becomes an unknown. Where the boundaries of routine stop, many people can go no further, and the rest can only do, so in a highly variable manner. The assumption that conduct is prompt and rational is in all cases a fiction. But it proves to be sufficiently near to reality, if things have time to hammer logic into men. Where this has happened, and within the limits in which it has happened, one may rest content with this fiction and build theories upon it. It is then not true that habit or custom or non-economic ways of thinking cause a hopeless difference between the individuals of different, classes, times, or cultures, and that, for example, the 'economics of the stock exchange’ would be inapplicable say to the peasants of today or to the craftsmen of the Middle Ages. On the contrary the same theoretical picture in its broadest contour lines fits the individuals of quite different cultures, whatever their degree of intelligence and of economic rationality, and we can depend upon it that the peasant sells his calf just as cunningly and egotistically as the stock exchange member his portfolio of shares. But this holds good only where precedents without number have formed conduct through decades and, in fundamentals, through hundreds and thousands of years, and have eliminated unadapted behavior. Outside of these limits our fiction loses its closeness to reality...
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		+	We can assume that every healthy man can sing if he will. Perhaps half the individuals in an ethically homogeneous group have the capacity for it to an average degree, a quarter in progressively diminishing measure, and, let us say, a quarter in a measure above the average; and within this quarter, through a series of continually increasing singing ability and continually diminishing number of people problem, the motive power of a great number of significant phenomena... We come finally to the Carusos. Only in this quarter are we struck in general by the singing ability, and only in the supreme instances can it become the characterising mark of the person. Although practically ail men can sing, singing ability does not cease to be a distinguishable characteristic and attribute of a minority, indeed not exactly of a type, because this characteristic — unlike ours — affects the total personality relatively little.