Joseph Schumpeter

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What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems by Linda Yueh

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., pp. 164, 378. 29.  Ibid., pp. 383–4. 30.  Keynes, Essays in Persuasion, p. 366. 31.  Ibid., p. 369. 32.  Ibid., p. 366. 7 – Joseph Schumpeter: What Drives Innovation? 1.    Joseph Schumpeter, 1942, Capitalism, Socialism and Democracy, New York: Harper & Brothers, p. 84. 2.    Thomas K. McCraw, 2007, Prophet of Innovation: Joseph Schumpeter and Creative Destruction, Cambridge, MA: Harvard University Press, p. x. 3.    Schumpeter, Capitalism, p. 83. 4.    Joseph Schumpeter, 1939, Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process, vol. II, New York: McGraw-Hill, p. 1033. 5.    

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, p. xiv. 30.  Joseph Schumpeter, 1955, ‘Social Classes in an Ethnically Homogeneous Environment’, trans. Heinz Norden, in Imperialism, Social Classes: Two Essays by Joseph Schumpeter, New York: Meridian Books, pp. 120–22. 31.  Joseph Schumpeter, 1928, ‘The Instability of Capitalism’, Economic Journal, 38, pp. 361–86. 32.  Schumpeter, Business Cycles, vol. I, pp. 103–4. 33.  World Bank, 1993, The East Asian Miracle: Economic Growth and Public Policy, Washington, DC: World Bank. 34.  Schumpeter, ‘The Instability of Capitalism’, pp. 364–6. 35.  Joseph Schumpeter, 1934, The Theory of Economic Development, Cambridge, MA: Harvard University Press, pp. 75–8. 36.  

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This means that the economic problem is not – if we look into the future – the permanent problem of the human race.’30 It means that we can look forward to a fifteen-hour working week, as ‘three hours a day is quite enough’.31 But, it would lead to an even greater challenge: [M]ankind will be deprived of its traditional purpose … Thus for the first time since his creation man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.32 7 Joseph Schumpeter: What Drives Innovation? Innovation is the engine of economic growth, or, as Joseph Schumpeter put it, innovation in a capitalist economy is the ‘perennial gale of creative destruction’.1 Schumpeter’s view was that the economy undergoes long cycles as new technologies are adopted, while existing technologies become obsolescent. And those new technologies give a boost to economic growth. Joseph Schumpeter was perhaps the first economist to define the ‘capitalist engine’, in his 1942 Capitalism, Socialism and Democracy, his most important work.2 Contrary to popular belief, the term ‘capitalism’ was not devised by Adam Smith.

The Great Economists: How Their Ideas Can Help Us Today by Linda Yueh

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., pp. 164, 378. 29. Ibid., pp. 383–4. 30. Keynes, Essays in Persuasion, p. 366. 31. Ibid., p. 369. 32. Ibid., p. 366. Chapter 7 – Joseph Schumpeter: What Drives Innovation? 1. Joseph Schumpeter, 1942, Capitalism, Socialism and Democracy, New York: Harper & Brothers, p. 84. 2. Thomas K. McCraw, 2007, Prophet of Innovation: Joseph Schumpeter and Creative Destruction, Cambridge, MA: Harvard University Press, p. x. 3. Schumpeter, Capitalism, p. 83. 4. Joseph Schumpeter, 1939, Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process, vol. II, New York: McGraw-Hill, p. 1033. 5.

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Schumpeter, Capitalism, pp. 167, 170, 190–91. 29. Ibid., p. xiv. 30. Joseph Schumpeter, 1955, ‘Social Classes in an Ethnically Homogeneous Environment’, trans. Heinz Norden, in Imperialism, Social Classes: Two Essays by Joseph Schumpeter, New York: Meridian Books, pp. 120–22. 31. Joseph Schumpeter, 1928, ‘The Instability of Capitalism’, Economic Journal, 38, pp. 361–86. 32. Schumpeter, Business Cycles, vol. I, pp. 103–4. 33. World Bank, 1993, The East Asian Miracle: Economic Growth and Public Policy, Washington, DC: World Bank. 34. Schumpeter, ‘The Instability of Capitalism’, pp. 364–6. 35. Joseph Schumpeter, 1934, The Theory of Economic Development, Cambridge, MA: Harvard University Press, pp. 75–8. 36.

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This means that the economic problem is not – if we look into the future – the permanent problem of the human race.’30 It means that we can look forward to a fifteen-hour working week, as ‘three hours a day is quite enough’.31 But, it would lead to an even greater challenge: [M]ankind will be deprived of its traditional purpose … Thus for the first time since his creation man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.32 CHAPTER 7 Joseph Schumpeter: What Drives Innovation? Innovation is the engine of economic growth, or, as Joseph Schumpeter put it, innovation in a capitalist economy is the ‘perennial gale of creative destruction’.1 Schumpeter’s view was that the economy undergoes long cycles as new technologies are adopted, while existing technologies become obsolescent. And those new technologies give a boost to economic growth. Joseph Schumpeter was perhaps the first economist to define the ‘capitalist engine’, in his 1942 Capitalism, Socialism and Democracy, his most important work.2 Contrary to popular belief, the term ‘capitalism’ was not devised by Adam Smith.

The Marginal Revolutionaries: How Austrian Economists Fought the War of Ideas by Janek Wasserman

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They served as Austrian government ministers, advisers to Habsburg royalty and heads of state, and policy experts, in addition to their roles as professors and journalists. They established themselves as the world’s most formidable opponents of Marxism and socialism and leading exponents of liberal ideology. In the interwar era, a new generation emerged to advance earlier intellectual and ideological efforts. First Mises, Joseph Schumpeter, and Hans Mayer, then Friedrich Hayek, Gottfried Haberler, and Oskar Morgenstern made their reputations by the end of the 1920s. They developed innovative understandings of business cycles and monetary theory, which gained a wide hearing in the post–World War I and Great Depression periods. They cultivated relationships with financial and political elites in chambers of commerce, national banks, and conservative political parties.

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The Austrian-German rivalry allowed Austrian scholars to gain recognition by challenging their German peers, however. The Methodenstreit was the most prominent example of these confrontations, and it created a counterpole to the hegemonic German approach in Vienna. The Methodenstreit: “A History of Wasted Energies” Joseph Schumpeter, a later member of the Austrian School, rendered a negative judgment of the “debate over methods” in his canonical history of economic thought. He explained, “Methodological clashes often are clashes of temperaments and of intellectual bents. This was so in our case. There are such things as historical and theoretical temperaments. . . .

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He offered a comprehensive explanation of the interest phenomenon while also leveling a blistering attack on labor theories of value. He became a major international figure, embodying the Austrian School even more than Menger. The book was translated into English, making it one of the few German works afforded such a treatment. It went through four editions and inspired several generations of scholars, including Joseph Schumpeter, Ludwig von Mises, and Friedrich Hayek. It also provoked ardent detractors. Henry Carey Baird, son of the American economist Henry Carey, called the book “the most complex, confusing, narrow, hair-splitting, and arrogant criticism.” It played a pivotal role in several controversies in the history of economic thought.

The Classical School by Callum Williams

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France at the time was a comparatively wealthy place, but was doing far worse than Britain. France’s smartest people applied themselves to try to understand what was going wrong. You may have noticed, however, that the book contains no contributions from Americans. That may seem surprising: today America dominates both the global economy and academic economics. However, Joseph Schumpeter says that “[a]s regards the United States, there is nothing to record in the way of systematic endeavor before the nineteenth century. This is as we should expect from environmental conditions that were unlikely to produce either a demand for or supply of general treatises.” Even in the 19th century America did not produce many economists, and those that it did, such as Henry George, tended to borrow ideas from the European classical economists.

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Imports can also improve productivity. A country can in theory run trade deficits indefinitely, with no ill effects. Trade deficits are usually associated with strong, not weak, economic growth. Nonetheless, in the 17th century the view was widely held that having a trade surplus was a good thing. Joseph Schumpeter says that it is “strikingly illustrative of the ways of the human mind that [John] Locke of all men should have committed himself to this [mercantilist] argument”. Michel de Montaigne was another supporter, noting that “no man profits but by the loss of others”. Daniel Defoe reckoned that wealth increased as the value of products that could be exported similarly increased.

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William Letwin, a historian, calls Jonathan Swift’s Modest Proposal (1729) “the last word on political arithmetic as an instrument of social policy”. The Anglo-Irish satirist Swift lambasted Petty’s theory by demonstrating the economic “advantages” of selling 100,000 children per annum to be eaten by the starving poor. Political economists also ignored Petty’s insights. Joseph Schumpeter argued that in the 18th century “the vast majority very quickly forgot” political arithmetic. Instead, they became increasingly interested in devising elaborate theories to describe the world. Empirical evidence was hard to get hold of, was unreliable, and, thanks to David Hume, there were lingering doubts as to whether it was possible to draw general statements from the analysis of data.

Austerity: The History of a Dangerous Idea by Mark Blyth

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Austerity was, then, in the eyes of liberals, after Keynes sacrificed on the altar of fiscal profligacy. Yet after two decades of failure, austerity’s arch defenders had little to say or show for all its virtue. Chief among those who were quieted was Joseph Schumpeter himself. Schumpeter’s Retreat Twelve years after criticizing the Roosevelt administration’s policies in The Economics of the Recovery Program, which gave Mellon’s liquidationism a theory of growth, stressed the importance of entrepreneurs, and argued for austerity, Joseph Schumpeter cut an intellectually lonely figure. By 1946, the world had gone Keynes’s way, not his. Schumpeter could, like many others, have jumped on the bandwagon, but for a true economic liberal, and a political conservative, that was never an option.

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These ideas were, I argue, the original neoliberal ideas in that they drew on the classical liberalism of Locke, Hume, and Smith, and applied themselves anew to the policy issues of the day. I then discuss the responses that these ideas engendered, the most relevant of which are John Maynard Keynes’s refutation of austerity policies and Joseph Schumpeter’s strange abrogation of them.11 By 1942, it seems that the die has been cast and austerity had been sent away to the retirement home for bad economic ideas. It turned out, however, to be a premature retirement. Austerity’s Contested Present In chapter 5, we take the story forward. We begin by detailing the two places austerity found a home after Keynes’s anti-austerity arguments seemed to have won the day: Germany—the home of ordoliberalism—and Austria, not the country, but Austria as a distinct school of economics.

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Where British New Liberals began to see recessions as ameliorable through more spending, the Austrians saw in recessions the necessary pain of austerity after the interventionist “party.” In sum, while the New Liberals and their mid-twentieth-century heirs embraced the state and intervention, the Austrians, in particular, Friedrich Hayek, Ludwig von Mises, and Joseph Schumpeter, rejected these notions entirely. John Maynard Keynes once noted that the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.68 Today’s ideas about austerity are no exception to this rule.

An Economic History of the Twentieth Century by J. Bradford Delong

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After the war, the former empire, which had been a single economic unit, was split among seven countries, each with its own currency and its own high tariffs. The regional division of labor unwound. Before the war ended, Joseph Schumpeter, just thirty-four years old at the time, had set out the resulting problem: “The material goods needed by the armies,” he said, had been provided and would continue to be provided. “After the war, we will be left… with a ‘monetary problem.’” He used an analogy, saying that countries paying for the war would be “in the position of an entrepreneur whose factory burnt down and now has to enter the losses in his books.”18 Joseph Schumpeter was finance minister of the new Austrian Republic by 1919. He favored an immediate and substantial wealth tax on all real, industrial, commercial, residential, and financial property to pay off the debt.

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The Role of Meiji Militarism in Japan’s Technological Progress,” Journal of Economic History 37, no. 1 (March 1977): 113–135. 21. Rudyard Kipling, “White Man’s Burden,” The Times, February 4, 1899, reprinted at Wikipedia, https://en.wikipedia.org/wiki/The_White_Man%27s_Burden. 22. Joseph Schumpeter, “The Sociology of Imperialisms,” 1918, in Imperialism and Social Classes: Two Essays by Joseph Schumpeter, Cleveland: Meridian Books, 2007. 23. John Hobson, Imperialism: A Study, London: James Nisbet, 1902. 24. Norman Angell, Europe’s Optical Illusion, Hamilton, Kent, UK: Simpkin, Marshall, 1908. 5. World War I 1. Norman Angell, Peace Theories and the Balkan War, London: Horace Marshall and Son, 1912, 124. 2.

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Clements, The Life of Herbert Hoover: Imperfect Visionary, 1918–1928, New York: Palgrave Macmillan, 2010. 16. Keynes, Economic Consequences, 268. 17. Keynes, Economic Consequences, 149. 18. Christian Seidl, “The Bauer-Schumpeter Controversy on Socialization,” History of Economic Ideas 2, no. 2 (1994): 53, quoting Joseph Schumpeter’s 1917 “Die Krise des Steuerstaates,” itself reprinted in Joseph Schumpeter, “Die Krise des Steuerstaates,” Aufsätze zur Soziologie, Tübingen: J. C. B. Mohr (Paul Siebeck), 1953. 19. Joe Weisenthal, Tracy Alloway, and Zach Carter, “The Real Story of Weimar Hyperinflation,” Bloomberg, Odd Lots Podcast, April 15, 2021, www.bloomberg.com/news/articles/2021-04-15/zach-carter-on-the-real-story-of-weimar-hyperinflation; Sally Marks, “The Myths of Reparations,” Central European History 11, no. 3 (2008): 231–255. 20.

The Price of Time: The Real Story of Interest by Edward Chancellor

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‘Interest is like a double-edged sword,’ concluded Proudhon, ‘it kills, whichever side it hits you with.’5 There was nothing original in Proudhon’s invective. His complaints had an ancient pedigree. He cited the Hebrew word for interest, neschek, which derives etymologically from the bite of a serpent.6 Proudhon’s rhetoric was high-flown and repetitive, and his economic analysis was not profound. In his History of Economic Analysis, Joseph Schumpeter lamented Proudhon’s complete inability to analyse. Even so, Proudhon had some original proposals. He wanted to nationalize the Banque de France, expand the money supply and reduce interest rates close to zero. His People’s Bank would charge half a per cent to cover its costs. Gold would be replaced by paper money.

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Earlier generations of economists, who considered the problem of interest more deeply than their twenty-first-century counterparts, had no doubt as to its importance. For Böhm-Bawerk, interest was ‘an organic necessity’.65 Irving Fisher called interest ‘too omnipresent a phenomenon to be eradicated’.66 In similar vein, Joseph Schumpeter stated that interest ‘permeates, as it were, the whole economic system’.67 The author of Das Kapital, an avowed enemy of interest, agreed with this arch-apologist for capitalism. In a phrase evocative of the ancient world in which a charge for lending was first recorded, Marx writes that ‘usury lives in the pores of production, as it were, just as the gods of Epicurus lived in the space between worlds.’68 2 Selling Time When money is lent on a contract to receive … [there is] an increase by way of compensation for the use; which is generally called interest by those who think it lawful, and usury by those who do not.

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Between 1927 and the end of 1929, Keynes’s personal fortune declined by more than three-quarters, from £44,000 to £7,815, as a result of heavy losses on commodity speculations, his use of portfolio leverage and his failure as an economist to anticipate Somary’s gathering storm clouds.54 Somary had studied economics at Vienna, where he’d attended the private seminars of Eugen von Böhm-Bawerk. Among the other seminar attendants were future luminaries of the Austrian school of economics, including Ludwig von Mises, Joseph Schumpeter and Friedrich Hayek. An axiom of the Austrian school was that interest is necessary so that investment and consumption decisions are co-ordinated over time.55 As we have seen, Böhm-Bawerk argued that the rate of interest reflects society’s time preference. He also claimed that the level of interest determines how much capital is tied up in production, and thus the return on capital.fn11 When interest is determined in a free market, he said, time preference and the return on capital should equalize.

Capitalism: Money, Morals and Markets by John Plender

activist fund / activist shareholder / activist investor, Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black Swan, bond market vigilante , bonus culture, Bretton Woods, business climate, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, Cornelius Vanderbilt, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial engineering, financial innovation, financial intermediation, Fractional reserve banking, full employment, Glass-Steagall Act, God and Mammon, Golden arches theory, Gordon Gekko, greed is good, Hyman Minsky, income inequality, industrial research laboratory, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, labour market flexibility, liberal capitalism, light touch regulation, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, mass immigration, means of production, Menlo Park, money market fund, moral hazard, moveable type in China, Myron Scholes, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Paul Samuelson, plutocrats, price stability, principal–agent problem, profit motive, proprietary trading, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, Veblen good, We are the 99%, Wolfgang Streeck, zero-sum game

As Karl Marx rightly perceived, industrial capitalism has always been inherently unstable, which is the first and most palpable defect of the system. The cycle of profit, speculation, irrational exuberance, stock market panic and recession has been an endemic feature of capitalism since the industrial revolution began. Creative destruction, the process identified by the Austrian-American economist Joseph Schumpeter as the essential dynamic of capitalism, has long been troublesome for those thrown out of work as a result of increasing competition and technological innovation. It also subverts the sense of community. And today, not only is the business cycle made worse by ill-judged monetary policies and manic bankers – there have been more than 100 major banking crises worldwide in the past three decades – but globalisation and economic interdependence have caused basic manufacturing industries to evacuate wholesale from the developed to the developing world, at a high cost in lost jobs.

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That said, the book undoubtedly satisfies the market test, since it remains one of the publishing world’s outstanding bestsellers.25 If there is now a more widespread acceptance that the money motive is not invariably reprehensible, there are caveats. For some, like Keynes, the motive could still be highly distasteful. In forecasting how the world might look to his generation’s grandchildren, he wrote that the love of money would ultimately be recognised as ‘a somewhat disgusting morbidity’. For others, such as Joseph Schumpeter, the economist best known for identifying creative destruction as the motor of capitalism, there remained a question as to how far the profit-maximising business person could be regarded as an admirable role model. He argued that something was lost in the transition from a society governed by aristocrats, whose values were essentially military, to an industrial age; and, unlike Thomas Carlyle, he saw the businessman as woefully unheroic: With the utmost ease and grace the lords and knights metamorphosed themselves into courtiers, administrators, diplomats, politicians and into military officers of a type that had nothing whatever to do with that of the medieval knight.

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And that is why resilience in an entrepreneur is more important than brilliance – grit trumps almost every other trait.’29 Nowadays there is what I would call grudging assent to the proposition that entrepreneurship has a vital role in generating economic growth, an idea that was first given its proper due by the Austrian school of economists in the twentieth century. Joseph Schumpeter, in particular, lauded the role of entrepreneurs in the capitalist process of creative destruction, whereby inefficient businesses are wiped out in the downturn of the economic cycle, and new, more competitive businesses emerge. The Austrians were bested in argument by Keynes in the 1930s on the question of whether to rely on laissez-faire, or on the monetary and fiscal activism that Keynes preferred, as a remedy for unemployment in the Great Depression.

The Entrepreneurial State: Debunking Public vs. Private Sector Myths by Mariana Mazzucato

Apple II, banking crisis, barriers to entry, Bretton Woods, business cycle, California gold rush, call centre, carbon footprint, carbon tax, Carmen Reinhart, circular economy, clean tech, computer age, creative destruction, credit crunch, David Ricardo: comparative advantage, demand response, deskilling, dual-use technology, endogenous growth, energy security, energy transition, eurozone crisis, everywhere but in the productivity statistics, Fairchild Semiconductor, Financial Instability Hypothesis, full employment, G4S, general purpose technology, green transition, Growth in a Time of Debt, Hyman Minsky, incomplete markets, information retrieval, intangible asset, invisible hand, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, knowledge worker, linear model of innovation, natural language processing, new economy, offshore financial centre, Philip Mirowski, popular electronics, Post-Keynesian economics, profit maximization, Ralph Nader, renewable energy credits, rent-seeking, ride hailing / ride sharing, risk tolerance, Robert Solow, shareholder value, Silicon Valley, Silicon Valley ideology, smart grid, Solyndra, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tony Fadell, too big to fail, total factor productivity, trickle-down economics, vertical integration, Washington Consensus, William Shockley: the traitorous eight

As a matter of fact, capitalist economy is not and cannot be stationary. Nor is it merely expanding in a steady manner. It is incessantly being revolutionized from within by new enterprise, i.e., by the intrusion of new commodities or new methods of production or new commercial opportunities into the industrial structure as it exists at any moment. Joseph Schumpeter (1942 [2003], 13) The important thing for Government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do those things which at present are not done at all. John Maynard Keynes (1926, xxx) It is a popular error that bureaucracy is less flexible than private enterprise.

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A grant from the Ford Foundation’s Reforming Global Finance initiative, led by Leonardo Burlamaqui, was not only helpful but useful due to Leonardo’s own work on understanding ways in which ‘knowledge governance’ can ‘shape’ markets. It was indeed Leonardo’s work with Ford that inspired the first meetings and work that led to another research project, funded by the Institute for New Economic Thinking (INET), in which Randy Wray and I are today banging heads: a project on how to bring together the thinking of Joseph Schumpeter on innovation and Hyman Minsky on finance, to understand the degree to which finance can be turned into a vehicle for creative destruction rather than its current obsession with Ponzi-like destructive creation. Amongst other friends and colleagues who have provided inspiration through interaction and feedback, I want to mention Fred Block, Michael Jacobs, Paul Nightingale and Andy Stirling, the latter two from SPRU, my new academic home.

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This economic concept is named after University of Chicago economist Frank Knight (1885–1972), who theorized about risk and uncertainty and their differences in economic terms. 2 Evans and Rauch (1999) show, for instance, that a Weberian-type State bureaucracy that employs meritocratic recruitment and offers predictable, rewarding longterm careers enhances prospects for growth, even when controlling for initial levels of GDP per capita and human capital. 3 Contemporary political economists, such as Chang (2008) and Reinert (2007), who specialize in the history of economic policy do of course talk about the role of the State in promoting a ‘catching-up’ process, or in actively acting countercyclically. Yet these are more in line with a view of the State not as an entrepreneurial risk taker (of first resort) but a more passive entrepreneur of last resort. 4 Joseph Schumpeter (1942 [2003]) referred to ‘creative destruction’ as the process by which innovation changes the status quo, allowing the market shares of firms which introduce new products and processes to grow, and those of the firms that resist change to fall. Chapter 1 FROM CRISIS IDEOLOGY TO THE DIVISION OF INNOVATIVE LABOUR Governments have always been lousy at picking winners, and they are likely to become more so, as legions of entrepreneurs and tinkerers swap designs online, turn them into products at home and market them globally from a garage.

The Inner Lives of Markets: How People Shape Them—And They Shape Us by Tim Sullivan

Abraham Wald, Airbnb, airport security, Al Roth, Alvin Roth, Andrei Shleifer, attribution theory, autonomous vehicles, barriers to entry, behavioural economics, Brownian motion, business cycle, buy and hold, centralized clearinghouse, Chuck Templeton: OpenTable:, classic study, clean water, conceptual framework, congestion pricing, constrained optimization, continuous double auction, creative destruction, data science, deferred acceptance, Donald Trump, Dutch auction, Edward Glaeser, experimental subject, first-price auction, framing effect, frictionless, fundamental attribution error, George Akerlof, Goldman Sachs: Vampire Squid, Gunnar Myrdal, helicopter parent, information asymmetry, Internet of things, invisible hand, Isaac Newton, iterative process, Jean Tirole, Jeff Bezos, Johann Wolfgang von Goethe, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Arrow, late fees, linear programming, Lyft, market clearing, market design, market friction, medical residency, multi-sided market, mutually assured destruction, Nash equilibrium, Occupy movement, opioid epidemic / opioid crisis, Pareto efficiency, Paul Samuelson, Peter Thiel, pets.com, pez dispenser, power law, pre–internet, price mechanism, price stability, prisoner's dilemma, profit motive, proxy bid, RAND corporation, ride hailing / ride sharing, Robert Shiller, Robert Solow, Ronald Coase, school choice, school vouchers, scientific management, sealed-bid auction, second-price auction, second-price sealed-bid, sharing economy, Silicon Valley, spectrum auction, Steve Jobs, Tacoma Narrows Bridge, techno-determinism, technoutopianism, telemarketer, The Market for Lemons, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, transaction costs, two-sided market, uber lyft, uranium enrichment, Vickrey auction, Vilfredo Pareto, WarGames: Global Thermonuclear War, winner-take-all economy

It was set in motion by Smith and carried on for one hundred years thereafter by the classical economists—David Ricardo, Thomas Malthus, Karl Marx, Vilfredo Pareto, among others. It was continued for nearly one hundred years more by neoclassical economists like Thorstein Veblen, John Maynard Keynes, and an enduring hero of free-market proponents, Joseph Schumpeter. Pareto, who lived from 1848 until 1923, is emblematic of both the worldliness and precision of these towering figures in the history of economic thought. He was well experienced in matters of business but also well schooled in the language of math that was already deployed to describe economics and commerce.

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This approach had many benefits: math created a common language that pushed for weaker assumptions, stronger conclusions, and greater generality. And it allowed economists, as a group, to start creating a concise, logical system that described the world, much the way physicists have done. (Critics of this approach had emerged already at the beginning of the twentieth century. The eminent Austrian American economist Joseph Schumpeter described Pareto’s theories as “arid generalizations” that did little to move the field forward.9) Mathematical models were easily assessed for logical errors. (At least superficially so: there was always the question of what assumptions one chose to make to shrink the market down to a few pages’ worth of algebra.)

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In contrast to the steady march that had taken place toward ever-greater generalizability of models, scholars were beginning to take specific phenomena they wished to explore and build up models that, while still abstract, aimed to capture the essence of a real-life market. Akerlof, with characteristic modesty, has observed that this was merely a return to the approach that iconic economists like Joseph Schumpeter and John Maynard Keynes had taken to describe the economy, where there was no pretension of modeling a complete system. Aspects of a market just drop from the sky. For instance, why do humans have the tendencies and instincts in market transactions that Keynes famously described as our “animal spirits”?

The New Depression: The Breakdown of the Paper Money Economy by Richard Duncan

Alan Greenspan, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Ben Bernanke: helicopter money, Bretton Woods, business cycle, currency manipulation / currency intervention, debt deflation, deindustrialization, diversification, diversified portfolio, fiat currency, financial innovation, Flash crash, Fractional reserve banking, Glass-Steagall Act, income inequality, inflation targeting, It's morning again in America, Joseph Schumpeter, laissez-faire capitalism, liquidity trap, low interest rates, market bubble, market fundamentalism, mass immigration, megaproject, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, Nixon triggered the end of the Bretton Woods system, private sector deleveraging, quantitative easing, reserve currency, risk free rate, Ronald Reagan, savings glut, special drawing rights, The Great Moderation, too big to fail, trade liberalization

Otherwise, the enormous amount of dollars its exporters earn in the United States each year will push up the yuan when the exporters bring them back home to China and convert them into yuan. That is something the Chinese authorities cannot allow because a much higher yuan would be sure to throw China’s economy into crisis. Notes 1. Joseph Schumpeter, Ten Great Economists, from Marx to Keynes (New York: Oxford University Press, 1951). 2. These estimates were reached using information published by the IMF on disclosed and undisclosed reserves. 3. Fed’s Flow of Funds Account of the United States, second quarter 2011 (see Exhibit 2.7, Rest of the World).

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Moreover, the amount of credit has grown so large relative to the amount of what was previously understood to be money that it has made money irrelevant. The new reality is that credit has displaced money as the key economic variable. That change is the subject of Chapter 4. Note 1. Joseph Schumpeter, History of Economic Analysis (New York: Oxford University Press, 1954), p. 1123. CHAPTER 4 The Quantity Theory of Credit A credit-expansion boom must unavoidably lead to a process which everyday speech calls the depression. —Ludwig von Mises1 So long as gold was money, credit creation was limited by the supply of gold.

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By the end of this chapter, the disturbing implications of this theory will have become clear. The Quantity Theory of Money The quantity theory of money asserts that changes in the quantity of money in an economy cause a proportional change in the price level. The theory is centuries old. In his magisterial work History of Economic Analysis, Joseph Schumpeter credits Jean Bodin, a French political philosopher, for being the first to propound the theory in 1568. David Hume, John Stuart Mill, Ludwig von Mises (with a few qualifications), and Milton Friedman—along with many others—all accepted and wrote about the quantity theory. In 1912, Irving Fisher published the definitive work on the subject, The Purchasing Power of Money: Its Determination and Relation to Credit, Interest and Crises.2 In that book, Fisher employed what he called the equation of exchange to demonstrate the relationship between the quantity of money and the price level.

Capitalism in America: A History by Adrian Wooldridge, Alan Greenspan

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, agricultural Revolution, air freight, Airbnb, airline deregulation, Alan Greenspan, American Society of Civil Engineers: Report Card, Asian financial crisis, bank run, barriers to entry, Bear Stearns, Berlin Wall, Blitzscaling, Bonfire of the Vanities, book value, Bretton Woods, British Empire, business climate, business cycle, business process, California gold rush, Charles Lindbergh, cloud computing, collateralized debt obligation, collective bargaining, Corn Laws, Cornelius Vanderbilt, corporate governance, corporate raider, cotton gin, creative destruction, credit crunch, debt deflation, Deng Xiaoping, disruptive innovation, Donald Trump, driverless car, edge city, Elon Musk, equal pay for equal work, Everybody Ought to Be Rich, Fairchild Semiconductor, Fall of the Berlin Wall, fiat currency, financial deregulation, financial engineering, financial innovation, fixed income, Ford Model T, full employment, general purpose technology, George Gilder, germ theory of disease, Glass-Steagall Act, global supply chain, Great Leap Forward, guns versus butter model, hiring and firing, Ida Tarbell, income per capita, indoor plumbing, informal economy, interchangeable parts, invention of the telegraph, invention of the telephone, Isaac Newton, Jeff Bezos, jimmy wales, John Maynard Keynes: technological unemployment, Joseph Schumpeter, junk bonds, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, labor-force participation, land bank, Lewis Mumford, Louis Pasteur, low interest rates, low skilled workers, manufacturing employment, market bubble, Mason jar, mass immigration, McDonald's hot coffee lawsuit, means of production, Menlo Park, Mexican peso crisis / tequila crisis, Michael Milken, military-industrial complex, minimum wage unemployment, mortgage debt, Myron Scholes, Network effects, new economy, New Urbanism, Northern Rock, oil rush, oil shale / tar sands, oil shock, Peter Thiel, Phillips curve, plutocrats, pneumatic tube, popular capitalism, post-industrial society, postindustrial economy, price stability, Productivity paradox, public intellectual, purchasing power parity, Ralph Nader, Ralph Waldo Emerson, RAND corporation, refrigerator car, reserve currency, rising living standards, road to serfdom, Robert Gordon, Robert Solow, Ronald Reagan, Sand Hill Road, savings glut, scientific management, secular stagnation, Silicon Valley, Silicon Valley startup, Simon Kuznets, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, stem cell, Steve Jobs, Steve Wozniak, strikebreaker, supply-chain management, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, total factor productivity, trade route, transcontinental railway, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, Unsafe at Any Speed, Upton Sinclair, urban sprawl, Vannevar Bush, vertical integration, War on Poverty, washing machines reduced drudgery, Washington Consensus, white flight, wikimedia commons, William Shockley: the traitorous eight, women in the workforce, Works Progress Administration, Yom Kippur War, young professional

In the 1830s, Americans began to use the phrase to refer to people who were engaged in mercantile transactions.3 Thereafter Americans reserved the same respect for businesspeople that the British reserved for gentlemen, the French for intellectuals, and the Germans for scholars. America’s willingness to “put something heroic into their way of trading,” as Alexis de Tocqueville put it, produced a cult of the entrepreneur. Americans were instinctive supporters of Joseph Schumpeter’s idea that the real motors of historical change were not workers, as Marx had argued, nor abstract economic forces, as his fellow economists tended to imply, but people who build something out of nothing, inventors like Thomas Edison, who had 1,093 patents, and company builders like Henry Ford, Thomas Watson, and Bill Gates.

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Creation and destruction are Siamese twins. The process involves displacing previously productive assets and their associated jobs with newer technologies and their jobs. Thus Henry Bessemer’s novel steel technology of 1855 displaced previous, more costly steelmaking. The world owes the idea of creative destruction to Joseph Schumpeter and his great work Capitalism, Socialism and Democracy (1942). “The process of creative destruction is the essential fact about capitalism,” Schumpeter argued. “It is what capitalism consists in and what every capitalist concern has got to live in.” Yet for all his genius, Schumpeter didn’t go beyond brilliant metaphors to produce a coherent theory of creative destruction: modern economists have therefore tried to flesh out his ideas and turn metaphors into concepts that acknowledge political realities, which is to say, the world as it really is.

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Sophisticated investors (including many foreigners) learned to hedge against risk by buying a “market basket” of railroad securities, just as today’s investors buy a basket of leading industrial stocks. Investors were keen on acquiring information and hedging against risk because the new business was so unstable. Joseph Schumpeter noted that the American railroad boom, far more than any of the European railroad booms, meant “building well ahead of demand” and therefore operating deficits for unspecifiable periods. The railroad barons had no choice but to engage in speculation on a massive scale: they needed to assemble unheard-of quantities of matériel in order to build businesses that initially had no customers.

As the Future Catches You: How Genomics & Other Forces Are Changing Your Work, Health & Wealth by Juan Enriquez

Albert Einstein, AOL-Time Warner, Apollo 13, Berlin Wall, bioinformatics, borderless world, British Empire, Buckminster Fuller, business cycle, creative destruction, digital divide, double helix, Ford Model T, global village, Gregor Mendel, half of the world's population has never made a phone call, Helicobacter pylori, Howard Rheingold, Jeff Bezos, Joseph Schumpeter, Kevin Kelly, knowledge economy, more computing power than Apollo, Neal Stephenson, new economy, personalized medicine, purchasing power parity, Ray Kurzweil, Richard Feynman, Robert Metcalfe, Search for Extraterrestrial Intelligence, SETI@home, Silicon Valley, spice trade, stem cell, the new new thing, yottabyte

Andrews, The Clone Age: Adventures in the New World of Reproductive Technology (New York: Henry Holt, 1999). 11. Juan Enriquez, “Green Biotech and European Competitiveness,” Trends in Biotechnology, April 2001. 12. This process of creative destruction was identified over half a century ago by an Austrian economist turned Harvard professor, Joseph Schumpeter. See Joseph Schumpeter, Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process (New York: McGraw-Hill, 1939). 13. Charles J. Whalen, “Today’s Hottest Economist Died Fifty Years Ago,” Business Week, December 11, 2000. Chapter XII: Sleepless … (and Angry) in Seattle 1.

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Western Europe is not immune to massive changes … And could easily lose its way if it keeps trying to stop … Key technologies … And keeps bleeding brains to areas like Silicon Valley. Technology is not kind … It does not wait … It does not say please … It slams into existing systems … And often destroys them … While creating a new system.12 (Today’s chi-chi economist, Joseph Schumpeter … died half a century ago … trained as a lawyer … coined the term “creative destruction”: new products and discoveries relentlessly destroy the old … By age 30, he had three clear goals in mind: to become “Europe’s greatest lover of beautiful women and Europe’s greatest horseman—and perhaps also the world’s greatest economist.”

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One by Meghnad Desai

3D printing, Alan Greenspan, bank run, banking crisis, Bear Stearns, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, correlation coefficient, correlation does not imply causation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, German hyperinflation, Glass-Steagall Act, Gunnar Myrdal, Home mortgage interest deduction, imperial preference, income inequality, inflation targeting, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, low interest rates, market bubble, market clearing, means of production, Meghnad Desai, Mexican peso crisis / tequila crisis, mortgage debt, Myron Scholes, negative equity, Northern Rock, oil shale / tar sands, oil shock, open economy, Paul Samuelson, Phillips curve, Post-Keynesian economics, price stability, purchasing power parity, pushing on a string, quantitative easing, reserve currency, rising living standards, risk/return, Robert Shiller, Robert Solow, Ronald Reagan, savings glut, secular stagnation, seigniorage, Silicon Valley, Simon Kuznets, subprime mortgage crisis, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, women in the workforce

In February 2009, as the British Prime Minister Gordon Brown was proposing a massive internationally coordinated Keynesian reflation package at the G20 summit in London, I wrote an article for the online edition of a major UK newspaper about the perils of following a Keynesian policy solution.1 It was clear to me that the cure would not come from a repetition of the old policies of borrowing and reflation. Globalization had fundamentally changed the context. To find a solution to the crisis we needed to explore the “underworld,” as Keynes described it, the world where economists who had gone out of fashion lived. Karl Marx, Joseph Schumpeter, Nikolai Kondratieff, Friedrich Hayek (and even Knut Wicksell, who was still read but not understood) viewed capitalism as a system which was subject to the waves of up and down cycles – as a dynamic disequilibrium system. Modern economics views the market as a stationary equilibrium system – where decisions taken are compatible, so in essence supply equals demand.

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Who is right – the Prize givers and receivers, or the general public which is dubious of economics and economists? Beyond the mainstream there are many pockets of unfashionable economics or heterodoxies, as we may call them. The economic theories of Marx have a bearing on the cycles, as do those of Frederick Hayek. who has his devoted supporters.5 Economists such as Joseph Schumpeter or Nikolai Kondratieff were also much concerned with finding cyclical patterns in economic data over the two previous centuries. It is these economists who have more to say about how and why we are in the state we are in than mainstream or even Keynesian theories. The Role of Globalization As we are going through a crunch in the West, many economies in Asia, Latin America and Africa – the so-called “emerging economies” of China, India, Brazil, Indonesia and Nigeria – are debating “problems” of maintaining their growth at 5 percent or 8 percent or even 10 percent.

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The tradition of Ricardo and Walras takes the equilibrium route. The equilibrium tradition is the more dominant one, especially in recent years. The tradition of Marx and Wicksell takes the disequilibrium path. And there are insights in the disequilibrium tradition which can be illuminating. It was Joseph Schumpeter who gave economics not only a theory but a vision – weltanschauung – about how capitalism flourished through a series of cycles of booms and busts. Creative Destruction The second half of the nineteenth century witnessed one of the many episodes of globalization. This one was built on the industrial and financial revolutions.

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

"World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, business cycle, buy and hold, Carmen Reinhart, classic study, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, eat what you kill, Edward Glaeser, electricity market, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, foreign exchange controls, full employment, geopolitical risk, George Akerlof, global rebalancing, Goodhart's law, Great Leap Forward, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, long and variable lags, Long Term Capital Management, low interest rates, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, military-industrial complex, Minsky moment, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, Nelson Mandela, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, Paul Volcker talking about ATMs, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, seminal paper, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, systems thinking, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

Newman et al, “When Will the Antarctic Ozone Hole Recover?” Geophysical Research Letters 33 (2006). 4 Andrew Mellon quotation from Herbert Hoover’s autobiography, The Memoirs of Herbert Hoover: Vol. 3, The Great Depression, 31-32. 5 In 1934, Joseph Schumpeter wrote, “depressions are not simply evils, which we might attempt to suppress, but . . . forms of something which has to be done.” Joseph Schumpeter, “Depressions,” in Douglass Brown et al., The Economics of the Recovery Program, 16. 6 This statement is itself an instance of the “paradox of the liar,” which is related to the impossibility of devising a logical system that is both internally consistent and complete, demonstrated by Russell and Goedel.

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This mutability is the key condition for capitalism’s prosperity and long-term survival. Yet politicians, businesspeople, and economists to the right of the ideological spectrum, the people supposedly most dedicated to capitalism’s historic triumph, are mostly blind to the most important reason for its success. They extol the virtues of Joseph Schumpeter’s process of “creative destruction,”3 whereby dying industries are replaced by previously unimagined new technologies and managerial systems, but they wilfully ignore the same process of creative self-destruction that renews the system as a whole. Why should the politico-economic structure of the capitalist system be considered immutable, while its microfoundations are in constant flux?

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See John Williamson, “What Washington Means by Policy Reform,” in John Williamson, ed., Latin American Readjustment: How Much Has Happened. 2 See Alain Gresh, “Understanding the Beijing Consensus,” trans. Stephanie Irvine, Le Monde Diplomatique English Edition (November 2008). The Beijing Consensus is described more extensively in Chapter 24. 3 Joseph Schumpeter, Capitalism, Socialism and Democracy. 4 “When they faced a graduated income tax in 1913, businessmen everywhere judged it the most destructive legislation in the nation’s history.” Robert Wiebe, Business Men and Reform: A Study of the Progressive Movement, 196. 5 David Lloyd George, chancellor of the exchequer, described his “People’s Budget” of 1909 as “a war budget.

Crisis Economics: A Crash Course in the Future of Finance by Nouriel Roubini, Stephen Mihm

Alan Greenspan, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, dark matter, David Ricardo: comparative advantage, debt deflation, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, George Akerlof, Glass-Steagall Act, global pandemic, global reserve currency, Gordon Gekko, Greenspan put, Growth in a Time of Debt, housing crisis, Hyman Minsky, information asymmetry, interest rate swap, invisible hand, Joseph Schumpeter, junk bonds, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market bubble, market fundamentalism, Martin Wolf, means of production, Minsky moment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, Northern Rock, offshore financial centre, oil shock, Paradox of Choice, paradox of thrift, Paul Samuelson, Ponzi scheme, price stability, principal–agent problem, private sector deleveraging, proprietary trading, pushing on a string, quantitative easing, quantitative trading / quantitative finance, race to the bottom, random walk, regulatory arbitrage, reserve currency, risk tolerance, Robert Shiller, Satyajit Das, Savings and loan crisis, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, subprime mortgage crisis, Suez crisis 1956, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, too big to fail, tulip mania, Tyler Cowen, unorthodox policies, value at risk, We are all Keynesians now, Works Progress Administration, yield curve, Yom Kippur War

As credit dried up in the United States, it evaporated overseas too, and as economies contracted, manufacturing giants like China and commodity exporters like Russia caught the virus. Toward the end of 2008 the pandemic worsened, and the history of long-forgotten crises became increasingly relevant for explaining what was happening. So too did the writings of economists who had languished in obscurity for many years. John Maynard Keynes came back into vogue, as did Joseph Schumpeter, Hyman Minsky, Irving Fisher, and even Karl Marx. Their sudden reappearance was significant, if portentous: all had made their mark studying how capitalism could collapse in crisis. They may have drawn wildly different conclusions as to why and how, much less what to do about it, but the fact that their names were uttered with a quiet respect was a sign that a sea change was at hand.

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It is is an admittedly selective history of economic theory, but its ambition is straightforward: to highlight what’s useful. As always, pragmatism informs our choices. Keynes is here, as is his most radical interpreter, Hyman Minsky, but so are economists from other camps: Robert Shiller, one of the most visible proponents of behavioral economics; Joseph Schumpeter, the grand theorist of capitalist “creative destruction”; and economists of a historical bent, from Charles Kindleberger to Carmen Reinhart and Kenneth Rogoff. Their disparate strands of thought inform our idiosyncratic approach to understanding crises. When Markets Behave Badly Crisis economics is the study of how and why markets fail.

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There’s another way of looking at financial crises, one that points to an entirely different understanding of the Great Depression of the 1930s, the Japanese near depression and Lost Decade of the 1990s, and the Great Recession of our own time. To Austria and Back The Austrian School originated in the late nineteenth and early twentieth centuries with a loosely affiliated group of Austrian economists: Carl Menger, Ludwig von Mises, Eugen von Böhm-Bawerk, and Friedrich Hayek. These economists and their many students, including Joseph Schumpeter, were a fractious bunch and are next to impossible to categorize. The same can be said of those twenty-first-century economists who consider themselves heirs to the Austrians. Nonetheless, a few generalizations are possible. Being an Austrian economist today is tantamount to holding libertarian economic beliefs.

Capitalism, Alone: The Future of the System That Rules the World by Branko Milanovic

affirmative action, Asian financial crisis, assortative mating, barriers to entry, basic income, Berlin Wall, bilateral investment treaty, Black Swan, Branko Milanovic, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carried interest, colonial rule, corporate governance, creative destruction, crony capitalism, deindustrialization, dematerialisation, Deng Xiaoping, discovery of the americas, European colonialism, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, full employment, ghettoisation, gig economy, Gini coefficient, global supply chain, global value chain, Great Leap Forward, high net worth, household responsibility system, income inequality, income per capita, invention of the wheel, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, labor-force participation, laissez-faire capitalism, land reform, liberal capitalism, low skilled workers, Lyft, means of production, new economy, offshore financial centre, Paul Samuelson, plutocrats, post-materialism, purchasing power parity, remote working, rent-seeking, ride hailing / ride sharing, Robert Solow, Silicon Valley, single-payer health, special economic zone, Tax Reform Act of 1986, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, uber lyft, universal basic income, Vilfredo Pareto, Washington Consensus, women in the workforce, working-age population, Xiaogang Anhui farmers

—Plato, The Republic The definition of liberal meritocratic capitalism is quite straightforward. I define capitalism in the fashion of Karl Marx and Max Weber, as the system where most production is carried out with privately owned means of production, capital hires legally free labor, and coordination is decentralized. In addition, to add Joseph Schumpeter’s requirement, most investment decisions are made by private companies or individual entrepreneurs.1 Definition of liberal meritocratic capitalism The terms “meritocratic” and “liberal” come from the definitions of various forms of equality that John Rawls lays out in A Theory of Justice (1971).

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Liberal theory thus tends to ignore the entire short twentieth century and to go directly from 1914 to the fall of the Berlin Wall in 1989, almost as if nothing had happened in between—1989 brings the world back to the path it was on in 1914, before it slipped in error. This is why liberal explanations for the outbreak of the war are nonexistent, and the explanations proffered are based on politics (Fritz Fischer, Niall Ferguson), the remaining influence of aristocratic societies (Joseph Schumpeter), or, least convincing of all, the idiosyncrasies of individual actors, mistakes, and accidents (A. J. P. Taylor). Marxism is much better able to explain the war and the rise of fascism. Its adherents hold that the war was the outcome of “the highest stage of capitalism,” that is, the stage at which capitalism had created cartels and national monopolies that fought each other for control of the rest of the world.

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The very “deepening” of capitalism through its undiluted emphasis on money-making and its expansion into the personal sphere (topics discussed in Chapter 5) leaves less time for broader political deliberations and cannot produce that ideal of the informed and concerned citizen that many democratic theories postulate. It can even be argued that such a citizen cannot coexist with hypercommercialized capitalism. Definitions of democracy that insist on citizens’ participation are thus at odds with reality. Robert Dahl’s and Joseph Schumpeter’s much more technical definitions of polyarchy and democracy are more accurate. In the words of one of Dahl’s critics, “Democracy and polyarchy are … [for Dahl] both purely instrumental devices for maximizing the satisfaction of prior, private wants [of citizens]—nothing more” (Krouse 1982, 449).

The Evolution of Everything: How New Ideas Emerge by Matt Ridley

"World Economic Forum" Davos, adjacent possible, affirmative action, Affordable Care Act / Obamacare, Albert Einstein, Alfred Russel Wallace, AltaVista, altcoin, An Inconvenient Truth, anthropic principle, anti-communist, bank run, banking crisis, barriers to entry, bitcoin, blockchain, Boeing 747, Boris Johnson, British Empire, Broken windows theory, carbon tax, Columbian Exchange, computer age, Corn Laws, cosmological constant, cotton gin, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, cryptocurrency, David Ricardo: comparative advantage, demographic transition, Deng Xiaoping, discovery of DNA, Donald Davies, double helix, Downton Abbey, driverless car, Eben Moglen, Edward Glaeser, Edward Lorenz: Chaos theory, Edward Snowden, endogenous growth, epigenetics, Ethereum, ethereum blockchain, facts on the ground, fail fast, falling living standards, Ferguson, Missouri, financial deregulation, financial innovation, flying shuttle, Frederick Winslow Taylor, Geoffrey West, Santa Fe Institute, George Gilder, George Santayana, Glass-Steagall Act, Great Leap Forward, Greenspan put, Gregor Mendel, Gunnar Myrdal, Henri Poincaré, Higgs boson, hydraulic fracturing, imperial preference, income per capita, indoor plumbing, information security, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jane Jacobs, Japanese asset price bubble, Jeff Bezos, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, Khan Academy, knowledge economy, land reform, Lao Tzu, long peace, low interest rates, Lyft, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, means of production, meta-analysis, military-industrial complex, mobile money, Money creation, money: store of value / unit of account / medium of exchange, Mont Pelerin Society, moral hazard, Necker cube, obamacare, out of africa, packet switching, peer-to-peer, phenotype, Pierre-Simon Laplace, precautionary principle, price mechanism, profit motive, RAND corporation, random walk, Ray Kurzweil, rent-seeking, reserve currency, Richard Feynman, rising living standards, road to serfdom, Robert Solow, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, scientific management, Second Machine Age, sharing economy, smart contracts, South Sea Bubble, Steve Jobs, Steven Pinker, Stuart Kauffman, tacit knowledge, TED Talk, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, twin studies, uber lyft, women in the workforce

The really big thing that both Smith and Ricardo – and Robert Malthus and John Stuart Mill and all the other British political economists of the time – missed, however, was that they were living through the Industrial Revolution. They had no conception that they stood ‘at the threshold of the most spectacular economic developments ever witnessed’, as Joseph Schumpeter put it a century later: ‘Vast possibilities matured into realities before their very eyes. Nevertheless, they saw nothing but cramped economies struggling with ever-decreasing success for their daily bread.’ This was because their world view was dominated by the idea of diminishing returns. Ricardo, for example, watching local farmers struggle with bad harvests in the 1810s, agreed with his friend Malthus that corn yields must stagnate, because the best land was already in cultivation and every marginal acre brought under the plough would be worse than the one before.

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The ‘marginalist’ revolution in economics, led by Carl Menger, Léon Walras and Stanley Jevons and culminating in the synthesis of Alfred Marshall, shifted the focus of price setting to the consumer rather than the producer, but left the question of increasing returns largely unanswered. In place of diminishing returns, they produced the idea of an equilibrium – a steady state of perfect competition towards which the economic system tended to move once information is easily available. Then came Joseph Schumpeter, with his relentless focus on innovation and his insistence that there was no equilibrium, but an unfolding of incessant, dynamic change. In his Theory of Economic Development, written while he was at the University of Czernowitz in 1909, Schumpeter was the first economist to insist that the role of the entrepreneur was crucial.

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In the 1920s the American sociologist Colum Gilfillan traced the pedigree of ships from dugout canoes to steamships, implying that there was a gradualism about the progress of technology that stories of sudden invention disguised, and an inevitability about each step once the previous one had been taken. In 1922 William Ogburn developed a fully-fledged theory of emergent invention, arguing that ‘the more there is to invent with, the greater will be the number of inventions’. The economists Joseph Schumpeter and Friedrich Hayek both saw the economy in explicitly Darwinian ways: as a system where ideas recombine and trends emerge rather than are imposed. In 1988 George Basalla wrote a book called The Evolution of Technology, which stressed the continuity of successive innovations. He pointed out that Eli Whitney’s cotton gin was not conjured out of thin air, but adapted from the Indian charka or roller gins already in use.

The Rational Optimist: How Prosperity Evolves by Matt Ridley

"World Economic Forum" Davos, 23andMe, Abraham Maslow, agricultural Revolution, air freight, back-to-the-land, banking crisis, barriers to entry, Bernie Madoff, British Empire, call centre, carbon credits, carbon footprint, carbon tax, Cesare Marchetti: Marchetti’s constant, charter city, clean water, cloud computing, cognitive dissonance, collateralized debt obligation, colonial exploitation, colonial rule, Corn Laws, Cornelius Vanderbilt, cotton gin, creative destruction, credit crunch, David Ricardo: comparative advantage, decarbonisation, dematerialisation, demographic dividend, demographic transition, double entry bookkeeping, Easter island, Edward Glaeser, Edward Jenner, electricity market, en.wikipedia.org, everywhere but in the productivity statistics, falling living standards, feminist movement, financial innovation, flying shuttle, Flynn Effect, food miles, Ford Model T, Garrett Hardin, Gordon Gekko, greed is good, Hans Rosling, happiness index / gross national happiness, haute cuisine, hedonic treadmill, Herbert Marcuse, Hernando de Soto, income inequality, income per capita, Indoor air pollution, informal economy, Intergovernmental Panel on Climate Change (IPCC), invention of agriculture, invisible hand, James Hargreaves, James Watt: steam engine, Jane Jacobs, Jevons paradox, John Nash: game theory, joint-stock limited liability company, Joseph Schumpeter, Kevin Kelly, Kickstarter, knowledge worker, Kula ring, Large Hadron Collider, Mark Zuckerberg, Medieval Warm Period, meta-analysis, mutually assured destruction, Naomi Klein, Northern Rock, nuclear winter, ocean acidification, oil shale / tar sands, out of africa, packet switching, patent troll, Pax Mongolica, Peter Thiel, phenotype, plutocrats, Ponzi scheme, precautionary principle, Productivity paradox, profit motive, purchasing power parity, race to the bottom, Ray Kurzweil, rent-seeking, rising living standards, Robert Solow, Silicon Valley, spice trade, spinning jenny, stem cell, Steve Jobs, Steven Pinker, Stewart Brand, supervolcano, technological singularity, Thales and the olive presses, Thales of Miletus, the long tail, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, Tragedy of the Commons, transaction costs, ultimatum game, upwardly mobile, urban sprawl, Vernor Vinge, Vilfredo Pareto, wage slave, working poor, working-age population, world market for maybe five computers, Y2K, Yogi Berra, zero-sum game

Innovation, whether in the form of new technology or new ways of organising the world, can destroy as well as create. A Wal-Mart store drives small general retailers out of business as surely as the computer drove the typewriter out of business. But against this must be balanced the enormous benefits that (especially the poorest) customers reap in terms of cheaper, more varied and better goods. It was Joseph Schumpeter who pointed out that the competition which keeps a businessman awake at night is not that from his rivals cutting prices, but that of entrepreneurs making his product obsolete. As Kodak and Fuji slugged it out for dominance in the 35mm film industry in the 1990s, digital photography began to extinguish the entire market for analogue film – as analogue records and analogue video cassettes had gone before.

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Suddenly the rising income of the average British worker met the falling cost of cotton cloth and suddenly everybody could afford to wear (and wash) cotton underwear. The historian Edward Baines noted in 1835 that the ‘wonderful cheapness of cotton goods’ was now benefiting the ‘bulk of the people’: ‘a country-wake in the nineteenth century may display as much finery as a drawing room in the eighteenth.’ The capitalist achievement, reflected Joseph Schumpeter a century later, ‘does not typically consist of providing more silk stockings for queens but in bringing them within reach of factory girls in return for steadily decreasing amounts of effort.’ But increasing supply was not easy, because even the remotest Pennine valleys and Welsh marches were now thickly settled with the cottages of weavers and spinsters, transport was dear and some of the workers were earning good enough wages to take weekend holidays, occasionally even drinking their pay away till Monday night, preferring consumption to extra income.

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It was Paul Romer’s great achievement in the 1990s to rescue the discipline of economics from the century-long cul-de-sac into which it had driven by failing to incorporate innovation. From time to time its practitioners had tried to escape into theorems of increasing returns – Mill in the 1840s, Allyn Young in the 1920s, Joseph Schumpeter in the 1940s, Robert Solow in the 1950s – but not until Romer’s ‘new growth theory’ in the 1990s was economics fully back in the real world: a world where perpetual innovation brings brief bursts of profit through temporary monopoly to whoever can commandeer demand for new products or services, and long bursts of growth to everybody else who eventually gets to share the spilled-over idea.

The State and the Stork: The Population Debate and Policy Making in US History by Derek S. Hoff

affirmative action, Alan Greenspan, Alfred Russel Wallace, back-to-the-land, British Empire, business cycle, classic study, clean water, creative destruction, David Ricardo: comparative advantage, demographic transition, desegregation, Edward Glaeser, feminist movement, full employment, garden city movement, Garrett Hardin, George Gilder, Gregor Mendel, Gunnar Myrdal, guns versus butter model, Herman Kahn, immigration reform, income inequality, income per capita, invisible hand, It's morning again in America, Jane Jacobs, John Maynard Keynes: technological unemployment, Joseph Schumpeter, labor-force participation, Lewis Mumford, manufacturing employment, mass immigration, New Economic Geography, new economy, old age dependency ratio, open immigration, Paul Samuelson, peak oil, pensions crisis, profit motive, public intellectual, Ralph Waldo Emerson, road to serfdom, Robert Solow, Ronald Reagan, scientific management, Scientific racism, secular stagnation, Simon Kuznets, The Chicago School, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, Thorstein Veblen, Tragedy of the Commons, trickle-down economics, urban planning, urban sprawl, W. E. B. Du Bois, wage slave, War on Poverty, white flight, zero-sum game

Laurence Laughlin, the old-guard head professor of political economy at the University of Chicago, called the law of diminishing returns to land “simply a physical fact . . . which Nature has disclosed to us, just as we say it is a fact that water runs down hill.”40 Suggesting that population growth among the “undesirable classes” reinforced their poverty, Laughlin wrote that “those who advise moral restraint on the growth of this class of persons . . . can not be called ‘hard-hearted,’ or ‘un-Christian,’ or ‘dismal Malthusians.’ They are rather the true friends of the unfortunate people, who need real, not sentimental and misdirected, kindness and help.”41 Frank Taussig, who taught at Harvard for over fifty years (his preeminent colleague Joseph Schumpeter called him the “American [Alfred] Marshall”),42 wrote in his economics textbook that the “Malthusian position is impregnable” and welcomed the eventual stationary state envisioned by John Stuart Mill.43 “A limitation of numbers is not a cause of higher wages,” Taussig observed, “but it is a condition of the maintenance of high wages.”44 Yale’s future president Arthur Hadley 52 chapter 2 scoffed at the young maverick opponents of laissez-faire for trying to wish away the iron laws of economics—including the law that too many children led to starvation wages.45 Frank Fetter, a Cornell and Princeton professor closely associated with the Austrian School of political economy, had critiqued Malthusian theory in his 1894 doctoral dissertation from the University of Halle.46 But in his 1913 presidential address to the AEA, “Population or Prosperity,” Fetter declared, “It is high time to revise the optimistic American doctrine of population.”47 Due to population growth, “popular welfare in America is already threatened,” he asserted.

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Generally, historians examining the decline of stagnation theory simply suggest that postwar prosperity and the Baby Boom rendered theories of secular stagnation moot.97 Or they emphasize conservative opposition to it, which was certainly important.98 For instance, financier Alexander Sachs, one of FDR’s economic advisers, believed that the nation was suffering from excessive taxation and an “under-investment” depression rather than a permanent economic plateau.99 Yet leading conservatives, including Austrian-born Harvard economist Joseph Schumpeter and population depressed 93 former President Herbert Hoover, tended to reject the end-of-innovation pillar of stagnation more than the end-of-population-growth pillar.100 Population experts themselves offered an important and original revolt against 1930s stagnationist thought.101 And mainstream anti-stagnationists included SPK in their intellectual tool kit.

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Scale referred to not only the physical scale of the planet but also the time scale of economic growth; ecological economists were adamant that perpetual growth was a seductive illusion over the long run because natural systems are “closed loops” and all human activity increases entropy, the energy unavailable for productive use. A small coterie launched ecological economics. Romanian-born Nicholas Georgescu-Roegen, who studied under Joseph Schumpeter at Harvard, deserves credit for giving birth to the field—which he called bioeconomics—in the mid 1960s. Georgescu-Roegen argued, in simplest terms, “Matter matters, too.” Seeing the earth as a closed system—he used the analogy of an hourglass—Georgescu-Roegen urged the reorientation of economic activity toward sustainability.57 Better known today is Kenneth Boulding, president of the American Economic Association in 1968, who began the 1960s as an orthodox economist at the University of Michigan, though one who had identified planetary limits in an introduction to Malthus’s Essay on Population.58 Boulding’s classic 1966 essay, “The Economics of the Coming Spaceship Earth,” pleaded for a transition from a reckless “cowboy economy” to a “spaceman economy.”59 This new economy would recognize that “the earth has become a single space- 176 chapter 6 ship, without unlimited reservoirs of anything, either for extraction or pollution, and in which, therefore, man must find his place in a cyclical ecological system which is capable of continuous reproduction of material form even though it cannot escape having inputs of energy.”60 A spaceman economy would emphasize the total stock of resources, not current consumption (called “throughput” by environmental economists).

Machine, Platform, Crowd: Harnessing Our Digital Future by Andrew McAfee, Erik Brynjolfsson

"World Economic Forum" Davos, 3D printing, additive manufacturing, AI winter, Airbnb, airline deregulation, airport security, Albert Einstein, algorithmic bias, AlphaGo, Amazon Mechanical Turk, Amazon Web Services, Andy Rubin, AOL-Time Warner, artificial general intelligence, asset light, augmented reality, autism spectrum disorder, autonomous vehicles, backpropagation, backtesting, barriers to entry, behavioural economics, bitcoin, blockchain, blood diamond, British Empire, business cycle, business process, carbon footprint, Cass Sunstein, centralized clearinghouse, Chris Urmson, cloud computing, cognitive bias, commoditize, complexity theory, computer age, creative destruction, CRISPR, crony capitalism, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, data science, Dean Kamen, deep learning, DeepMind, Demis Hassabis, discovery of DNA, disintermediation, disruptive innovation, distributed ledger, double helix, driverless car, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Ethereum, ethereum blockchain, everywhere but in the productivity statistics, Evgeny Morozov, fake news, family office, fiat currency, financial innovation, general purpose technology, Geoffrey Hinton, George Akerlof, global supply chain, Great Leap Forward, Gregor Mendel, Hernando de Soto, hive mind, independent contractor, information asymmetry, Internet of things, inventory management, iterative process, Jean Tirole, Jeff Bezos, Jim Simons, jimmy wales, John Markoff, joint-stock company, Joseph Schumpeter, Kickstarter, Kiva Systems, law of one price, longitudinal study, low interest rates, Lyft, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, Marc Andreessen, Marc Benioff, Mark Zuckerberg, meta-analysis, Mitch Kapor, moral hazard, multi-sided market, Mustafa Suleyman, Myron Scholes, natural language processing, Network effects, new economy, Norbert Wiener, Oculus Rift, PageRank, pattern recognition, peer-to-peer lending, performance metric, plutocrats, precision agriculture, prediction markets, pre–internet, price stability, principal–agent problem, Project Xanadu, radical decentralization, Ray Kurzweil, Renaissance Technologies, Richard Stallman, ride hailing / ride sharing, risk tolerance, Robert Solow, Ronald Coase, Salesforce, Satoshi Nakamoto, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, speech recognition, statistical model, Steve Ballmer, Steve Jobs, Steven Pinker, supply-chain management, synthetic biology, tacit knowledge, TaskRabbit, Ted Nelson, TED Talk, the Cathedral and the Bazaar, The Market for Lemons, The Nature of the Firm, the strength of weak ties, Thomas Davenport, Thomas L Friedman, too big to fail, transaction costs, transportation-network company, traveling salesman, Travis Kalanick, Two Sigma, two-sided market, Tyler Cowen, Uber and Lyft, Uber for X, uber lyft, ubercab, Vitalik Buterin, warehouse robotics, Watson beat the top human players on Jeopardy!, winner-take-all economy, yield management, zero day

¶ A mechanical fillet is a smooth transition from one area of a part to another—for example, a rounded corner between two surfaces that meet at a right angle. # Or it might not be a good idea. Only time and research will tell. PART 2 PRODUCT AND PLATFORM CHAPTER 6 THE TOLL OF A NEW MACHINE Economic progress, in capitalist society, means turmoil. — Joseph Schumpeter, 1942 WITHIN ONE GENERATION, SEVERAL LONG-STANDING INDUSTRIES were transformed permanently and deeply by a single computer network. The business world has rarely, if ever, seen disruption at this speed and scale before. The first sentence in the previous paragraph exaggerates—the Internet had some help from other technologies as it remade sector after sector—but we don’t think the second sentence does.

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It’s like a totem; it’s a psychological anchor into something that you care about. Acquiring innovation. It was thought for a long time that large, established companies would be the biggest innovators. They’re the ones, after all, with the resources to afford large labs and R&D staff. The great Austrian economist Joseph Schumpeter challenged this view. He maintained that smaller, younger, more entrepreneurial firms—companies that had no interest in maintaining the status quo—were more likely to come up with truly novel goods and services. As he put it, “In general it is not the owner of stage coaches who builds railways.”

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I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.” “Indeed,” Keynes wrote, “the world is ruled by little else.” Keynes saw that the ideas of prominent “worldly philosophers”* like Adam Smith, Karl Marx, David Ricardo, Friedrich Hayek, and Joseph Schumpeter reach far outside the discipline of economics. They change how people think about fairness and justice, how companies organize themselves and innovate, how governments approach taxation and trade, and so on. Economists think about exchange, a fundamental and universal human activity, so their biggest ideas on the subject have had a huge impact.

Sabotage: The Financial System's Nasty Business by Anastasia Nesvetailova, Ronen Palan

Alan Greenspan, algorithmic trading, bank run, banking crisis, barriers to entry, Basel III, Bear Stearns, Bernie Sanders, big-box store, bitcoin, Black-Scholes formula, blockchain, Blythe Masters, bonus culture, Bretton Woods, business process, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, critique of consumerism, cryptocurrency, currency risk, democratizing finance, digital capitalism, distributed ledger, diversification, Double Irish / Dutch Sandwich, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, gig economy, Glass-Steagall Act, global macro, Gordon Gekko, high net worth, Hyman Minsky, independent contractor, information asymmetry, initial coin offering, interest rate derivative, interest rate swap, Joseph Schumpeter, junk bonds, Kenneth Arrow, litecoin, London Interbank Offered Rate, London Whale, Long Term Capital Management, margin call, market fundamentalism, Michael Milken, mortgage debt, new economy, Northern Rock, offshore financial centre, Paul Samuelson, peer-to-peer lending, plutocrats, Ponzi scheme, Post-Keynesian economics, price mechanism, regulatory arbitrage, rent-seeking, reserve currency, Ross Ulbricht, shareholder value, short selling, smart contracts, sovereign wealth fund, Thorstein Veblen, too big to fail

The instruments enabled many banks to shield themselves from losses, at the expense of investors. Ultimately, CDSs became a tool of the sabotage of government as well, entrapping a giant insurer on one side of the CDS business. THE BITTER AFTERTASTE OF FINANCIAL INNOVATION A classic scholar of business behaviour, Joseph Schumpeter, saw innovation as an important source of market power.28 Schumpeter analysed various innovations: the introduction of new products, new methods of production and new forms of business organization, as well as the penetration of new markets. Crucially, he argued, it is not a mere invention or a new product, or even several such products, that transforms an economy, but ‘the carrying out of new combinations’ that works as the key driver of economic change.29 Michael Milken, Lewie Ranieri and Blythe Masters became celebrities in the world of finance and beyond.

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., ‘In defence of big banks’, The New York Times, 22 August 2012, www.nytimes.com/2012/08/23/opinion/dont-break-up-the-big-banks.html. Hodgson, G. M., ‘John R. Commons and the Foundations of Institutional Economics’, Journal of Economic Issues, vol. 37, 2003, pp. 547–76, https://doi.org/10.1080/00213624.2003.11506603. Hodgson, G. M., The Evolution of Institutional Economics, Routledge, 2004. Hosters, J., ‘Joseph Schumpeter and His Legacy in Innovation Studies’, Knowledge, Technology, & Policy, vol. 18:3, 2005, pp. 20–37. Independent, ‘The banker the credit crisis couldn’t touch’, 27 July 2008, www.independent.co.uk/news/business/analysis-and-features/the-banker-the-credit-crisis-couldnt-touch-878002.html. Ingram, D. and P.

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Giannone, ‘AIG bailout good for banks while investors bleed’, Reuters, 11 March 2009, www.reuters.com/article/us-aig-bailout-sb-idUSTRE52A0TP20090311. 27. ‘Credit derivatives: the great untangling’, Economist, 6 November 2008, www.economist.com/briefing/2008/11/06/the-great-untangling. 28. H. Minsky, Stabilizing an Unstable Economy, Yale University Press, 1986, p. 346. 29. J. Hosters, ‘Joseph Schumpeter and His Legacy in Innovation Studies’, Knowledge, Technology, & Policy, vol. 18:3, 2005, pp. 20–37. J. A. Schumpeter, ‘The Influence of Protective Tariffs on the Industrial Development of the United States’, in Proceedings of the Academy of Political Science, May 1940, pp. 2–7. 30. M. Lavoie, Introduction to Post-Keynesian Economics, Palgrave Macmillan, 2009. 31.

Future Politics: Living Together in a World Transformed by Tech by Jamie Susskind

3D printing, additive manufacturing, affirmative action, agricultural Revolution, Airbnb, airport security, algorithmic bias, AlphaGo, Amazon Robotics, Andrew Keen, Apollo Guidance Computer, artificial general intelligence, augmented reality, automated trading system, autonomous vehicles, basic income, Bertrand Russell: In Praise of Idleness, Big Tech, bitcoin, Bletchley Park, blockchain, Boeing 747, brain emulation, Brexit referendum, British Empire, business process, Cambridge Analytica, Capital in the Twenty-First Century by Thomas Piketty, cashless society, Cass Sunstein, cellular automata, Citizen Lab, cloud computing, commons-based peer production, computer age, computer vision, continuation of politics by other means, correlation does not imply causation, CRISPR, crowdsourcing, cryptocurrency, data science, deep learning, DeepMind, digital divide, digital map, disinformation, distributed ledger, Donald Trump, driverless car, easy for humans, difficult for computers, Edward Snowden, Elon Musk, en.wikipedia.org, end-to-end encryption, Erik Brynjolfsson, Ethereum, ethereum blockchain, Evgeny Morozov, fake news, Filter Bubble, future of work, Future Shock, Gabriella Coleman, Google bus, Google X / Alphabet X, Googley, industrial robot, informal economy, intangible asset, Internet of things, invention of the printing press, invention of writing, Isaac Newton, Jaron Lanier, John Markoff, Joseph Schumpeter, Kevin Kelly, knowledge economy, Large Hadron Collider, Lewis Mumford, lifelogging, machine translation, Metcalfe’s law, mittelstand, more computing power than Apollo, move fast and break things, natural language processing, Neil Armstrong, Network effects, new economy, Nick Bostrom, night-watchman state, Oculus Rift, Panopticon Jeremy Bentham, pattern recognition, payday loans, Philippa Foot, post-truth, power law, price discrimination, price mechanism, RAND corporation, ransomware, Ray Kurzweil, Richard Stallman, ride hailing / ride sharing, road to serfdom, Robert Mercer, Satoshi Nakamoto, Second Machine Age, selection bias, self-driving car, sexual politics, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, smart contracts, Snapchat, speech recognition, Steve Bannon, Steve Jobs, Steve Wozniak, Steven Levy, tech bro, technological determinism, technological singularity, technological solutionism, the built environment, the Cathedral and the Bazaar, The Structural Transformation of the Public Sphere, The Wisdom of Crowds, Thomas L Friedman, Tragedy of the Commons, trolley problem, universal basic income, urban planning, Watson beat the top human players on Jeopardy!, work culture , working-age population, Yochai Benkler

Ryan, On Politics, 961. 33. See Sasha Issenberg, ‘How Obama’s Team Used Big Data to Rally Voters’, MIT Techology Review, 19 December 2012 <https://www. technologyreview.com/s/509026/how-obamas-team-usedbig-data-to-rally-voters/> (accessed 1 December 2017). 34. ‘Joseph Schumpeter’, Wikipedia, last edited 23 December 2017 <https://en.wikipedia.org/wiki/Joseph_Schumpeter> (accessed 21 January 2018). 35. Pedro Domingos, The Master Algorithm: How the Quest for the Ultimate Learning Machine Will Remake Our World (London: Allen Lane, 2015), 17. 36. Carole Cadwalladr, ‘Robert Mercer:The Big Data Billionaire Waging War on Mainstream Media’, The Guardian, 26 February 2017 <https:// www.theguardian.com/politics/2017/feb/26/robert-mercerbreitbart-war-on-media-steve-bannon-donald-trump-nigel-farage> (accessed 1 December 2017). 37.

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Future Perfect: The Case for Progress in a Networked Age. London: Penguin, 2013. Jones, Steve. ‘Why “Big Data” is the Fourth Factor of Production’. Financial Times, 27 Dec. 2012. <https://www.ft.com/content/5086d700-504a11e2-9b66-00144feab49a> (accessed 9 Dec. 2017). ‘Joseph Schumpeter’. Wikipedia, last modified 23 Dec. 2017 <https:// en.wikipedia.org/wiki/Joseph_Schumpeter> (accessed 21 Jan. 2018). Jouppi, Norm. ‘Google Supercharges Machine Learning Tasks With TPU Custom Chip’. Google Cloud Platform Blog, 18 May 2016 <https:// cloudplatform.googleblog.com/2016/05/Google-supercharges-machinelearning-tasks-with-custom-chip.html> (accessed 28 Nov. 2017).

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Fourth, dialogue between politicians and the public was seen as a useful generator of good ideas. Finally, representative systems were considered the best way to mediate and moderate the fickle passions of the masses, while still taking their sentiment into account. In the modern age, representative democracy has been our best answer to the question posed by Joseph Schumpeter: ‘How is it technically possible for “people” to rule?’30 Schumpeter, a giant of twentieth-century economics, was sceptical in principle of the value of direct participation, arguing that the ‘electoral mass . . . is incapable of action other than a stampede’.31 And he looked at the modern democracies around him and decided that in practice, too, they were nothing like the classical archetype.

Keynes Hayek: The Clash That Defined Modern Economics by Nicholas Wapshott

airport security, Alan Greenspan, banking crisis, Bear Stearns, Bretton Woods, British Empire, business cycle, collective bargaining, complexity theory, creative destruction, cuban missile crisis, Francis Fukuyama: the end of history, full employment, Gordon Gekko, greed is good, Gunnar Myrdal, if you build it, they will come, Isaac Newton, Joseph Schumpeter, Kickstarter, liquidationism / Banker’s doctrine / the Treasury view, means of production, military-industrial complex, Mont Pelerin Society, mortgage debt, New Journalism, Nixon triggered the end of the Bretton Woods system, Northern Rock, Paul Samuelson, Philip Mirowski, Phillips curve, price mechanism, public intellectual, pushing on a string, road to serfdom, Robert Bork, Robert Solow, Ronald Reagan, Simon Kuznets, The Chicago School, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Malthus, trickle-down economics, Tyler Cowen, War on Poverty, We are all Keynesians now, Yom Kippur War

Kahn was the Messenger Angel who brought messages and problems from Keynes to the ‘Circus’ and who went back to Heaven with the result of our deliberations.”10 Kahn was an indifferent physicist turned inspired economist thanks to his mastery of mathematics, winning a first-class degree before being elected as a fellow of King’s in 1930. Kahn’s switch of subject led the Austrian School economist Joseph Schumpeter,11 with a typical lack of sensitivity, to inform him that “many a failed race-horse makes quite a good hack.”12 Keynes thought Kahn had “as much natural aptitude for economics as anyone whom I have taught since the war.”13 Kahn was highly intelligent and meticulous in his logic, but he lacked the confidence to press his ideas on others.

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“The most we may hope for is that the growing information of the public may make it easier for central banks both to follow a cautious policy during the upward swing of the cycle, and so to mitigate the following depression, and to resist the well-meaning but dangerous proposals to fight depression by ‘a little inflation.’”52 So Hayek came to the end of his quartet of lectures. “In the event the lectures were a sensation,” recalled Robbins, “partly for their revelations of an aspect of classical monetary theory which for many years had been forgotten.”53 There was a sense, according to Joseph Schumpeter, that Hayek was saying something new and startling. Although Hayek’s lectures raised as many questions as they answered, Robbins was particularly pleased, for they had achieved exactly his intended purpose, to introduce British economists to “this great tradition [the Austrian School], [that] will do something to persuade English readers that here is a school of thought which can only be neglected at the cost of losing contact with what may prove to be one of the most fruitful scientific developments of our age.”54 The talks served as an extended job interview for Hayek, who dearly wished to join the LSE faculty.

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Galbraith jokingly observed, “Some will wonder if economists are capable of such refined emotion.”50 One young Harvard economics graduate student, Robert Bryce,51 a Canadian, enjoyed the added allure of having just arrived from Cambridge, England, where he had been taught by Keynes himself and had attended Hayek’s seminar at the LSE with the attitude of a Christian minister witnessing a cannibal ceremony. Bryce took full advantage of his links to the master, so much so that Joseph Schumpeter was prompted to remark, “Keynes is Allah and Bryce is his prophet.”52 Just as not all of those in Washington who fell under the spell of Keynes were young, some older economics professors at Harvard also underwent an unlikely epiphany. Alvin H. Hansen, who before long came to be known as the “American Keynes,” was a fifty-year-old classical economist when recruited by Harvard from the University of Minnesota in 1937.

Masters of Management: How the Business Gurus and Their Ideas Have Changed the World—for Better and for Worse by Adrian Wooldridge

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, affirmative action, Alan Greenspan, barriers to entry, behavioural economics, Black Swan, blood diamond, borderless world, business climate, business cycle, business intelligence, business process, carbon footprint, Cass Sunstein, Clayton Christensen, clean tech, cloud computing, collaborative consumption, collapse of Lehman Brothers, collateralized debt obligation, commoditize, company town, corporate governance, corporate social responsibility, creative destruction, credit crunch, crowdsourcing, David Brooks, David Ricardo: comparative advantage, disintermediation, disruptive innovation, do well by doing good, don't be evil, Donald Trump, Edward Glaeser, Exxon Valdez, financial deregulation, Ford Model T, Frederick Winslow Taylor, future of work, George Gilder, global supply chain, Golden arches theory, hobby farmer, industrial cluster, intangible asset, It's morning again in America, job satisfaction, job-hopping, joint-stock company, Joseph Schumpeter, junk bonds, Just-in-time delivery, Kickstarter, knowledge economy, knowledge worker, lake wobegon effect, Long Term Capital Management, low skilled workers, Mark Zuckerberg, McMansion, means of production, Menlo Park, meritocracy, Michael Milken, military-industrial complex, mobile money, Naomi Klein, Netflix Prize, Network effects, new economy, Nick Leeson, Norman Macrae, open immigration, patent troll, Ponzi scheme, popular capitalism, post-industrial society, profit motive, purchasing power parity, radical decentralization, Ralph Nader, recommendation engine, Richard Florida, Richard Thaler, risk tolerance, Ronald Reagan, science of happiness, scientific management, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Steven Levy, supply-chain management, tacit knowledge, technoutopianism, the long tail, The Soul of a New Machine, The Wealth of Nations by Adam Smith, Thomas Davenport, Tony Hsieh, too big to fail, vertical integration, wealth creators, women in the workforce, young professional, Zipcar

With a Scalpel, Not a Hatchet Some would argue that all these contradictions indicate that management theory is itself a contradiction in terms. I prefer to see it as an immature discipline, prevented from growing up, partly, by its enormous financial success. Management theory is in roughly the same state that economics was a century ago. Many of its fundamental tenets have yet to be established. The discipline still awaits its Joseph Schumpeter or John Maynard Keynes. It lacks rules of debate, so the discipline remains open to anybody with an axe to grind—much as economics was open to the likes of Karl Marx. However, just as anybody wanting to know about economics a hundred years ago could draw on writers such as Alfred Marshall, Adam Smith, and David Ricardo, management theory already has its founding fathers—among them, Alfred Sloan and Peter Drucker.

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It is an ad campaign and an insurance policy rolled into one. It is no accident that some of the leading proponents of CSR are companies that have been embroiled in scandals or companies that operate in scandal-plagued industries such as oil and gas. CSR is both a ready-made advertising campaign and an insurance policy. Joseph Schumpeter once complained that “the public mind has by now so thoroughly grown out of humor with business, as to make condemnation of capitalism and all its works almost a requirement of the etiquette of the discussion.”10 CSR gives companies a seat at the table. Globalization has given new urgency to the trend.

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The future lay with small firms that could exploit individual creativity and with bigger firms that could split themselves into small centers and encourage internal competition between these profit centers. “Jesus Christ tried 12,” Macrae argued in one of the telltale phrases that made his work so readable, “and that proved one too many.” This was heresy at the time. In 1942, Joseph Schumpeter had warned, in Capitalism, Socialism and Democracy, that the bureaucratization of capitalism was killing the spirit of entrepreneurship. Why should governments risk the turmoil of “creative destruction” when Keynesian economists, working hand in glove with big business and big government, could provide orderly prosperity?

The Master Switch: The Rise and Fall of Information Empires by Tim Wu

accounting loophole / creative accounting, Alfred Russel Wallace, Andy Rubin, AOL-Time Warner, Apple II, barriers to entry, British Empire, Burning Man, business cycle, Cass Sunstein, Clayton Christensen, commoditize, corporate raider, creative destruction, disinformation, disruptive innovation, don't be evil, Douglas Engelbart, Douglas Engelbart, Eben Moglen, Ford Model T, Howard Rheingold, Hush-A-Phone, informal economy, intermodal, Internet Archive, invention of movable type, invention of the telephone, invisible hand, Jane Jacobs, John Markoff, Joseph Schumpeter, Menlo Park, open economy, packet switching, PageRank, profit motive, radical decentralization, road to serfdom, Robert Bork, Robert Metcalfe, Ronald Coase, scientific management, search costs, seminal paper, sexual politics, shareholder value, Silicon Valley, Skype, Steve Jobs, Steve Wozniak, Telecommunications Act of 1996, The Chicago School, The Death and Life of Great American Cities, the long tail, the market place, The Wisdom of Crowds, too big to fail, Upton Sinclair, urban planning, vertical integration, Yochai Benkler, zero-sum game

Two of his works are particularly important for this work: The Theory of Economic Development; and Capitalism, Socialism, and Democracy (New York: Routledge, 2006) (1942). For more about his work see Robert Loring Allen, Opening Doors: The Life and Work of Joseph Schumpeter, Volume One—Europe (New Brunswick, NJ: Transaction Publishers, 1991); on his up-and-down life, see Richard Swedberg’s Schumpeter: A Biography (Princeton, NJ: Princeton University Press, 1991); Thomas K. McCraw, Prophet of Innovation: Joseph Schumpeter and Creative Destruction (Cambridge, MA: Belknap Press, 2007). 17. Albert Bigelow Paine, In One Man’s Life: Being Chapters from the Personal & Business Career of Theodore N.

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In fact, without White’s opposition, there is good reason to think that Gray would have both created a working telephone and patented it long before Bell.7 The initial inability of Hubbard, White, and everyone else to recognize the promise of the telephone represents a pattern that recurs with a frequency embarrassing to the human race. “All knowledge and habit once acquired,” wrote Joseph Schumpeter, the great innovation theorist, “becomes as firmly rooted in ourselves as a railway embankment in the earth.” Schumpeter believed that our minds were, essentially, too lazy to seek out new lines of thought when old ones could serve. “The very nature of fixed habits of thinking, their energy-saving function, is founded upon the fact that they have become subconscious, that they yield their results automatically and are proof against criticism and even against contradiction by individual facts.”8 The men dreaming of a better telegraph were, one might say, mentally warped by the tangible demand for a better telegraph.

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As if mourning his company, Alexander Bell became a bedridden invalid, in the grip of such a depression that he checked himself in to Massachusetts General Hospital.15 CYCLES OF BIRTH AND DEATH The struggle between Bell and Western Union over the fate of the telephone was, in retrospect, a match to the death. The victor would go on to prosper, while the loser would wilt away and die. This is how the Cycle turns. No thinker of the twentieth century better understood that such winner-take-all contests were the very soul of the capitalist system than did the economist Joseph Schumpeter, the “prophet of innovation.” Schumpeter’s presence in the history of economics seems designed to displease everyone. His prose, his personality, and his ideas were infuriatingly provocative and confounding, and quite deliberately so. He bragged of sexual exploits at faculty meetings, and while living in the United States during World War II, he voiced support for Germany, supposedly out of dislike for Russians.

The Long Twentieth Century: Money, Power, and the Origins of Our Times by Giovanni Arrighi

anti-communist, Asian financial crisis, barriers to entry, Bretton Woods, British Empire, business climate, business logic, business process, classic study, colonial rule, commoditize, Corn Laws, creative destruction, cuban missile crisis, David Ricardo: comparative advantage, declining real wages, deindustrialization, double entry bookkeeping, European colonialism, Fairchild Semiconductor, financial independence, financial intermediation, floating exchange rates, gentrification, Glass-Steagall Act, Great Leap Forward, income inequality, informal economy, invisible hand, joint-stock company, Joseph Schumpeter, Kōnosuke Matsushita, late capitalism, London Interbank Offered Rate, means of production, Meghnad Desai, military-industrial complex, Money creation, money: store of value / unit of account / medium of exchange, new economy, offshore financial centre, oil shock, Peace of Westphalia, post-Fordism, profit maximization, Project for a New American Century, RAND corporation, reserve currency, scientific management, spice trade, Strategic Defense Initiative, Suez canal 1869, the market place, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, trade route, transaction costs, transatlantic slave trade, transcontinental railway, upwardly mobile, vertical integration, Yom Kippur War

A dominant state exercises a hegemonic function if it leads the system of states in a desired direction and, in so doing, is perceived as pursuing a general interest. It is this kind of leadership that makes the dominant state hegemonic. But a dominant state may lead also in the sense that it draws other states onto its own path of development. Borrowing an expression from Joseph Schumpeter (1963: 89), this second kind of leadership can be designated as “leadership against one’s own will” because, over time, it enhances competition for power rather than the power of the hegemon. These two kinds of leadership may coexist — at least for a time. But it is only leadership in the first sense that defines a situation as hegemonic.

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In other words, the decision not to do what the Europeans would do later is perfectly understandable in terms of a territorialist logic of power that weighed carefully the prospective benefits, costs, and risks of the additional commitment of resources to stateand war-making involved in the territorial and commercial expansion of empire. In this connection we should note that Joseph Schumpeter’s (1955: 64-5) thesis that precapitalist state formations have been characterized by strong “objectless” tendencies “toward forcible expansion, without definite, utilitarian limits — that is, non-rational and irrational, purely instinctual inclinations toward war and conquest” — holds no water in the case of THE THREE I-IEGEMONIES OF HISTORICAL CAPITALISM 37 Imperial China.

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(Braudel 1984: 125). From all these points of view, Venice’s state-centered regime of accumulation appears to have been far more successful than Genoa’s capital-centered regime. This was certainly true in the short run, bearing in mind that, in these things, a century is even more of a “short run” than Joseph Schumpeter thought. But in the longer run, it was not the Venetians but the Genoese that went on to promote, monitor, and benefit from the first world-embracing cycle of capital accumulation. This brings us to another major difference between the two regimes of accumulation. The very success of the Venetian regime of accumulation, combined with the fact that this success rested on the power of the state, enhanced the introversion of Venetian capitalism and its lack of innovative thrust.

Crisis and Leviathan: Critical Episodes in the Growth of American Government by Robert Higgs, Arthur A. Ekirch, Jr.

Alistair Cooke, American ideology, business cycle, clean water, collective bargaining, creative destruction, credit crunch, declining real wages, endowment effect, fiat currency, fixed income, foreign exchange controls, full employment, Glass-Steagall Act, guns versus butter model, hiring and firing, Ida Tarbell, income per capita, Jones Act, Joseph Schumpeter, laissez-faire capitalism, land bank, manufacturing employment, means of production, military-industrial complex, minimum wage unemployment, plutocrats, post-industrial society, power law, price discrimination, profit motive, rent control, rent-seeking, Richard Thaler, road to serfdom, Ronald Reagan, Sam Peltzman, Savings and loan crisis, Simon Kuznets, strikebreaker, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, transcontinental railway, union organizing, Upton Sinclair, War on Poverty, Works Progress Administration

A postelection survey, intended to demonstrate the victorious candidate's mandate, revealed, as McCloskey put it, "that 5% of the people voted for me because they agreed with my views; 11 % voted for me even though they disagreed with my views, and 84% didn't have any idea what the hell my views were."30 In sum, one has many good reasons to agree with Joseph Schumpeter's assessment: "The freely voting rational citizen, conscious of his (long-run) interests, and the representative who acts in obedience to them-is this not 15 The Sources of Big Government the perfect example of a nursery tale?"31 Political actions commonly take place in an environment of ignorance, misinformation, posturing, and heated emotions; there are long seasons of lassitude and maneuvering punctuated by brief episodes of frenzied action.

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Paul David, for example, has argued for it in his studies of technological change. David criticizes "a mechanistic world view that allots to the past at best a transient role in shaping the future." He stresses historical irreversibility, where "previous economic configurations become irrevocably lost." As early as 1942 Joseph Schumpeter warned against commission of a mechanistic, trend-imposing "statistical crime": "for any historical time series, the very concept of historical sequence implies the occurrence of irreversible changes in the economic structure which must be expected to affect the law of any given economic quantity."5 Only a few economists have adopted this perspective explicitly in studies of the growth of governmental power over the economy, but among political historians the idea is widely accepted. 6 A SCHEMATIC VIEW OF THE PROBLEM As we have seen, several commonly employed indexes of the size of government display a ratchet movement during the twentieth century: government grew suddenly much bigger with the onset of each great crisis; after the crisis it receded but usually not to the precrisis level or even to a level that would have been reached had the precrisis rate of growth persisted instead of being displaced by the events of the crisis.

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American governments in the twentieth century, impelled by a more "progressive" ideology, readily accepted-indeed eagerly sought-expanded powers. The crisis of the 1890s, the last major battle in which the forces of classical liberalism won a clear victory, serves as an illuminating backdrop against which the crises of the twentieth century stand out in bold relief. CREATIVE DESTRUCTION IDEOLOGICALLY SUSTAINED, 1865-1893 When Joseph Schumpeter coined the expression "creative destruction" to describe the dynamics of "relatively unfettered capitalism," he might have had in mind the United States in the late nineteenth century. Certainly the nation's economic development had never been so rapid, nor so erratic and disruptive. The American who studies the statistics of his country's social and economic change, wrote the industrialist Andrew Carnegie in the early 1890s, "becomes almost dizzy at discovering the velocity with which she is rushing on."

Does Capitalism Have a Future? by Immanuel Wallerstein, Randall Collins, Michael Mann, Georgi Derluguian, Craig Calhoun, Stephen Hoye, Audible Studios

affirmative action, blood diamond, Bretton Woods, BRICs, British Empire, business cycle, butterfly effect, company town, creative destruction, deindustrialization, demographic transition, Deng Xiaoping, discovery of the americas, distributed generation, Dr. Strangelove, eurozone crisis, fiat currency, financial engineering, full employment, gentrification, Gini coefficient, global village, hydraulic fracturing, income inequality, Isaac Newton, job automation, joint-stock company, Joseph Schumpeter, junk bonds, land tenure, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, loose coupling, low skilled workers, market bubble, market fundamentalism, mass immigration, means of production, mega-rich, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, offshore financial centre, oil shale / tar sands, Ponzi scheme, postindustrial economy, reserve currency, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, Suez crisis 1956, too big to fail, transaction costs, vertical integration, Washington Consensus, WikiLeaks

What will our grandchildren consume fifty years from now? We cannot begin to envisage their consumer fads, but we can be sure there will be some. Markets are not fixed by territory. Planet Earth can be filled and yet new markets can be created. That, of course, depends on what some have called the “technological fix” and it is more or less what Joseph Schumpeter called “creative destruction,” which he identified as being the core of capitalist dynamism—entrepreneurs pour money into technological innovation which results in the creation of new industries and the destruction of old ones. The Great Depression in the United States was partially caused by the stagnation of the major traditional industries, while the new emerging industries, though vibrant, were not yet big enough to absorb the surplus capital and labor of the period.

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The fundamentalist character of the neoliberal movement is revealed in its adamant refusal to recognize as capitalism anything except the purest unregulated markets—just as religious fundamentalists recognize only their own radical brand of faith as true religion. History, however, shows that the ideal type of free markets cannot be observed in any empirical situation; it is an ideological fantasy. Following in the footsteps of Fernand Braudel and Joseph Schumpeter, we argue that sustained profits always require a degree of state protection and market monopoly. Hegemonic monopoly is what in fact propelled the renewed surge of American power and finance at the turn of the twenty-first century. At the time Michael Mann and Immanuel Wallerstein publicly opposed the project for an American world empire, and both presented analytical arguments questioning its viability.1 There is now enough hard evidence to see how these predictions squared with reality.

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There will be whole new fronts of pathbreaking research, for instance, in the alternative organization of markets. The dismissal of market possibilities was a major theoretical and practical mistake of twentieth-century leftist movements. We treat with great respect the intellectual legacy of Joseph Schumpeter. But what will be the future uses of his theory of entrepreneurial dynamism? Who or what could play the role of entrepreneurs in the future, even beyond the crisis of capitalism? Is it possible to harness entrepreneurial energies toward more market creativity and less destruction? No less seriously we take Karl Polanyi’s idea of ‘fictitious commodities’, like land, money, and human life, that cannot be traded.

Reinventing Capitalism in the Age of Big Data by Viktor Mayer-Schönberger, Thomas Ramge

accounting loophole / creative accounting, Air France Flight 447, Airbnb, Alvin Roth, Apollo 11, Atul Gawande, augmented reality, banking crisis, basic income, Bayesian statistics, Bear Stearns, behavioural economics, bitcoin, blockchain, book value, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, Cass Sunstein, centralized clearinghouse, Checklist Manifesto, cloud computing, cognitive bias, cognitive load, conceptual framework, creative destruction, Daniel Kahneman / Amos Tversky, data science, Didi Chuxing, disruptive innovation, Donald Trump, double entry bookkeeping, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Evgeny Morozov, flying shuttle, Ford Model T, Ford paid five dollars a day, Frederick Winslow Taylor, fundamental attribution error, George Akerlof, gig economy, Google Glasses, Higgs boson, information asymmetry, interchangeable parts, invention of the telegraph, inventory management, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, job satisfaction, joint-stock company, Joseph Schumpeter, Kickstarter, knowledge worker, labor-force participation, land reform, Large Hadron Collider, lone genius, low cost airline, low interest rates, Marc Andreessen, market bubble, market design, market fundamentalism, means of production, meta-analysis, Moneyball by Michael Lewis explains big data, multi-sided market, natural language processing, Neil Armstrong, Network effects, Nick Bostrom, Norbert Wiener, offshore financial centre, Parag Khanna, payday loans, peer-to-peer lending, Peter Thiel, Ponzi scheme, prediction markets, price anchoring, price mechanism, purchasing power parity, radical decentralization, random walk, recommendation engine, Richard Thaler, ride hailing / ride sharing, Robinhood: mobile stock trading app, Sam Altman, scientific management, Second Machine Age, self-driving car, Silicon Valley, Silicon Valley startup, six sigma, smart grid, smart meter, Snapchat, statistical model, Steve Jobs, subprime mortgage crisis, Suez canal 1869, tacit knowledge, technoutopianism, The Future of Employment, The Market for Lemons, The Nature of the Firm, transaction costs, universal basic income, vertical integration, William Langewiesche, Y Combinator

Machine learning system experts around the world are actively pursuing strategies to teach their systems to be creative, albeit currently with only very limited success. It seems that so far, creativity is a difficult nut to crack for machines. Until this changes, managers will continue to be needed to steer the complex process of creative destruction, which famed Austrian American economist Joseph Schumpeter saw as the source of sweeping innovation. FUKOKU’S CHOICE—WHICH WE CALL OPTION ONE—FOCUSES on cost. This solution works only if firms successfully automate and optimize decision-making, cutting down on overhead and permanently reducing the size of the workforce. But at its heart, option one is a bet on the past, a bet on a strategy that will disrupt its workers rather than its structure.

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firms will increase in size and combine: The Marxist Monopoly Capital, written in the 1960s, is perhaps one of the most cited critiques from the left, although the authors’ argument against “monopoly capitalism” echoes Lenin’s earlier work; Paul A. Baran and Paul M. Sweezy, Monopoly Capital: An Essay on the American Economic and Social Order (New York: Monthly Review Press, 1966). The economist and admirer of innovation Joseph Schumpeter was more nuanced in his critique: on the one hand, he identified large firms as surprising places of innovation; on the other hand, he worried that capitalism may become undone as monopolies cripple the human urge to innovate; see generally Thomas K. McCraw, Prophet of Innovation (Cambridge: Harvard University Press, 2007).

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For example, a seller may offer an initial service at a loss to a buyer, imagining that the transaction will lead to repeat sales, not knowing that the buyer never intends to come back—or would only do so for the same low price. The seller’s “loss leader” leads to nothing but a loss. before copycats appear and free ride: In his famous book The Theory of Economic Development, Joseph Schumpeter argued that entrepreneurs, by definition, have discovered a category of exclusive information. They’re the first people to identify a new market, patent an invention, launch an efficient means of production, or introduce some other “new combination”—a way to coordinate human activity—before anyone else is aware of it.

Who Needs the Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank by John Tamny

Airbnb, Alan Greenspan, Apollo 13, bank run, Bear Stearns, Bernie Madoff, bitcoin, Bretton Woods, business logic, buy and hold, Carl Icahn, Carmen Reinhart, corporate raider, correlation does not imply causation, cotton gin, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, Donald Trump, Downton Abbey, Fairchild Semiconductor, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, Glass-Steagall Act, Home mortgage interest deduction, Jeff Bezos, job automation, Joseph Schumpeter, junk bonds, Kenneth Rogoff, Kickstarter, Larry Ellison, liquidity trap, low interest rates, Mark Zuckerberg, market bubble, Michael Milken, Money creation, money market fund, moral hazard, mortgage tax deduction, NetJets, offshore financial centre, oil shock, peak oil, Peter Thiel, Phillips curve, price stability, profit motive, quantitative easing, race to the bottom, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Solyndra, Steve Jobs, The Wealth of Nations by Adam Smith, too big to fail, Travis Kalanick, Uber for X, War on Poverty, yield curve

We know this because we’re aware of all the rich venture capitalists who grew that way by virtue of putting money behind eventual tech behemoths, along with employees who have attained wealth that can be measured in the tens of millions thanks to stock options. What this tells us is that to attain credit to grow, tech entrepreneurs must give up not insignificant ownership stakes in their companies for the privilege. Beyond that, the nature of entrepreneurialism must be taken into account. The great Austrian economist Joseph Schumpeter aptly described the entrepreneur as the individual whose work “consists precisely in breaking up old, and creating new, tradition.”3 In a world of consumers who are frequently resistant to change, the entrepreneur intends to offer the consumer or business a product or service they didn’t know they wanted.

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Unknown are all the economic advances that would have expanded the credit pie had the dollar been stable in the 2000s such that credit had migrated to real ideas instead of consumption. CHAPTER FIFTEEN Conclusion: Why Washington and Wall Street Are Better Off Living Apart The investment banker is ‘a producer’ of money and credit, “the capitalist par excellence.” —Joseph Schumpeter “Your No. 1 client is the government,” John J. Mack, Morgan Stanley’s chairman and chief executive from 2005 to 2009, told current CEO James Gorman in a recent phone call. Mr. Gorman, who was visiting Washington that day, agreed. —Wall Street Journal, September 10, 2013 ALTHOUGH SILICON VALLEY can still claim top-dog status as the center of technological innovation in the United States, Austin, Texas, is increasingly part of the discussion.

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Paul Scott, “From Washed-Up Drug Addict to $100M Man,” Daily Mail Online, May 23, 2013. 15. Ibid. CHAPTER FOUR 1. Claire Cain, “Wearing Your Failures on Your Sleeve,” New York Times, November 8, 2014. 2. Mike Isaac, “Upstarts Raiding Giants for Staff in Silicon Valley,” New York Times, August 19, 2015. 3. Thomas K. McCraw, Prophet of Innovation: Joseph Schumpeter and Creative Destruction (Cambridge, Mass.: Belknap Press, 2007), 70. 4. Ibid., 73. 5. Julianne Pepitone & Stacy Cawley, “Facebook’s first big investor, Peter Thiel, cashes out,” CNNMoney, August 20, 2012. 6. Peter Thiel, with Blake Masters, Zero to One (New York: Crown Business, 2014), 84. 7.

Who's Your City?: How the Creative Economy Is Making Where to Live the Most Important Decision of Your Life by Richard Florida

Abraham Maslow, active measures, assortative mating, back-to-the-city movement, barriers to entry, big-box store, blue-collar work, borderless world, BRICs, business climate, Celebration, Florida, correlation coefficient, creative destruction, dark matter, David Brooks, David Ricardo: comparative advantage, deindustrialization, demographic transition, edge city, Edward Glaeser, epigenetics, extreme commuting, financial engineering, gentrification, Geoffrey West, Santa Fe Institute, happiness index / gross national happiness, high net worth, income inequality, industrial cluster, invention of the telegraph, Jane Jacobs, job satisfaction, Joseph Schumpeter, knowledge economy, knowledge worker, low skilled workers, megacity, new economy, New Urbanism, Peter Calthorpe, place-making, post-work, power law, Richard Florida, risk tolerance, Robert Gordon, Robert Shiller, Seaside, Florida, Silicon Valley, Silicon Valley startup, superstar cities, The Death and Life of Great American Cities, the strength of weak ties, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tyler Cowen, urban planning, World Values Survey, young professional

Chapter 4 1 Robert Lucas, “On the Mechanics of Economic Development,” Journal of Monetary Economics 22, 1988, pp. 3-42. 2 Adam Smith, The Wealth of Nations, Bantam, 2003 (1st ed., 1776). 3 David Ricardo, Principles of Political Economy and Taxation, Cosimo Classics, 2006 (1st ed., 1817). 4 Joseph Schumpeter, Theory of Economic Development, Harvard University Press, 1934 (1st ed., 1911); Schumpeter, Capitalism, Socialism, and Democracy, Harper, 1975 (1st ed., 1942). Thomas McCraw has written an illuminating biography of Schumpeter, Prophet of Innovation: Joseph Schumpeter and Creative Destruction, Belknap, 2007. 5 Bill Steigerwald, “City Views: Urban Studies Legend Jane Jacobs on Gentrification, the New Urbanism, and Her Legacy,” Reason, June 2001. 6 See the discussion of Jacobs’s ideas in David Ellerman, “Jane Jacobs on Development,” Oxford Development Studies, December 4, 2004, pp. 507-521. 7 Geoffrey West et al., “Growth, Innovation, Scaling, and the Pace of Life in Cities,” Proceedings of the National Academy of Sciences, April 24, 2007, pp. 7301-7306. 8 Robert Axtell and Richard Florida, “Emergent Cities: Micro-foundations of Zipf’s Law,” March 2006.

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In 1776 Adam Smith published The Wealth of Nations, which argued that specialization, efficiency, and division of labor are the cornerstones of modern economic growth.2 Later, David Ricardo’s theory of comparative advantage argued that not just firms but countries gain advantage by specializing in certain kinds of economic activity.3 The far-seeing urbanist Jane Jacobs agrees that specialization has its uses, but she focuses on an even more fundamental source of economic growth—what she terms expansion. Like the great economist Joseph Schumpeter, she emphasizes the critical importance of innovation and entrepreneurship. In her eyes, the prospect of new types of work and new ways of doing things drives large-scale economic expansion. But where most economists locate momentum in great companies, entrepreneurs, and nation-states, Jacobs presciently identifies great cities as the prime motor force.

Big Three in Economics: Adam Smith, Karl Marx, and John Maynard Keynes by Mark Skousen

Albert Einstein, banking crisis, behavioural economics, Berlin Wall, Bretton Woods, business climate, business cycle, creative destruction, David Ricardo: comparative advantage, delayed gratification, experimental economics, financial independence, Financial Instability Hypothesis, foreign exchange controls, full employment, Hernando de Soto, housing crisis, Hyman Minsky, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Arrow, laissez-faire capitalism, liberation theology, liquidity trap, low interest rates, means of production, Meghnad Desai, microcredit, minimum wage unemployment, money market fund, open economy, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, Post-Keynesian economics, price stability, pushing on a string, rent control, Richard Thaler, rising living standards, road to serfdom, Robert Shiller, Robert Solow, rolodex, Ronald Coase, Ronald Reagan, school choice, secular stagnation, Simon Kuznets, The Chicago School, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, Tragedy of the Commons, unorthodox policies, Vilfredo Pareto, zero-sum game

Economists over the years have had difficulty understanding Ricardo's "corn model" and his Principles textbook, especially the twisted assumptions he required to prove his theories. Ricardo once remarked that only twenty-five people in the entire country could understand it. A century later, Chicago economist Frank H. Knight remarked, "there is much [here] I cannot follow" (1959, 365). Joseph Schumpeter lambasted Ricardo for making most of the economic players "frozen and given," piling "one simplified assumption upon another," and developing a theory "that can never be refuted and lacks nothing save sense" (Schumpeter 1954, 472-73). Just the kind of theory Marx needed! Perhaps Keynes had Ricardo in mind when he wrote, "It is astonishing what foolish things one can temporarily believe if one thinks too long alone, particularly in economics" (Keynes 1973a [1936], xxiii).

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Brilliant, handsome, and witty, Sweezy left Harvard in 1932 as a classical economist, went to the London School of Economics for graduate work, became an ardent Hayekian, then briefly fell under the spell of Harold Laski and John Maynard Keynes, and finally converted to Marxism! From then on, the debonair Sweezy made every effort to make Marxism respectable on college campuses. Returning to Harvard as an instructor during the golden era of the Keynesian revolution, he befriended John Kenneth Galbraith, tutored Robert Heilbroner, and collaborated with Joseph Schumpeter on his forthcoming Capitalism, Socialism and Democracy. Sweezy wrote his most famous article on the "kinked" demand curve, helped organize the Harvard Teachers' Union, and published The Theory of Capitalist Development (1942), an extremely coherent and compelling exposition of Marxism (although the author overly committed himself to citing Stalin).

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In 1936, Sidney and Beatrice Webb came back with glowing reports of a "new civilization" and the "re-making of man," a vibrant nation with full employment, good working conditions, free education, free medical services, child care and maternity benefits, and the widespread availability of museums, theaters, and concert halls. Oskar Lange, a Polish socialist, and Fred M. Taylor, president of the AEA, contended that central planning boards could imitate the market's success. Austrian economist and Harvard professor Joseph Schumpeter chided Mises and Hayek by concluding, "Can socialism work? Of course it can," adding even more damagingly, "The capitalist order tends to destroy itself and centralist socialism is ... a likely heir apparent" (Schumpeter 1950 [1942], 167). Foreign Aid and Development Economics After World War II, European and Latin American countries began experimenting with socialism on a gigantic scale, nationalizing industry after industry, raising taxes, imposing wage-price controls, inflating the money supply, creating national welfare programs, and engaging in all kinds of collectivist mischief.

What's Wrong With Economics: A Primer for the Perplexed by Robert Skidelsky

additive manufacturing, agricultural Revolution, behavioural economics, Black Swan, Bretton Woods, business cycle, carbon tax, Cass Sunstein, central bank independence, cognitive bias, conceptual framework, Corn Laws, corporate social responsibility, correlation does not imply causation, creative destruction, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, degrowth, disruptive innovation, Donald Trump, Dr. Strangelove, full employment, George Akerlof, George Santayana, global supply chain, global village, Gunnar Myrdal, happiness index / gross national happiness, hindsight bias, Hyman Minsky, income inequality, index fund, inflation targeting, information asymmetry, Internet Archive, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, knowledge economy, labour market flexibility, loss aversion, Mahbub ul Haq, Mark Zuckerberg, market clearing, market friction, market fundamentalism, Martin Wolf, means of production, Modern Monetary Theory, moral hazard, paradox of thrift, Pareto efficiency, Paul Samuelson, Philip Mirowski, Phillips curve, precariat, price anchoring, principal–agent problem, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, shareholder value, Silicon Valley, Simon Kuznets, sunk-cost fallacy, survivorship bias, technoutopianism, The Chicago School, The Market for Lemons, The Nature of the Firm, the scientific method, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Thorstein Veblen, Tragedy of the Commons, transaction costs, transfer pricing, Vilfredo Pareto, Washington Consensus, Wolfgang Streeck, zero-sum game

No one has any incentive to change what they are doing. Economics shares the concept of equilibrium with physics. The idea is that there exist forces in nature which automatically balance each other. Any disturbance to the balance will set up an opposing force to restore it: you swing the pendulum one way, and gravity pushes it back. Joseph Schumpeter (1883–1950) described equilibrium as the ‘magna charta’ of exact economics.1 But it poses a severe problem. How do economists reconcile, even notionally, the idea of a state of rest with the undoubted dynamism and instability of economic life? The answer lies in the notion of ‘shocks’. The normal state of economic life is one of predictable activity, based on stable expectations.

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The stationary state is a kind of equilibrium in which the economy simply reproduces itself. This translates into the idea of balanced growth, with population and capital increasing at roughly the same rate and preferences staying constant.8 Partial equilibrium traces the adjustment of supply to demand in a particular market in isolation from the rest of the economy. Joseph Schumpeter contrasted static and dynamic models. Statics refers to an economy of given, known, and constant external conditions, such as tastes and technology. This has no resemblance to modern market economies. In dynamic analysis, external conditions not only change but such change is fundamental to a capitalist economy.

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Most economists cannot envisage a post-capitalist era, because they see scarcity as a permanent condition: the Robbins definition sets no limit to human wants. Scarcity continues to demand arithmetical – not moral – solutions. Further, capitalism has showed itself superior to communism as a growth engine, because central planning couldn’t do the necessary social arithmetic – an argument we owe to Hayek (1937). Then there was Joseph Schumpeter, whose views could be summarised as ‘never let a recession go to waste’. He was the apostle of wealth-creation through ‘creative destruction’. Progress was not a smooth evolutionary process but a chaotic one, in which moribund giants are constantly being replaced by agile upstarts through a succession of crises.

Where Does Money Come From?: A Guide to the UK Monetary & Banking System by Josh Ryan-Collins, Tony Greenham, Richard Werner, Andrew Jackson

bank run, banking crisis, banks create money, Basel III, Big bang: deregulation of the City of London, book value, Bretton Woods, business cycle, capital controls, cashless society, central bank independence, credit crunch, currency risk, double entry bookkeeping, en.wikipedia.org, eurozone crisis, fiat currency, financial innovation, fixed income, floating exchange rates, Fractional reserve banking, full employment, global reserve currency, Goodhart's law, Hyman Minsky, inflation targeting, interest rate derivative, interest rate swap, Joseph Schumpeter, low skilled workers, market clearing, market design, market friction, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Northern Rock, offshore financial centre, Post-Keynesian economics, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, Real Time Gross Settlement, reserve currency, Ronald Reagan, seigniorage, special drawing rights, the payments system, trade route, transaction costs

Our bankers are indeed nothing but Goldsmiths’ shops where, if you lay money on demand, they allow you nothing; if at time, three per cent.’ Daniel Defoe, Essay on Projects, 16901 It proved extraordinarily difficult for economists to recognise that bank loans and bank investments do create deposits. Joseph Schumpeter, 19542 2.1. The confusion around banking There is significant confusion about banks. Much of the public is unclear about what banks actually do with their money. Economics graduates are slightly better informed, yet many textbooks used in university economics courses teach a model of banking that has not applied in the UK for a few decades, and unfortunately many policymakers and economists still work on this outdated model.

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They are fairly homogenous, reasonably durable, portable and of a convenient size for the smallest or, in packets, for the largest transactions (divisible). The centrality of the commodity itself in determining the nature of money led to this theory being called the ‘commodity theory of money’ or the ‘metallist theory of money’. As the economist Joseph Schumpeter describes it, the logic of this argument leads to a conception of money as a neutral, imaginary ‘veil’ lying over the ‘real’ economy:13 ‘Real analysis’ proceeds from the principle that all essential phenomena of economic life are capable of being described in terms of goods and services, of decisions about them and of relations between them.

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These deposits are accepted by everyone, including the state, in payment for taxes. This is the process of credit creation, which enables banks to create money. It is the ability of banks to create new money, independently of the state, which gave rise to modern capitalism and makes it distinctive. As political economist Geoffrey Ingham describes it, following Joseph Schumpeter: The financing of production with money-capital in the form of newly created bank money uniquely specifies capitalism as a form of economic system. Enterprises, wage labour and market exchange existed to some small degree, at least, in many previous economic systems, but... their expansion into the dominant mode of production was made possible by the entirely novel institution of a money-producing banking system.1 7.1.

The Curse of Bigness: Antitrust in the New Gilded Age by Tim Wu

AltaVista, AOL-Time Warner, barriers to entry, Big Tech, collective bargaining, corporate personhood, corporate raider, creative destruction, Donald Trump, Ida Tarbell, income inequality, Johann Wolfgang von Goethe, John Perry Barlow, Joseph Schumpeter, Kickstarter, move fast and break things, new economy, open economy, Peter Thiel, Plato's cave, price discrimination, road to serfdom, Robert Bork, Silicon Valley, Snapchat, The Chicago School

See Etsuko Kameoka, Competition Law and Policy in Japan and The EU (2014), pp. 5–6 *In the early 1960s, historian Richard Hofstadter would famously remark that antitrust was no longer a popular movement but that it “now runs its quiet course without much public attention.” *One prominent exception was the iconoclastic economist Joseph Schumpeter, who had championed the entrepreneur in his earlier years, but in his later years grew to admire the large monopolistic corporation and begun to see the lure of monopoly as a principal driver of innovation and “creative destruction.” Schumpeter, however, did not take seriously the problem of investment in barriers to entry, and particularly the power of government to insulate monopolies from creative destruction.

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Rec. 16452 (1950). 82 efforts to transplant U.S. antitrust laws to Japan: Competition Law and Policy in Japan and the EU, Etsuko Kameoka, Edward Elgar Publishing, 2014. 83 “not a single American-trained economist of any prominence”: The Antitrust Experiment in America, Donald Dewey, Columbia University Press, 1990. 83 “now runs its quiet course”: The Paranoid Style in American Politics, Richard Hofstadter, Vintage Books, 2008. 84 “a private, competitive enterprise economy”: “The Case Against Big Business,” George J. Stigler, Fortune, May 1, 1952. 84 iconoclastic economist Joseph Schumpeter: Capitalism, Socialism and Democracy, Joseph A. Schumpeter, Routledge, 1976. 84 “did not take seriously the problems”: The Master Switch: The Rise and Fall of Information Empires, Tim Wu, Vintage Books, 2011. 85 “the existing structure is the efficient structure”: In Defense of Industrial Concentration, John S.

Green Tyranny: Exposing the Totalitarian Roots of the Climate Industrial Complex by Rupert Darwall

1960s counterculture, active measures, Affordable Care Act / Obamacare, Albert Einstein, Bakken shale, Berlin Wall, Bernie Sanders, California energy crisis, carbon credits, carbon footprint, centre right, clean tech, collapse of Lehman Brothers, creative destruction, decarbonisation, deindustrialization, dematerialisation, disinformation, Donald Trump, electricity market, Elon Musk, energy security, energy transition, facts on the ground, Fall of the Berlin Wall, Garrett Hardin, gigafactory, Gunnar Myrdal, Herbert Marcuse, hydraulic fracturing, Intergovernmental Panel on Climate Change (IPCC), invisible hand, it's over 9,000, James Watt: steam engine, John Elkington, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, liberal capitalism, market design, means of production, megaproject, Mikhail Gorbachev, mittelstand, Murray Bookchin, Neil Armstrong, nuclear winter, obamacare, oil shale / tar sands, Paris climate accords, Peace of Westphalia, peak oil, plutocrats, postindustrial economy, precautionary principle, pre–internet, recommendation engine, renewable energy transition, rent-seeking, road to serfdom, rolling blackouts, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley billionaire, Solyndra, Strategic Defense Initiative, subprime mortgage crisis, tech baron, tech billionaire, The Wealth of Nations by Adam Smith, Tragedy of the Commons, women in the workforce, young professional

It disappeared after Hitler’s defeat and only bubbled up again in the terrorism and antinuclear protests of the 1970s and the formation of the Green Party in 1980. German eco-ideas found their way across the Atlantic, where they fed progressives’ attack on capitalism, targeting its most concrete manifestation—the modern corporation. In the 1940s, the Austrian economist Joseph Schumpeter identified the corporation’s vulnerability in his prediction that capitalism would be the cause of its own downfall. Environmentalism—the belief that mankind’s activities threaten the survival of both humanity and the planet—found a receptive audience in boardrooms and among those to whom business leaders turn to tell them what is important.

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Nazi ecological politics were rehabilitated by the Greens and would come to form part of mainstream German and then European politics. What united them was a deep hostility to capitalism and the free market. Against them stands the Jeremiah of capitalism. Far from wishing to see capitalism fail, Joseph Schumpeter foresaw its death coming from its own hand; although writing in the 1940s, he could not have foreseen that the instrument of its self-destruction would be environmentalism. This, then, is the ideological landscape across which the action unfolds. At the end of the 1960s, while American environmentalists were focusing their efforts on banning DDT, Sweden was putting coal—the most ubiquitous source of electrical energy—in the crosshairs when it made acid rain the world’s top environmental problem.

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Promoting itself as a model for America, it is self-evidently impossible for all the other forty-seven contiguous states to import one-third of their electricity from each other. California also led the way in being the crucible of America’s Climate Industrial Complex. In the 1940s, the Austrian economist Joseph Schumpeter argued that cultural and sociological factors would lead to the demise of capitalism. The fruits of capitalism harvested by tech billionaires, hedge fund managers, and foundation executives were poured into the 2010 fight to defeat Proposition 23, which had attempted to limit the economic damage of California’s renewable targets.

The Digital Party: Political Organisation and Online Democracy by Paolo Gerbaudo

Airbnb, barriers to entry, basic income, Bernie Sanders, bitcoin, Californian Ideology, call centre, Cambridge Analytica, centre right, creative destruction, crowdsourcing, data science, digital capitalism, digital divide, digital rights, disintermediation, disruptive innovation, Donald Trump, Dunbar number, Edward Snowden, end-to-end encryption, Evgeny Morozov, feminist movement, gig economy, industrial robot, Jaron Lanier, Jeff Bezos, Jeremy Corbyn, jimmy wales, Joseph Schumpeter, Mark Zuckerberg, Network effects, Occupy movement, offshore financial centre, oil shock, post-industrial society, precariat, Ralph Waldo Emerson, Richard Florida, Richard Stallman, Ruby on Rails, self-driving car, Silicon Valley, Skype, Slavoj Žižek, smart cities, Snapchat, social web, software studies, Stewart Brand, technological solutionism, technoutopianism, the long tail, Thomas L Friedman, universal basic income, vertical integration, Vilfredo Pareto, WikiLeaks

What is characteristic to the political party, vis-à-vis other forms of association, is the way in which it is devised as a means to assert power within a larger corporate body, namely a state, for whose control it competes. The zero degree of the party in the context of democratic countries is an organisation that competes for government power through elections. This is reflected in minimalist definitions of political parties, such as Joseph Schumpeter’s ‘a group whose members propose to act in concert in the competitive struggle for political power’46 and Giovanni Sartori’s ‘any political group identified by an official label that presents at elections, and is capable of placing through (free and unfree) elections candidates for public office’.47 The second key element of political parties is the voluntary character of adherence: parties are ‘membership organisations’ which need not only to obtain votes but also to attract members.

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This is in line with what Weber called the ‘principle of small numbers’ (Prinzip der kleinen Zahl) that is, ‘the superior political manoeuvrability of small leading groups’.76 This view of the passivity of the mass, shared by Gramsci, Weber and Michels does not necessarily imply a wholesale indictment of democracy. Rather, what it entails is a model of ‘competitive democracy’ – in which, not too differently from Joseph Schumpeter’s procedural theory of democracy,77 the membership’s power largely revolves around its ability to choose over competing leaders and the ongoing threat of revoking support. This may seem like a diminutive power, when compared with more idealistic theories of democracy as direct intervention of individuals in deliberative processes, which, as we shall see, strongly inform the vision of online democracy.

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In fact, economic crises have also often been moments of rapid technological innovation. Richard Florida, for example, highlights that during the Long Depression that started in 1873 there was a peak in patents, and the same may be said about the stagflation of the 1970s that led to the development of industrial robots.98 Furthermore, we know from Joseph Schumpeter that capitalism is characterised by a tendency towards creative destruction,99 in which incumbents in various industries are constantly threatened by the rise of new products and services, and we most clearly see this phenomenon in the so-called ‘disruption’100 posed by new companies, such as Airbnb, Amazon, Uber and Deliveroo, to existing companies.

23 Things They Don't Tell You About Capitalism by Ha-Joon Chang

accelerated depreciation, affirmative action, Alan Greenspan, AOL-Time Warner, Asian financial crisis, bank run, banking crisis, basic income, Berlin Wall, Bernie Madoff, borderless world, business logic, Carmen Reinhart, central bank independence, collateralized debt obligation, colonial rule, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, deskilling, digital divide, ending welfare as we know it, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, full employment, German hyperinflation, Gini coefficient, Glass-Steagall Act, hiring and firing, Hyman Minsky, income inequality, income per capita, invisible hand, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, light touch regulation, Long Term Capital Management, low skilled workers, manufacturing employment, market fundamentalism, means of production, Mexican peso crisis / tequila crisis, microcredit, Myron Scholes, North Sea oil, offshore financial centre, old-boy network, post-industrial society, price stability, profit maximization, profit motive, purchasing power parity, rent control, Robert Solow, shareholder value, short selling, Skype, structural adjustment programs, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, Toyota Production System, trade liberalization, trickle-down economics, women in the workforce, working poor, zero-sum game

When they should be maximizing profits, it was argued, these managers were maximizing sales (to maximize the size of the company and thus their own prestige) and their own perks, or, worse, engaged directly in prestige projects that add hugely to their egos but little to company profits and thus its value (measured essentially by its stock market capitalization). Some accepted the rise of the professional managers as an inevitable, if not totally welcome, phenomenon. Joseph Schumpeter, the Austrian-born American economist who is famous for his theory of entrepreneurship (see Thing 15), argued in the 1940s that, with the growing scale of companies and the introduction of scientific principles in corporate research and development, the heroic entrepreneurs of early capitalism would be replaced by bureaucratic professional managers.

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No more heroes any more Our discussion so far shows that what makes the poor countries poor is not the lack of raw individual entrepreneurial energy, which they in fact have in abundance. The point is that what really makes the rich countries rich is their ability to channel the individual entrepreneurial energy into collective entrepreneurship. Very much influenced by capitalist folklore, with characters such as Thomas Edison and Bill Gates, and by the pioneering work of Joseph Schumpeter, the Austrian-born Harvard economics professor, our view of entrepreneurship is too much tinged by the individualistic perspective – entrepreneurship is what those heroic individuals with exceptional vision and determination do. By extension, we believe that any individual, if they try hard enough, can become successful in business.

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Even though they were not trained as economists, the economic officials of East Asia knew some economics. However, especially until the 1970s, the economics they knew was mostly not of the free-market variety. The economics they happened to know was the economics of Karl Marx, Friedrich List, Joseph Schumpeter, Nicholas Kaldor and Albert Hirschman. Of course, these economists lived in different times, contended with different problems and had radically differing political views (ranging from the very right-wing List to very left-wing Marx). However, there was a commonality between their economics.

The Internet Is Not the Answer by Andrew Keen

"World Economic Forum" Davos, 3D printing, A Declaration of the Independence of Cyberspace, Airbnb, AltaVista, Andrew Keen, AOL-Time Warner, augmented reality, Bay Area Rapid Transit, Berlin Wall, Big Tech, bitcoin, Black Swan, Bob Geldof, Boston Dynamics, Burning Man, Cass Sunstein, Charles Babbage, citizen journalism, Clayton Christensen, clean water, cloud computing, collective bargaining, Colonization of Mars, computer age, connected car, creative destruction, cuban missile crisis, data science, David Brooks, decentralized internet, DeepMind, digital capitalism, disintermediation, disruptive innovation, Donald Davies, Downton Abbey, Dr. Strangelove, driverless car, Edward Snowden, Elon Musk, Erik Brynjolfsson, fail fast, Fall of the Berlin Wall, Filter Bubble, Francis Fukuyama: the end of history, Frank Gehry, Frederick Winslow Taylor, frictionless, fulfillment center, full employment, future of work, gentrification, gig economy, global village, Google bus, Google Glasses, Hacker Ethic, happiness index / gross national happiness, holacracy, income inequality, index card, informal economy, information trail, Innovator's Dilemma, Internet of things, Isaac Newton, Jaron Lanier, Jeff Bezos, job automation, John Perry Barlow, Joi Ito, Joseph Schumpeter, Julian Assange, Kevin Kelly, Kevin Roose, Kickstarter, Kiva Systems, Kodak vs Instagram, Lean Startup, libertarian paternalism, lifelogging, Lyft, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Martin Wolf, Mary Meeker, Metcalfe’s law, military-industrial complex, move fast and break things, Nate Silver, Neil Armstrong, Nelson Mandela, Network effects, new economy, Nicholas Carr, nonsequential writing, Norbert Wiener, Norman Mailer, Occupy movement, packet switching, PageRank, Panopticon Jeremy Bentham, Patri Friedman, Paul Graham, peer-to-peer, peer-to-peer rental, Peter Thiel, plutocrats, Potemkin village, power law, precariat, pre–internet, printed gun, Project Xanadu, RAND corporation, Ray Kurzweil, reality distortion field, ride hailing / ride sharing, Robert Metcalfe, Robert Solow, San Francisco homelessness, scientific management, Second Machine Age, self-driving car, sharing economy, Sheryl Sandberg, Silicon Valley, Silicon Valley billionaire, Silicon Valley ideology, Skype, smart cities, Snapchat, social web, South of Market, San Francisco, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, subscription business, TaskRabbit, tech bro, tech worker, TechCrunch disrupt, Ted Nelson, telemarketer, The future is already here, The Future of Employment, the long tail, the medium is the message, the new new thing, Thomas L Friedman, Travis Kalanick, Twitter Arab Spring, Tyler Cowen, Tyler Cowen: Great Stagnation, Uber for X, uber lyft, urban planning, Vannevar Bush, warehouse robotics, Whole Earth Catalog, WikiLeaks, winner-take-all economy, work culture , working poor, Y Combinator

“We are asked to perform for our friends, to create things they like, to work on a personal brand—and brands teach us that authenticity is the result of consistency. We must honor our true self and represent the same self to all of our friends or risk being discredited.”105 Berners-Lee’s definition of capitalism, however, is too pedestrian. Rather than just a static market economy that enables trading, capitalism is what the Austrian economist Joseph Schumpeter called an “evolutionary” process of economic change that “never can be stationary.” In his 1942 magnum opus Capitalism, Socialism and Democracy, Schumpeter used the term “Creative Destruction” to describe the constant cycles of disruptive invention and reinvention that drive capitalism. “This process of Creative Destruction is the essential fact about capitalism,” Schumpeter insisted.

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“Nearly everything you think you know about strategy and innovation is wrong,” Downes and Nunes warn about today’s radically disruptive economy.59 In their 2014 book, Big Bang Disruption,60 they describe an economy in which disruption is devastating rather than creative. It’s a world, they say, in which Joseph Schumpeter’s “perennial gales of creative destruction” have become Category 5 hurricanes. Upheavals from big-bang disruptors like Google, Uber, Facebook, and Instagram “don’t create dilemmas for innovators,” Downes and Nunes warn, “they trigger disasters.”61 And Kodak is the textbook example of this kind of disaster—a $31 billion company employing 145,000 people that, as they note, was bankrupted “gradually and then suddenly”62 by the hurricane from Silicon Valley.

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Real Books,” New York Times, July 9, 2014. 55 Andrew Wallenstein, “Cable Operator Pitching TV Industry on Plan to Convert Illegal Downloads to Legal Transaction Opportunities,” Variety, August 5, 2013, variety.com/2013/digital/news/comcast-developing-anti-piracy-alternative-to-six-strikes-exclusive-1200572790. 56 “Recording Industry Welcomes Support by Payment Providers to Tackle Illegal Online Sale of Unlicensed Music,” International Federation of the Phonographic Industry, March 2, 2011, ifpi.org/content/section_news/20110302.html. 57 Bill Rosenblatt, “Ad Networks Adopt Notice-and-Takedown for Ads on Pirate Sites,” Copyright and Technology Blog, July 21, 2013, copyrightandtechnology.com/category/economics. 58 Victoria Espinel, “Coming Together to Combat Online Piracy and Counterfeiting,” Whitehouse.gov, July 15, 2013. 59 Kyle Alspach, “Steve Case: Silicon Valley Has Wrong Mindset for Next Internet Revolution,” Techflash, October 10, 2013. 60 Mariana Mazzucato, The Entrepreneurial State: Debunking Public vs. Private Sector Myths (London: Anthem, 2013), p. 105. 61 Joseph Schumpeter, “The Entrepreneurial State,” Economist, August 31, 2013. 62 Michael Ignatieff, “We Need a New Bismarck to Tame the Machines,” Financial Times, February 11, 2014. 63 Catherine Bigelow, “An Honor for Danielle Steel and a Downton for All,” SFGate, January 9, 2014. 64 Chrystia Freeland, Plutocrats: The Rise of the New Global Super Rich and the Fall of Everyone Else (New York: Penguin, 2012). 65 Chrystia Freeland, “Sympathy for the Toffs,” New York Times, January 24, 2014. 66 Ibid. 67 William Powers, Hamlet’s BlackBerry: A Practical Philosophy for Building a Good Life in the Digital Age (HarperCollins, 2010). 68 Jeff Jarvis, “What Society Are We Building Here?

Innovation and Its Enemies by Calestous Juma

3D printing, additive manufacturing, agricultural Revolution, Asilomar, Asilomar Conference on Recombinant DNA, autonomous vehicles, behavioural economics, big-box store, biodiversity loss, business cycle, Cass Sunstein, classic study, clean water, collective bargaining, colonial rule, computer age, creative destruction, CRISPR, Daniel Kahneman / Amos Tversky, deskilling, disruptive innovation, driverless car, electricity market, energy transition, Erik Brynjolfsson, fail fast, financial innovation, global value chain, Honoré de Balzac, illegal immigration, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invention of movable type, invention of the printing press, Joseph Schumpeter, knowledge economy, loss aversion, Marc Andreessen, means of production, Menlo Park, mobile money, New Urbanism, Nicholas Carr, pensions crisis, phenotype, precautionary principle, Ray Kurzweil, Recombinant DNA, refrigerator car, Second Machine Age, self-driving car, smart grid, smart meter, stem cell, Steve Jobs, synthetic biology, systems thinking, tacit knowledge, technological singularity, The Future of Employment, Thomas Kuhn: the structure of scientific revolutions, Travis Kalanick

INNOVATION AND ITS ENEMIES Introduction New ideas are not only the enemy of old ones; they also appear often in an extremely unacceptable form. CARL GUSTAV JUNG The quickest way to find out who your enemies are is to try doing something new. This book explores the dynamics of social opposition to innovation.1 In his pioneering work, the Austrian economist Joseph Schumpeter identified innovation as the central force in economic transformation. Much of the scholarly elaboration of his work has focused on how innovation drives economic evolution and the critical role that entrepreneurs play in the process. Innovation, according to Schumpeter, is the creation of new combinations that represent a departure from established practices.

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As Lynn White observed in Medieval Technology and Social Change, “The acceptance or rejection of an invention, or the extent to which its implications are realized if it is accepted, depends quite as much upon the conditions of society, and upon the imagination of its leaders, as upon the nature of the technological item itself.”15 Schumpeter, Innovation, and Social Transformation The preceding discussion illustrates “creative destruction,” a term coined by Austrian economist Joseph Schumpeter in his 1942 book Capitalism, Socialism and Democracy. Schumpeter believed that capitalism is a system that must always evolve, and with the evolution comes change. The change requires the destruction of something old, replaced by something new, such as the gun replacing archery and the mobile phone replacing the landline.

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Behind this seemingly innocent beverage lies one of the world’s most colorful technological controversies that spanned centuries and continents. Grounds for Concern The story of coffee shows how new innovations coevolve with social institutions that they disrupt and recreate. It also plays to Joseph Schumpeter’s rejection of the equilibrium outlook of economic life. He took the rather controversial view that “all change in consumers’ tastes is incidental to, and brought about by, producers’ actions.”3 Coffee (Coffea arabica), native to the highlands of Ethiopia, is such an example. Coffee was used by Ethiopian people for centuries.4 Most likely this was in the form of whole berries or leaves rather than beans.

The Innovation Illusion: How So Little Is Created by So Many Working So Hard by Fredrik Erixon, Bjorn Weigel

Airbnb, Alan Greenspan, Albert Einstein, American ideology, asset allocation, autonomous vehicles, barriers to entry, Basel III, Bernie Madoff, bitcoin, Black Swan, blockchain, Blue Ocean Strategy, BRICs, Burning Man, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, classic study, Clayton Christensen, Colonization of Mars, commoditize, commodity super cycle, corporate governance, corporate social responsibility, creative destruction, crony capitalism, dark matter, David Graeber, David Ricardo: comparative advantage, discounted cash flows, distributed ledger, Donald Trump, Dr. Strangelove, driverless car, Elon Musk, Erik Brynjolfsson, Fairchild Semiconductor, fear of failure, financial engineering, first square of the chessboard / second half of the chessboard, Francis Fukuyama: the end of history, general purpose technology, George Gilder, global supply chain, global value chain, Google Glasses, Google X / Alphabet X, Gordon Gekko, Greenspan put, Herman Kahn, high net worth, hiring and firing, hockey-stick growth, Hyman Minsky, income inequality, income per capita, index fund, industrial robot, Internet of things, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, Just-in-time delivery, Kevin Kelly, knowledge economy, laissez-faire capitalism, low interest rates, Lyft, manufacturing employment, Mark Zuckerberg, market design, Martin Wolf, mass affluent, means of production, middle-income trap, Mont Pelerin Society, Network effects, new economy, offshore financial centre, pensions crisis, Peter Thiel, Potemkin village, precautionary principle, price mechanism, principal–agent problem, Productivity paradox, QWERTY keyboard, RAND corporation, Ray Kurzweil, rent-seeking, risk tolerance, risk/return, Robert Gordon, Robert Solow, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, Steve Ballmer, Steve Jobs, Steve Wozniak, subprime mortgage crisis, technological determinism, technological singularity, TED Talk, telemarketer, The Chicago School, The Future of Employment, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, transportation-network company, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, uber lyft, University of East Anglia, unpaid internship, Vanguard fund, vertical integration, Yogi Berra

Likewise, Robert Gordon’s stellar work on productivity and American prosperity – in some ways the antithesis to Brynjolfsson and McAfee’s work – has given us an extraordinary number of insights. Throughout the work on this book we have been reminded of the significance of many classical or political economists in the nineteenth and twentieth centuries. There are few roads to understanding business and the economy that do not stop by Karl Marx, Joseph Schumpeter, and Friedrich Hayek. One can dispute their politics, but their insights into the economy are instructive for a contemporary student in that field. Similarly, when we have reread works by scholars like John Kenneth Galbraith, Alexander Gerschenkron, and Susan Strange, to name just three, we have been struck by their insights.

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Of all the internet start-ups, for example, three-quarters fail because of “premature scaling” alone, according to the Startup Genome Report.32 Yet here we are, with rising venture capital investment in internet start-ups – many of them rushing to scale up their businesses faster than the others. Joseph Schumpeter, the Austrian-born economist, argued along the same lines and, partly inspired by German scholar Werner Sombart, portrayed the capitalist innovation process as “a perennial gale of creative destruction.” For Schumpeter, creation and destruction were part of the same process of economic renewal.

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Companies, he argued, are not black boxes that cannot be understood by economists. Nor are the successes and failures of firms mysteriously shielded from generalized observations about how economies work. Coase, who came from an institutionalist school of thought, was not all that impressed by Joseph Schumpeter’s almost Nietzsche-like admiration of the strong and individualistic entrepreneur: entrepreneurs, Schumpeter later wrote, act “with confidence beyond the range of familiar beacons,” a trait “present in only a small fraction of the population.”14 Nor was Coase satisfied with the residual treatment of firms in much of the economic thinking at the time – a perception of firms memorably described by Cambridge economist Dennis Robertson as “lumps of butter coagulating in a pail of buttermilk.”15 Like other economists with similar interests, Schumpeter could not give a reasonable explanation for why companies exist, and failure to understand such a basic component of economics clouded their views about the role of firms in the economy.

The end of history and the last man by Francis Fukuyama

affirmative action, anti-communist, Ayatollah Khomeini, Berlin Wall, Bonfire of the Vanities, business cycle, centre right, classic study, cuban missile crisis, deindustrialization, Deng Xiaoping, Donald Trump, European colonialism, Exxon Valdez, F. W. de Klerk, Fall of the Berlin Wall, Francis Fukuyama: the end of history, full employment, Gini coefficient, Great Leap Forward, Gunnar Myrdal, Herbert Marcuse, Hernando de Soto, income inequality, Isaac Newton, Joan Didion, joint-stock company, Joseph Schumpeter, kremlinology, land reform, liberal world order, liberation theology, life extension, linear programming, long peace, means of production, Michael Milken, Mikhail Gorbachev, Nelson Mandela, New Journalism, nuclear winter, old-boy network, open economy, post-industrial society, RAND corporation, Ronald Reagan, Socratic dialogue, Strategic Defense Initiative, strikebreaker, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, zero-sum game

Historically, some of the most impressive economic growth records have been compiled by this type of state, including Imperial Germany, Meiji Japan, the Russia of Witte and Stolypin, and, more recently, Brazil after the military takeover in 1964, Chile under Pinochet, and, of course, the NIEs of Asia.31 Between 1961 and 1968, for example, the average annual growth rate of the developing world’s democracies, including India, Ceylon, the Philippines, Chile, and Costa Rica, was only 2.1 percent, whereas the group of conservative authoritarian regimes (Spain, Portugal, Iran, Taiwan, South Korea, Thailand, and Pakistan) had an average growth rate of 5.2 percent.32 The reasons why a market-oriented authoritarian state should do better economically than a democratic one are reasonably straightforward, and were described by the economist Joseph Schumpeter in his book Capitalism, Socialism, and Democracy. While voters in democratic countries may affirm free-market principles in the abstract, they are all too ready to abandon them when their own short-term, economic self-interest is at stake. There is no presumption, in other words, that democratic publics will make economically rational choices, or that economic losers will not use their political power to protect their positions.

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Imperialism and war were historically the product of aristocratic societies. If liberal democracy abolished the class distinction between masters and slaves by making the slaves their own masters, then it too should eventually abolish imperialism. This thesis was stated in a slightly different form by the economist Joseph Schumpeter, who argued that democratic capitalist societies were markedly un-warlike and anti-imperialistic because they provided other outlets for the energies that formerly fanned wars: The competitive system absorbs the full energies of most of the people at all economic levels. Constant application, attention, and concentration of energy are the conditions of survival within it, primarily in the specifically economic professions, but also in other activities organized on their model.

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They do not risk their lives, but they stake their fortunes, status, and reputations for the sake of a certain kind of glory; they work extremely hard and put aside small pleasures for the sake of larger and intangible ones; their labor frequently results in products and machines that demonstrate a breathtaking domination of the hardest of masters, nature; and if they are not classically public-spirited, they necessarily participate in the social world constituted by civil society. The classical capitalist entrepreneur described by Joseph Schumpeter is therefore not Nietzsche’s last man. It is in the very design of democratic capitalist countries like the United States that the most talented and ambitious natures should tend to go into business, rather than into politics, the military, universities, or the church. And it would seem not entirely a bad thing for the long-run stability of democratic politics that economic activity can preoccupy such ambitious natures for an entire lifetime.

The Limits of the Market: The Pendulum Between Government and Market by Paul de Grauwe, Anna Asbury

Alan Greenspan, banking crisis, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, conceptual framework, crony capitalism, Easter island, Erik Brynjolfsson, eurozone crisis, Honoré de Balzac, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kitchen Debate, means of production, Money creation, moral hazard, Paul Samuelson, price discrimination, price mechanism, profit motive, Robert Gordon, Robert Solow, Ronald Coase, Simon Kuznets, The Nature of the Firm, The Rise and Fall of American Growth, too big to fail, transaction costs, trickle-down economics, ultimatum game, very high income

Philosophers, economists, social scientists, and historians have developed countless theories describing how capitalism emerged and why ultimately it would be doomed. The key characteristics of these analyses are that they predict the final collapse of capitalism and its transformation into something very different in which governments (the state) will take over the command of the economy. Karl Marx, Friedrich Engels, Joseph Schumpeter, Rosa Luxemburg, Vladimir Lenin, Karl Polanyi, all have developed what I would call ‘linear theories’ of the rise and fall of capitalism, i.e. theories predicting that capitalism would disappear and be replaced permanently by some form of state control over the economy. This linear theory contrasts with the cyclical theory that has been developed in this book, i.e. a theory predicting that capitalism is subject to a rise and fall followed by a resurrection, which in turn leads to a new rise and fall, ad infinitum.

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One must admit that the World War I came close to making the Leninist prediction come true. In addition, Lenin’s contribution to destroying capitalism in Russia was formidable. But again his triumph in the end would only be temporary as Russia returned to capitalism during the s. This has led some to quip that communism is the longest road to capitalism. Joseph Schumpeter, the brilliant Austrian economist, who like so many intellectuals and scientists emigrated to the US during the s to escape Nazi totalitarianism, was not a communist. Yet he had an interesting theory about why capitalism was in trouble and would be overtaken by a new system of organizing the economy.

How Markets Fail: The Logic of Economic Calamities by John Cassidy

Abraham Wald, Alan Greenspan, Albert Einstein, An Inconvenient Truth, Andrei Shleifer, anti-communist, AOL-Time Warner, asset allocation, asset-backed security, availability heuristic, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black-Scholes formula, Blythe Masters, book value, Bretton Woods, British Empire, business cycle, capital asset pricing model, carbon tax, Carl Icahn, centralized clearinghouse, collateralized debt obligation, Columbine, conceptual framework, Corn Laws, corporate raider, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Daniel Kahneman / Amos Tversky, debt deflation, different worldview, diversification, Elliott wave, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, Garrett Hardin, George Akerlof, Glass-Steagall Act, global supply chain, Gunnar Myrdal, Haight Ashbury, hiring and firing, Hyman Minsky, income per capita, incomplete markets, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Nash: game theory, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kickstarter, laissez-faire capitalism, Landlord’s Game, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, mental accounting, Mikhail Gorbachev, military-industrial complex, Minsky moment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, Naomi Klein, negative equity, Network effects, Nick Leeson, Nixon triggered the end of the Bretton Woods system, Northern Rock, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, Ponzi scheme, precautionary principle, price discrimination, price stability, principal–agent problem, profit maximization, proprietary trading, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, RAND corporation, random walk, Renaissance Technologies, rent control, Richard Thaler, risk tolerance, risk-adjusted returns, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, subprime mortgage crisis, tail risk, Tax Reform Act of 1986, technology bubble, The Chicago School, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, too big to fail, Tragedy of the Commons, transaction costs, Two Sigma, unorthodox policies, value at risk, Vanguard fund, Vilfredo Pareto, wealth creators, zero-sum game

The idea of the free market as a spontaneously generated system for “the utilization of knowledge,” he said to an interviewer later in his life, was “the basis not only of my economic but also much of my political views . . . the amount of information the authorities can use is always very limited, and the market uses an infinitely greater amount of information than the authorities can ever do.” Back in the 1940s, when Hayek formulated his ideas about information, there was no sign of communism collapsing: to most observers, it looked like laissez-faire was the ideology whose time had passed. In 1942, Joseph Schumpeter, another Austrian admirer of free markets, who taught at Harvard, published Capitalism, Socialism, and Democracy, in which he argued that capitalism itself was doomed and bureaucracy was its replacement. Hayek was equally fearful about the future, and he set out to write a popular text defending the values of free market liberalism.

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After trying his hand at fiction, journalism, and mine engineering, he followed the advice of his father, an economist, and devoted himself to economics. During the 1860s, Walras published articles on various topics, but it was his 1874 treatise, Elements of Pure Economics, that established him as a major figure. (Joseph Schumpeter, in his History of Economic Analysis, described Walras as “the greatest of all economists.”) After reviewing previous economic doctrines, Walras began his formal analysis by considering how prices are determined in a barter economy where two people trade two items, such as bread and wine, for each other.

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In what was perhaps a poke at the efficient market hypothesis, Minsky described his thesis that capitalist economies inevitably progress from conservative finance to reckless speculation as the “financial instability hypothesis.” Minsky described it as an interpretation of Keynes’s General Theory, and he also credited the Austrian economist Joseph Schumpeter for influencing his views. “The first theorem of the financial instability hypothesis is that the economy has financing regimes under which it is stable, and financing regimes in which it is unstable,” he explained in 1992. “The second theorem of the financial instability hypothesis is that over periods of prolonged prosperity, the economy transits from financial relations that make for a stable system to financial relations that make for an unstable system.”

How to Fix Copyright by William Patry

A Declaration of the Independence of Cyberspace, barriers to entry, big-box store, borderless world, bread and circuses, business cycle, business intelligence, citizen journalism, cloud computing, commoditize, content marketing, creative destruction, crowdsourcing, death of newspapers, digital divide, en.wikipedia.org, facts on the ground, Frederick Winslow Taylor, George Akerlof, Glass-Steagall Act, Gordon Gekko, haute cuisine, informal economy, invisible hand, John Perry Barlow, Joseph Schumpeter, Kickstarter, knowledge economy, lone genius, means of production, moral panic, new economy, road to serfdom, Ronald Coase, Ronald Reagan, search costs, semantic web, shareholder value, Silicon Valley, The Chicago School, The Wealth of Nations by Adam Smith, trade route, transaction costs, trickle-down economics, Twitter Arab Spring, Tyler Cowen, vertical integration, winner-take-all economy, zero-sum game

Indeed, it is a dangerous objective since invocation of the balance metaphor is often done in order to maintain the status quo, as in “why upset the balance?” or as in descriptions of the status quo as containing a “delicate balance.” Balance conflicts with the dynamic disruption that creatively pushes us forward no matter how reluctantly: that’s what is behind Austrian economist Joseph Schumpeter’s theory of creative disruption, which was not named, it should be noted, “creative balance.” The balance metaphor should be abandoned in favor of simply asking, “what is the result we want?” What we want, however, cannot be separated from the political arena in which rights and privileges are granted or changed.

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Francis Gurry, the Director General of the World Intellectual Property Organization cautioned, “Copyright should be about promoting cultural dynamism, not preserving or promoting vested business interests.”26 Innovation Requires a Dynamic Legal System Innovation is by its nature dynamic. Innovation’s power lies in what economist Joseph Schumpeter termed “creative destruction”: the introduction of innovative products and business models that displace old ones.27 If an innovative product or service does not provide competition to existing products or services, it is not innovative. Competition is inextricably linked to innovation. Laws are not.

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Jack Goldsmith and Tim Wu, Who Controls the Internet?: Illusions of a Borderless World (2008, Oxford University Press. See also Johnny Ryan, A History of the Interent and the Digital Future (2010, Reaktion Books). 26. Francis Gurry,The Future of Copyright, address delivered in Sydney, Australia, February 25, 2011. 27. Joseph Schumpeter, Capitalism, Socialism and Democracy 83 (Harper & Brothers 3d ed. 1950, 2006 paperback) (1942). 28. Sam Ricketson, WIPO Study on Limitations and Exceptions of Copyright Related Rights in the Digital Environment at page 4, Standing Committee on Copyright and Related Rights, 9th Session, Geneva, June 23 to 27, 2003, SCCR/9/7 (April 5, 2003).

Going Solo: The Extraordinary Rise and Surprising Appeal of Living Alone by Eric Klinenberg

big-box store, carbon footprint, classic study, David Brooks, deindustrialization, deskilling, employer provided health coverage, equal pay for equal work, estate planning, fear of failure, financial independence, fixed income, Joseph Schumpeter, knowledge economy, longitudinal study, mass incarceration, New Urbanism, public intellectual, Ralph Waldo Emerson, rent control, Richard Florida, San Francisco homelessness, selection bias, Silicon Valley, Skype, speech recognition, women in the workforce, work culture , working poor, young professional

Durkheim argued that the modern division of labor would bind citizens organically. After all, individuals could achieve “independence” and “liberty” only if they were supported by the key modern social institutions—the family, the economy, and the state—which meant they had a clear self-interest in joining together to promote the common good. The Austrian economist Joseph Schumpeter didn’t think individuals would see things this way. In his 1942 book Capitalism, Socialism, and Democracy, Schumpeter observed that modern capitalism promoted “the rationalization of everything in life,” and predicted that a cold, calculating culture would ultimately lead to the “decomposition” of the collective.

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They tend to overlook the fact that neither individuals nor societies see living alone as a goal or an end point—which is why social movements to promote the interests of singletons are so difficult to organize. And they don’t admit that living alone has not led to the “decomposition” of collective life and the end of meaningful social commitments, as the economist Joseph Schumpeter and many others feared. More pragmatically, those who caution against the shift toward living alone need to grapple with the fact that the social changes driving it—the emergence of the individual, the rising status of women, the growth of cities, the development of communications technologies, and the expansion of the life course—are unlikely to be reversed.

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This is consistent with the observations of Yale law professor Robert Ellickson, who writes, “As a nation becomes more prosperous, its households generally shrink in size.” See Ellickson, The Household, p. 35. For Kosovo and Albania, see Sasha Tsenkova, Housing Policy Reforms in Post-Socialist Europe: Lost in Transition (Heidelberg: Physica-Verlag, 2009), p. 115. 18. See Euromonitor International, “Single Living.” 19. See Joseph Schumpeter, Capitalism, Socialism, and Democracy (New York: Harper Perennial, 1962 [1942]). p. 157. 20. The survey figures are reported in Frank Furstenberg Jr., Sheela Kennedy, Vonnie McLoyd, Rubén Rumbaut, and Richard Settersten Jr., “Growing Up Is Harder to Do,” Contexts 3, no. 3 (2004): 36. 21.

The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies by Erik Brynjolfsson, Andrew McAfee

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, access to a mobile phone, additive manufacturing, Airbnb, Alan Greenspan, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, American Society of Civil Engineers: Report Card, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, barriers to entry, basic income, Baxter: Rethink Robotics, Boston Dynamics, British Empire, business cycle, business intelligence, business process, call centre, carbon tax, Charles Lindbergh, Chuck Templeton: OpenTable:, clean water, combinatorial explosion, computer age, computer vision, congestion charging, congestion pricing, corporate governance, cotton gin, creative destruction, crowdsourcing, data science, David Ricardo: comparative advantage, digital map, driverless car, employer provided health coverage, en.wikipedia.org, Erik Brynjolfsson, factory automation, Fairchild Semiconductor, falling living standards, Filter Bubble, first square of the chessboard / second half of the chessboard, Frank Levy and Richard Murnane: The New Division of Labor, Freestyle chess, full employment, G4S, game design, general purpose technology, global village, GPS: selective availability, Hans Moravec, happiness index / gross national happiness, illegal immigration, immigration reform, income inequality, income per capita, indoor plumbing, industrial robot, informal economy, intangible asset, inventory management, James Watt: steam engine, Jeff Bezos, Jevons paradox, jimmy wales, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kevin Kelly, Khan Academy, Kiva Systems, knowledge worker, Kodak vs Instagram, law of one price, low skilled workers, Lyft, Mahatma Gandhi, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Mars Rover, mass immigration, means of production, Narrative Science, Nate Silver, natural language processing, Network effects, new economy, New Urbanism, Nicholas Carr, Occupy movement, oil shale / tar sands, oil shock, One Laptop per Child (OLPC), pattern recognition, Paul Samuelson, payday loans, post-work, power law, price stability, Productivity paradox, profit maximization, Ralph Nader, Ray Kurzweil, recommendation engine, Report Card for America’s Infrastructure, Robert Gordon, Robert Solow, Rodney Brooks, Ronald Reagan, search costs, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Simon Kuznets, six sigma, Skype, software patent, sovereign wealth fund, speech recognition, statistical model, Steve Jobs, Steven Pinker, Stuxnet, supply-chain management, TaskRabbit, technological singularity, telepresence, The Bell Curve by Richard Herrnstein and Charles Murray, the Cathedral and the Bazaar, the long tail, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, Tyler Cowen, Tyler Cowen: Great Stagnation, Vernor Vinge, warehouse robotics, Watson beat the top human players on Jeopardy!, winner-take-all economy, Y2K

.* So the only viable way for societies to become wealthier—to improve the standard of living available to its people—is for their companies and workers to keep getting more output from the same number of inputs, in other words more goods and services from the same number of people. Innovation is how this productivity growth happens. Economists love to argue with one another, but there’s great consensus among them about the fundamental importance of innovation for growth and prosperity. Most in the profession would agree with Joseph Schumpeter, the topic’s great scholar, who wrote that, “Innovation is the outstanding fact in the economic history of capitalist society . . . and also it is largely responsible for most of what we would at first sight attribute to other factors.”3 It is here that the consensus ends. How much of this “outstanding fact” is taking place right now, and whether it’s on an upward or downward trend, is a matter of great dispute.

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As we discussed at the beginning of the chapter, the earnings of bricklayers will vary a lot less than the winner-take-all earnings of app developers, but that’s not the only difference. Instead of stable market shares, where revenues and income correspond proportionally to differences in talent and effort, competition in winner-take-all markets will be much more unstable and asymmetrical. The great economist Joseph Schumpeter wrote of “creative destruction,” where each innovation not only created value for consumers but also wiped out the previous incumbent. The winners scaled up and dominated their markets, but were in turn vulnerable to the next generation of innovators. Schumpeter’s observation describes markets in software, media, and the Internet much better than traditional markets in manufacturing and services.

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Thomas Edison, Henry Ford, Bill Gates, and many others created new industries that more than replaced the work that was eliminated as farming jobs vanished over the decades. The current transformation of the economy creates an equally large opportunity. Entrepreneurship has been an important part of the Econ 101 playbook at least since economist Joseph Schumpeter’s landmark work, written in the middle of the twentieth century, on the nature of capitalism and innovation. Schumpeter put forward our favorite definition of innovation—“the market introduction of a technical or organisational novelty, not just its invention”—and, like us, believed that it was an essentially recombinant process, “the carrying out of new combinations.”11 He also argued that innovation was less likely to take place in incumbent companies than in the upstarts that were trying to displace them.

Made to Break: Technology and Obsolescence in America by Giles Slade

Albert Einstein, Alexey Pajitnov wrote Tetris, American ideology, Apollo Guidance Computer, Apple's 1984 Super Bowl advert, Buckminster Fuller, business cycle, Cass Sunstein, Charles Babbage, Charles Lindbergh, creative destruction, disinformation, Douglas Engelbart, Douglas Engelbart, Dr. Strangelove, Fairchild Semiconductor, Ford Model T, global village, Herman Kahn, housing crisis, indoor plumbing, invention of radio, Jeff Hawkins, John Perry Barlow, Joseph Schumpeter, Lewis Mumford, Marshall McLuhan, Mikhail Gorbachev, more computing power than Apollo, mutually assured destruction, PalmPilot, planned obsolescence, public intellectual, Ralph Nader, rent control, Ronald Reagan, Silicon Valley, Steve Jobs, Strategic Defense Initiative, Suez crisis 1956, the market place, the medium is the message, The Soul of a New Machine, The Theory of the Leisure Class by Thorstein Veblen, Thorstein Veblen, unemployed young men, upwardly mobile, Vladimir Vetrov: Farewell Dossier, white picket fence, women in the workforce

If Armstrong had conceived of his situation in these terms, he might have acted differently. Advanced capitalism had regularly stifle or swallowed up the individual entrepreneur during these years when the political will to enforce legislation against monopolistic practices was the exception rather than the rule. In 1942 the Harvard economist Joseph Schumpeter would devote a portion of his influ ntial book Capitalism, Socialism and Democracy to documenting the causes for what he called “the obsolescence of the entrepreneurial function” in advanced capitalism.16 But whatever Armstrong’s motives were, his decision to exclude RCA proved to be a critical miscalculation, since it left Sarnoff with a strong disincentive to end his campaign against FM.

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Perhaps because of this cooptation, the counterculture lasted well beyond the sixties and permitted Madison Avenue to engage in cycle after cycle of rebellion and transgression, marketing new goods, new fads, new symbolic gestures of defian e.The twist that DDB put on psychological obsolescence through their VW ads at the very beginning of the 1960s has been with us ever since. THEODORE LEVITT AND MARSHALL MCLUHAN Bernbach was not the only 1960s marketing genius who was obsessed with obsolescence. Fascinated by the economic theories of Joseph Schumpeter and Peter F. Drucker, Theodore Levitt, an oil industry executive born in Germany decided on a career change in the 1940s. After leaving his position at Standard Oil, Levitt completed a Ph.D. in economics at Ohio State University in 1951. By 1959 he had come under the influ nce of John Kenneth Galbraith and had joined the faculty of Harvard’s Graduate School of Business Administration.

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Advertising and Selling, 11, no. 10 (September 5, 1928): 19,20,44, 46. 3. Ibid., p. 44. 4. Ibid., p. 49. 5. Joseph A. Schumpeter, The Theory of Economic Development: An Enquiry into Profits Capital, Credits, Interest and the Business Cycle,trans. R. Opie (Cambridge: Harvard University Press, 1934). 6. Eduard März, Joseph Schumpeter: Scholar, Teacher, Politician (New Haven: Yale University Press, 1991), p. 5. 7. Schumpeter, Capitalism, Socialism and Democracy, pp. 82–83. 8. Paul M. Mazur, American Prosperity: Its Causes and Consequences (London: Jonathan Cape, 1928), p. 98. 9. Ibid., p. 99. 10. Frederick, “Is Progressive Obsolescence the Path toward Increased Consumption?”

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

Alan Greenspan, balance sheet recession, banking crisis, basic income, Bear Stearns, Bernie Sanders, Bretton Woods, business climate, business cycle, carbon tax, Carmen Reinhart, central bank independence, circular economy, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, degrowth, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, endogenous growth, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, Ford Model T, forward guidance, full employment, G4S, general purpose technology, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labour market flexibility, low interest rates, low skilled workers, Martin Wolf, mass incarceration, military-industrial complex, Modern Monetary Theory, Money creation, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, ocean acidification, paradox of thrift, Paul Samuelson, planned obsolescence, Post-Keynesian economics, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Solyndra, Steve Jobs, stock buybacks, systems thinking, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, Tragedy of the Commons, transaction costs, trickle-down economics, universal basic income, vertical integration, very high income

Fortunately, there are plenty of resources within economics with which to do this. For these characteristics of capitalist economies are hardly revelatory. They have been analysed in theory and documented in practice for more than a hundred years of economic scholarship. They underlie the work of some of the greatest economists of the past century—such as Karl Polanyi, Joseph Schumpeter and John Maynard Keynes—and of the more recent schools of evolutionary, institutional and post-Keynesian economics. As the separate chapters in this book show, analysis based on these foundations can generate searching critiques of current policy, and powerful alternative perspectives. Three key insights underpin a rethinking of capitalism in these ways.

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It is organisations—including household families, business enterprises and government agencies—and not markets that invest in the productive capabilities embodied in physical and human capital that generate productivity. Markets can give organisations access to labour, land, finance and intermediate products, but, as recognised explicitly in the views of both Karl Marx and Joseph Schumpeter, market exchange per se does not enhance the productivity of these inputs.3 Organisations enhance productivity by first developing and then utilising the productive resources that they have under their control. In any economy characterised by significant productivity growth, the investment strategies and organisational structures of business enterprises drive productivity growth.

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Beyond that logical statement, however, the elaboration of the theory of innovative enterprise requires systematic comparative–historical research on the organisational and institutional determinants of the processes that transform technological and market conditions to generate goods and services that are higher quality and lower cost than those that previously existed. Writing at the end of his career, Joseph Schumpeter advised: ‘Nobody can hope to understand the economic phenomena of any, including the present, epoch who has not an adequate command of the historical facts and an adequate amount of historical sense or of what may be described as historical experience.’38 By ‘historical experience’ Schumpeter, who more than any other economist argued for the centrality of innovation for understanding a capitalist economy, meant the ability of the economist to integrate theory and history.

European Spring: Why Our Economies and Politics Are in a Mess - and How to Put Them Right by Philippe Legrain

3D printing, Airbnb, Alan Greenspan, Asian financial crisis, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, book value, Boris Johnson, Bretton Woods, BRICs, British Empire, business cycle, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, clean tech, collaborative consumption, collapse of Lehman Brothers, collective bargaining, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Crossrail, currency manipulation / currency intervention, currency peg, debt deflation, Diane Coyle, disruptive innovation, Downton Abbey, Edward Glaeser, Elon Musk, en.wikipedia.org, energy transition, eurozone crisis, fear of failure, financial deregulation, financial engineering, first-past-the-post, Ford Model T, forward guidance, full employment, Gini coefficient, global supply chain, Great Leap Forward, Growth in a Time of Debt, high-speed rail, hiring and firing, hydraulic fracturing, Hyman Minsky, Hyperloop, immigration reform, income inequality, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), Irish property bubble, James Dyson, Jane Jacobs, job satisfaction, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, labour mobility, land bank, liquidity trap, low interest rates, margin call, Martin Wolf, mittelstand, moral hazard, mortgage debt, mortgage tax deduction, North Sea oil, Northern Rock, offshore financial centre, oil shale / tar sands, oil shock, open economy, peer-to-peer rental, price stability, private sector deleveraging, pushing on a string, quantitative easing, Richard Florida, rising living standards, risk-adjusted returns, Robert Gordon, savings glut, school vouchers, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart grid, smart meter, software patent, sovereign wealth fund, Steve Jobs, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, Tyler Cowen, Tyler Cowen: Great Stagnation, working-age population, Zipcar

Throw in insights from political economy, namely how policymakers get caught up with the crowd or captured by it, and the dangers of micromanagement become clear. The task for policymakers is particularly tricky because while the inherent instability of capitalism is a source of progress – the “gales of creative destruction” produced by innovators and entrepreneurs, as Joseph Schumpeter put it – it can also be extremely damaging: when the financial system runs away with itself and then crashes. Economies need to try to capture the benefits of entrepreneurs’ efforts – or the animal spirits of investors, as Keynes put it – while limiting the financial sector’s excesses. Governments need to encourage the dynamism of technological and business progress, while stepping in to rekindle its spirits in a slump.

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Steel illustrate the same process of industrial mutation… that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in. Joseph Schumpeter, Capitalism, Socialism and Democracy, 1942588 To get a glimpse of Europe’s future, you need to get down and party. Hackers, coders, gamers, developers, designers, DJs, technologists, entrepreneurs – they come together from all over Europe each year at Campus Party for a week of inspiring talks, eye-opening demos, informal networking and creative sparking.

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Thus economic growth is an ongoing voyage of discovery into an unknowable future, fuelled by ingenuity and energy, trialled by enterprising businesses and stimulated by competition within a framework of supportive institutions. In effect, it is a bit like evolution, which proceeds by mutation, selection and replication. While I do not agree with much of what Joseph Schumpeter wrote, his insight in 1942 that capitalism is an evolutionary process of continuous innovation and creative destruction seems fundamentally correct. Developing economies can grow simply by imitating what works well in more advanced ones – as can the less developed parts of every advanced economy.

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis by James Rickards

"World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, Bayesian statistics, Bear Stearns, behavioural economics, Ben Bernanke: helicopter money, Benoit Mandelbrot, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, blockchain, Boeing 747, Bonfire of the Vanities, Bretton Woods, Brexit referendum, British Empire, business cycle, butterfly effect, buy and hold, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, cellular automata, cognitive bias, cognitive dissonance, complexity theory, Corn Laws, corporate governance, creative destruction, Credit Default Swap, cuban missile crisis, currency manipulation / currency intervention, currency peg, currency risk, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, disintermediation, distributed ledger, diversification, diversified portfolio, driverless car, Edward Lorenz: Chaos theory, Eugene Fama: efficient market hypothesis, failed state, Fall of the Berlin Wall, fiat currency, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, Fractional reserve banking, G4S, George Akerlof, Glass-Steagall Act, global macro, global reserve currency, high net worth, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Isaac Newton, jitney, John Meriwether, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, Long Term Capital Management, low interest rates, machine readable, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, Minsky moment, Money creation, money market fund, mutually assured destruction, Myron Scholes, Naomi Klein, nuclear winter, obamacare, offshore financial centre, operational security, Paul Samuelson, Peace of Westphalia, Phillips curve, Pierre-Simon Laplace, plutocrats, prediction markets, price anchoring, price stability, proprietary trading, public intellectual, quantitative easing, RAND corporation, random walk, reserve currency, RFID, risk free rate, risk-adjusted returns, Robert Solow, Ronald Reagan, Savings and loan crisis, Silicon Valley, sovereign wealth fund, special drawing rights, stock buybacks, stocks for the long run, tech billionaire, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transfer pricing, value at risk, Washington Consensus, We are all Keynesians now, Westphalian system

Revelation 6:5–6 Introduction Felix Somary was perhaps the greatest economist of the twentieth century. He is certainly among the least known. Somary was born in 1881 in a German-speaking part of what was then the Austro-Hungarian Empire. He studied law and economics at the University of Vienna. There he was a classmate of Joseph Schumpeter’s and took his Ph.D. with Carl Menger, the father of Austrian economics. During the First World War Somary served as a central banker in occupied Belgium, but for most of his career he was a private banker to wealthy individuals and institutions. He moved to Zurich in the 1930s where he lived and worked until his death in 1956.

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The sanjak railway episode echoes rivalries in our own day about natural gas pipelines from the Caspian Sea to Europe, some of which may traverse old Ottoman sanjaks. The players—Turkey, Russia, and Germany—are the same. Where is our new Somary? Who is the new raven? Somary also used the historical-cultural method favored by Joseph Schumpeter. In 1913, Somary was asked by the seven great powers of the day to reorganize the Chinese monetary system. He declined the role because he felt a more pressing monetary crisis was coming in Europe. A decade ahead of a powerful deflation that held the world in its grip from 1924 to 1939, he wrote: Europeans found the Chinese amusing for their rejection of paper money and their practice of weighing metallic currency on scales.

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That would be a strange answer to Marx’s prayer. But history sometimes indulges in jokes of questionable taste. Joseph A. Schumpeter Capitalism, Socialism and Democracy (1942) Show me the man and I’ll find you the crime. Lavrentiy Beria, chief of the Secret Police (NKVD) under Stalin Schumpeter Reconsidered Joseph Schumpeter’s name conjures the phrase “creative destruction,” his best-known intellectual contribution, one of the most powerful economic insights of the twentieth century, with important implications today. Schumpeter’s concept was that capitalism is a dynamic force more potent than the enterprises that rise and fall within it.

The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order by Benn Steil

activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, Asian financial crisis, banks create money, Bretton Woods, British Empire, business cycle, capital controls, Charles Lindbergh, currency manipulation / currency intervention, currency peg, deindustrialization, European colonialism, facts on the ground, fiat currency, financial independence, floating exchange rates, full employment, global reserve currency, imperial preference, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, lateral thinking, low interest rates, margin call, means of production, Michael Milken, money: store of value / unit of account / medium of exchange, Monroe Doctrine, New Journalism, Nixon triggered the end of the Bretton Woods system, open economy, Paul Samuelson, Potemkin village, price mechanism, price stability, psychological pricing, public intellectual, reserve currency, road to serfdom, seigniorage, South China Sea, special drawing rights, Suez canal 1869, Suez crisis 1956, The Great Moderation, the market place, trade liberalization, Works Progress Administration

Maynard would later reflect proudly on his chosen profession that the economist “must be mathematician, historian, statesman, philosopher.”5 He would never display a rare gift as any one of these alone, but he amalgamated them with a genius that no economist has ever matched. It is a long-standing matter of contention among Keynes’s chroniclers the degree to which his personal life should be held to inform his development as a public intellectual, scholar, and statesman. Famed economist Joseph Schumpeter, for example, cuttingly pronounced Keynes’s famous aphorism “in the long run we are all dead” to be a natural perspective for a childless thinker. Keynes and his future wife, it should be noted, had tried to have a child in the late 1920s; but more to the point, to dismiss important elements of Keynes’s thinking on the grounds that they were artifacts of alleged hidden impulses is to fail to give his reasoning its due.

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“Had Keynes begun … with the simple statement that he found it realistic to assume that modern capitalistic societies had money wage rates that were sticky and resistant to downward movements,” the great economist Paul Samuelson argued in 1964, “most of his insights would have remained just as valid.”96 This is the logical basis on which much Keynesian analysis today is undertaken—not on Keynes’s theorizing about the unique menace of money (to which Keynes clung tenaciously). “Most people who admire Keynes,” Joseph Schumpeter wryly observed, “take from him what is congenial to them and leave the rest.”97 For his part, Rueff argued that Keynes’s monetary and fiscal policy prescriptions had no sound basis. On the contrary, their inevitable result down the road would be inflation and a private productive apparatus less able to supply the goods and services people actually want.98 Hubert Henderson and others had shared this view, but it did not become widespread until the stagflation of the 1970s and the consequent anti-Keynesian blowback.

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If money wages in this country always go up when the cost of imported food stuffs rises, the power of exchange depreciation to help us begins to evaporate.”40 Keynes was more an internationalist Englishman than an English internationalist. Therefore it was not surprising that “Keynes’s advice,” in the words of his great contemporary Joseph Schumpeter, “was in the first instance always English advice, born of English problems.”41 These problems were mutating rapidly with global economic and political forces during the 1920s and ’30s. In the ’20s, memories were still fresh of Great Britain, the nineteenth century’s imperial creditor nation, in Keynes’s words “conduct[ing] the international orchestra,” whereas by the ’30s a grim acceptance had set in that Britain had a chronic payments deficit problem that could not be cured within the strictures of any idealist, “automatic” global system—particularly one whose terms would now be set by the United States.

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism by Kevin Phillips

"World Economic Forum" Davos, Alan Greenspan, algorithmic trading, asset-backed security, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, business cycle, buy and hold, collateralized debt obligation, computer age, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, diversification, Doha Development Round, energy security, financial deregulation, financial engineering, financial innovation, fixed income, Francis Fukuyama: the end of history, George Gilder, Glass-Steagall Act, housing crisis, Hyman Minsky, imperial preference, income inequality, index arbitrage, index fund, interest rate derivative, interest rate swap, Joseph Schumpeter, junk bonds, Kenneth Rogoff, large denomination, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, Menlo Park, Michael Milken, military-industrial complex, Minsky moment, mobile money, money market fund, Monroe Doctrine, moral hazard, mortgage debt, Myron Scholes, new economy, oil shale / tar sands, oil shock, old-boy network, peak oil, plutocrats, Ponzi scheme, profit maximization, prosperity theology / prosperity gospel / gospel of success, Renaissance Technologies, reserve currency, risk tolerance, risk/return, Robert Shiller, Ronald Reagan, Satyajit Das, Savings and loan crisis, shareholder value, short selling, sovereign wealth fund, stock buybacks, subprime mortgage crisis, The Chicago School, Thomas Malthus, too big to fail, trade route

Every boom, they say, comes from extraordinary credit expansion out of proportion to real economic growth. One Austrian School acolyte, Kurt Richebächer, had predicted just that unhappy fate for the U.S. housing bubble several years before his death during the summer of 2007. Hyman Minsky (1919-96), part Keynesian, part disciple of Joseph Schumpeter, became so well known for preaching the financial system’s vulnerability to speculation and risk that admirers labeled the August panic a “Minsky Moment.” Certainly the Austrian-Minsky fusion, so specific in its finger pointing, will rise or fall on the economic outcome of the next several years.

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FIGURE 2.3 The Evolution of Critical Derivatives, 1972-2005 Source: Chase Manhattan; 1993-2005 discussions from various sources. Back in 1977, Time had titled a lengthy essay on credit card issuers “Merchants of Debt” but had examined none of the bolder new financial products. Perhaps unknowingly, the magazine had adopted a phrase used in the 1930s by Joseph Schumpeter, an economist of the Austrian School, and then in the 1970s by Hyman Minsky. Both men argued that downturns evolved from financial and credit excesses. “Merchants of debt” was their epithet for banks and other financial entities that strove to market debt in as many (innovative) forms and to as many buyers as possible.

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Clearly, elements of marketplace globalization are in some retreat, not least in the United States. Over the last fifteen years, I have used the term “financial mercantilism” to describe a collaboration in which Washington and the U.S. financial sector seek to minimize certain unwanted marketplace forces. The purpose is to suppress what economist Joseph Schumpeter called “creative destruction”—for the United States, circa 2008, that would include the failure of a major financial institution or the deflation-cum-downward-revaluation of financial assets. My book Arrogant Capital (1994), following several notable bailouts, used this phraseology: “Financial mercantilism—government-business collaboration calculated to suspend or stymie market forces—has at least partly replaced yesteryear’s vibrant capitalism.”

The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality by Branko Milanovic

Berlin Wall, Branko Milanovic, colonial rule, crony capitalism, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, endogenous growth, Fall of the Berlin Wall, financial deregulation, full employment, Gini coefficient, high net worth, illegal immigration, income inequality, income per capita, Joseph Schumpeter, means of production, open borders, Pareto efficiency, plutocrats, purchasing power parity, Simon Kuznets, very high income, Vilfredo Pareto, Washington Consensus, zero-sum game

After stating boldly, “I am simply investigating the uniformity of the phenomena” and “not seeking to convince anyone,” he, perhaps uniquely in the history of social sciences, warded off potential readers by warning them that “those who have another objective will have no trouble finding an infinity of works which will give them complete satisfaction; they need not read this one.”6 The malaise, Aron explained, stems from Pareto’s attitude, which in essence says that everything professors teach is false. But the professors, Pareto argued, must persevere in this falsehood because that’s the only thing the populace would ever understand, since to teach the truth would be fatal to any social order. In Pareto’s jargon: social equilibrium requires belief in nonlogical sentiments.7 This is how Joseph Schumpeter in his monumental History of Economic Analysis described Pareto:He was a man of strong passions, passions of the kind that effectively preclude a man from seeing more than one side of a political issue, or for that matter, of a civilization. This disposition was reinforced rather than mitigated by his classic education that made the ancient world as familiar to him as were his own Italy and France—the rest of the world just [barely] existed for him.8 Pareto wrote two influential (text)books of economics and is today, in the economics profession, remembered essentially for two contributions: Pareto improvement (or Pareto optimum) and Pareto’s “law” of income distribution.

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I am grateful to Andrea Brandolini for the information on Pareto. 5 Raymond Aron, Main Currents in Sociological Thought (New York: Pelican, 1967), 2:176. 6 Vilfredo Pareto, Manual of Political Economy, translated by Ann S. Schwirr (New York: Augustus M. Kelley, 1971), 2. 7 “This is why Pareto will always remain apart among professors and sociologists. It is almost intolerable to the mind, at least to a teacher, to admit that truth in itself can be harmful” (Aron, Main Currents, 2:177). 8 Joseph Schumpeter, A History of Economic Analysis (1952; reprint, New York: Oxford University Press, 1980), 860. 9 The formula is a bit more complicated. Say that the “guillotine” is 1.45. If n people have incomes higher than y, then increasing the threshold to 1.1y would reduce the number of people with such high incomes to n/(1.1)1.45 = n/1.148. 10 Pareto, Manual of Political Economy, 312. 11 Pareto died in 1923, a year after Mussolini came to power in Italy.

Double Entry: How the Merchants of Venice Shaped the Modern World - and How Their Invention Could Make or Break the Planet by Jane Gleeson-White

Affordable Care Act / Obamacare, Alan Greenspan, Bernie Madoff, Black Swan, British Empire, business cycle, carbon footprint, corporate governance, credit crunch, double entry bookkeeping, full employment, Gordon Gekko, income inequality, invention of movable type, invention of writing, Islamic Golden Age, Johann Wolfgang von Goethe, Johannes Kepler, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Mahbub ul Haq, means of production, Naomi Klein, Nelson Mandela, Ponzi scheme, shareholder value, Silicon Valley, Simon Kuznets, source of truth, spice trade, spinning jenny, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, traveling salesman, upwardly mobile

Like Sombart, Weber argues that double entry is significant because it makes possible an abstract measure of income and expenses—and therefore enables the calculation of profit, the key component of capitalistic business practice. Weber also believed that the formal rationality of double entry made the world a cold and disenchanted place—and, ominously, predicted that double entry would continue its rule ‘perhaps until the last ton of fossilized coal is burnt’. The economist Joseph Schumpeter (1883–1950) also traces the development of capitalism back to double-entry bookkeeping. In Capitalism, Socialism and Democracy, published in 1942, Schumpeter says that capitalism adds a new edge to rationality by ‘exalting the monetary unit—not itself a creation of capitalism—into a unit of account.

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p. 169 ‘The most general presupposition . . .’ Weber in Carruthers and Espeland, op. cit., p. 32. p. 169 ‘a rational capitalistic establishment . . .’ Weber in Michael J. Fischer, ‘Luca Pacioli on business profits’, Journal of Business Ethics, vol. 25, no. 4, June 2000, pp. 299–312. p. 169 ‘exalting the monetary unit . . .’ Joseph Schumpeter, Capitalism, Socialism and Democracy, Taylor & Francis e-Library, 1942, p. 123. p. 170 ‘generates a formal spirit of critique . . .’ D. Stephen Long, Divine Economy, Routledge, London, 2000, p. 18. p. 171 ‘Perhaps it is sufficient to . . .’ Yamey, Art and Accounting, op. cit., p. 82.

Capital Ideas: The Improbable Origins of Modern Wall Street by Peter L. Bernstein

Albert Einstein, asset allocation, backtesting, Benoit Mandelbrot, Black Monday: stock market crash in 1987, Black-Scholes formula, Bonfire of the Vanities, Brownian motion, business cycle, buy and hold, buy low sell high, capital asset pricing model, corporate raider, debt deflation, diversified portfolio, Eugene Fama: efficient market hypothesis, financial innovation, financial intermediation, fixed income, full employment, Glass-Steagall Act, Great Leap Forward, guns versus butter model, implied volatility, index arbitrage, index fund, interest rate swap, invisible hand, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Arrow, law of one price, linear programming, Louis Bachelier, mandelbrot fractal, martingale, means of production, Michael Milken, money market fund, Myron Scholes, new economy, New Journalism, Paul Samuelson, Performance of Mutual Funds in the Period, profit maximization, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk free rate, risk/return, Robert Shiller, Robert Solow, Ronald Reagan, stochastic process, Thales and the olive presses, the market place, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, transfer pricing, zero-coupon bond, zero-sum game

That journal is now nearly sixty years old and commands wide respect among economists, statisticians, and mathematicians. The first issue of Econometrica, which appeared in January 1933, contained an introductory article by the famous Harvard economist and the first president of the Econometric Society, Joseph Schumpeter, as well as a timely paper by Irving Fisher titled “The Debt-Deflation Theory of Great Depressions.” The first fruit of Cowles’s own research into market forecasting, an article titled “Can Stock Market Forecasters Forecast?,” appeared in the July 1933 issue. A three-word abstract of the article concluded: “It is doubtful.”

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He set out to find an economist who could explain to his satisfaction what had caused the recent debacle in the nation’s economy, as Diogenes had set out with his lamp in search of one honest man. Williams got to know the greats of the Harvard economics faculty at the time—the quintessential Viennese Joseph Schumpeter, the plain midwestern American Alvin Hansen, and the irrepressible Wassily Leontief, newly arrived from the University of Kiel in Germany, to which he had fled after the Russian revolution. Much as Williams admired these figures, he confesses in his memoir that, like Diogenes, he never found the man he was seeking.

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Modigliani describes Burbank as “a famous anti-foreigner and anti-semite.”4 Samuelson is even harsher: “Burbank stood for everything in scholarly life for which I had utter contempt and abhorrence.”5 The interview did not go well. Burbank reviewed the list of all the famous people on the Harvard faculty, expressed his doubts that Modigliani could match their skills, and suggested that the young man go home.a Though he had decided that Harvard was clearly not for him, Modigliani did have lunch with Joseph Schumpeter and Gottfried Haberler while he was in Cambridge. Haberler was another senior and foreign-born member of the Harvard department. “They gave me hell,” Modigliani recalls, when he told them he had decided to return to the New School.6 They insisted that Burbank had overstepped his authority and had no business rejecting the choice of the economics faculty.

The Ascent of Money: A Financial History of the World by Niall Ferguson

Admiral Zheng, Alan Greenspan, An Inconvenient Truth, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Bear Stearns, Black Monday: stock market crash in 1987, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, business cycle, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, classic study, collateralized debt obligation, colonial exploitation, commoditize, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, deglobalization, diversification, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Glaeser, Edward Lloyd's coffeehouse, equity risk premium, financial engineering, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, Future Shock, German hyperinflation, Greenspan put, Herman Kahn, Hernando de Soto, high net worth, hindsight bias, Home mortgage interest deduction, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, iterative process, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", John Meriwether, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour mobility, Landlord’s Game, liberal capitalism, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, Naomi Klein, National Debt Clock, negative equity, Nelson Mandela, Nick Bostrom, Nick Leeson, Northern Rock, Parag Khanna, pension reform, price anchoring, price stability, principal–agent problem, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, quantitative hedge fund, RAND corporation, random walk, rent control, rent-seeking, reserve currency, Richard Thaler, risk free rate, Robert Shiller, rolling blackouts, Ronald Reagan, Savings and loan crisis, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, stocks for the long run, structural adjustment programs, subprime mortgage crisis, tail risk, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus, Thorstein Veblen, tontine, too big to fail, transaction costs, two and twenty, undersea cable, value at risk, W. E. B. Du Bois, Washington Consensus, Yom Kippur War

Evolutionary economics is in fact a well-established sub-discipline, which has had its own dedicated journal for the past sixteen years.21 Thorstein Veblen first posed the question ‘Why is Economics Not an Evolutionary Science?’ (implying that it really should be) as long ago as 1898.22 In a famous passage in his Capitalism, Socialism and Democracy, which could equally well apply to finance, Joseph Schumpeter characterized industrial capitalism as ‘an evolutionary process’: This evolutionary character . . . is not merely due to the fact that economic life goes on in a social and natural environment which changes and by its change alters the data of economic action; this fact is important and these changes (wars, revolutions and so on) often condition industrial change, but they are not its prime movers.

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Left to itself, natural selection should work fast to eliminate the weakest institutions in the market, which typically are gobbled up by the successful. But most crises also usher in new rules and regulations, as legislators and regulators rush to stabilize the financial system and to protect the consumer/voter. The critical point is that the possibility of extinction cannot and should not be removed by excessively precautionary rules. As Joseph Schumpeter wrote more than seventy years ago, ‘This economic system cannot do without the ultima ratio of the complete destruction of those existences which are irretrievably associated with the hopelessly unadapted.’ This meant, in his view, nothing less than the disappearance of ‘those firms which are unfit to live’.30 In writing this book, I have frequently been asked if I gave it the wrong title.

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.), Learning by Doing in Markets, Firms and Countries (Cambridge, MA, 1999), pp. 253-94. 27 The allusion is of course to Richard Dawkins, The Selfish Gene (2nd edn., Oxford, 1989). 28 Rudolf Hilferding, Finance Capital: A Study of the Latest Phase of Capitalist Development (London, 2006 [1919]). 29 ‘Fear and Loathing, and a Hint of Hope’, The Economist, 16 February 2008. 30 Joseph Schumpeter, The Theory of Economic Development (Cambridge, MA, 1934), p. 253. 31 Bertrand Benoit and James Wilson, ‘German President Complains of Financial Markets “Monster” ’, Financial Times, 15 May 2008. List of Illustrations Photographic acknowledgements are given in parentheses. Every effort has been made to contact all copyright holders.

Samuelson Friedman: The Battle Over the Free Market by Nicholas Wapshott

2021 United States Capitol attack, Alan Greenspan, bank run, basic income, battle of ideas, Bear Stearns, Berlin Wall, Bretton Woods, business cycle, California gold rush, collective bargaining, coronavirus, corporate governance, COVID-19, creative destruction, David Ricardo: comparative advantage, Donald Trump, double helix, en.wikipedia.org, fiat currency, financial engineering, fixed income, floating exchange rates, full employment, God and Mammon, greed is good, Gunnar Myrdal, income inequality, indoor plumbing, invisible hand, John von Neumann, Joseph Schumpeter, Kenneth Arrow, laissez-faire capitalism, light touch regulation, liquidity trap, lockdown, low interest rates, Machinery of Freedom by David Friedman, market bubble, market clearing, mass immigration, military-industrial complex, Money creation, money market fund, Mont Pelerin Society, moral hazard, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, paradox of thrift, Paul Samuelson, Philip Mirowski, Phillips curve, price mechanism, price stability, public intellectual, pushing on a string, quantitative easing, rent control, road to serfdom, Robert Bork, Robert Solow, Ronald Coase, Ronald Reagan, school vouchers, seminal paper, Simon Kuznets, social distancing, Tax Reform Act of 1986, The Chicago School, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, too big to fail, trickle-down economics, universal basic income, upwardly mobile, urban renewal, War on Poverty, We are all Keynesians now, Works Progress Administration, zero-sum game

“Without exception, my mentors in Chicago said to go to Columbia,” he recalled. “I was never one particularly to accept advice of my elders and betters. And kind of by miscalculation I picked Harvard.”27 At Harvard, Samuelson was taught by a group of exceptional German and Austrian intellectuals escaping the tyranny of Nazism, among them Wassily Leontief,28 Joseph Schumpeter,29 Gottfried Haberler,30 and Alvin Hansen,31 known as “the American Keynes” for his adept, early, and highly influential exposition of Keynes’s 1936 masterwork, The General Theory, to American economists. The terms of Samuelson’s fellowship meant he could not study for a PhD, so he holed up in the Harvard library writing a succession of groundbreaking papers on mathematical economics.

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The more distinguished Samuelson’s career became, the more valuable his cache of papers was to a research university. In November 2006, Samuelson asked the Harvard Archive about lodging his voluminous files of personal and academic papers with the university. He reminded Harvard that they held Joseph Schumpeter’s papers, but that the archives of Nobelists Franco Modigliani and Robert Solow were to be found at the impressive library facilities at Duke University, in Durham, North Carolina. “When one stays preoccupied with doing new research,” he wrote, “little time is left to plan optimally autobiographical and archival matters.

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Samuelson Facts. https://www.nobelprize.org/prizes/economic-sciences/1970/samuelson/facts/. 15.Quoted in Friedman and Friedman, Two Lucky People, pp. 444–45. 16.Letter from Samuelson to Friedman, November 5, 1970. Hoover Institution Friedman archive. 17.Letter from Friedman to Arthur R. Nayer, October 13, 1970. Hoover Institution Friedman archive. 18.Samuelson named Jacob Viner, Frank Knight, Paul Douglas, Joseph Schumpeter, Wassily Leontief, Gottfried Haberler, Alvin Hansen, Lloyd Metzler, Robert Solow, James Tobin, Lawrence Klein, Robert Mundell, Joseph Stiglitz, Bertil Ohlin, Gunnar Myrdal, Erik Lundberg, Ingvar Svennilson, Gustav Cassel, Erik Lindahl, and Knut Wicksell. 19.https://www.nobelprize.org/uploads/2018/06/samuelson-lecture.pdf. 20.Ibid. 21.Thorstein Bunde Veblen, born Torsten Bunde Veblen in Norway (July 30, 1857–August 3, 1929), economist and sociologist best known for his idea of “conspicuous consumption”: people engage in conspicuous consumption, along with “conspicuous leisure,” to demonstrate their wealth or to mark social status. 22.Samuelson, “A few remembrances of Friedrich von Hayek (1899–1992),” Journal of Economic Behavior & Organization, vol. 69, no. 1, January 2009, pp. 1–4. 23.Friedman and Friedman, Two Lucky People, p. 445. 24.Larry Martz, “A Nobel for Friedman,” Newsweek, October 25, 1974. 25.Friedman and Friedman, Two Lucky People, p. 442. 26.Ibid. 27.Newsweek, October 25, 1976. 28.Friedman letter to Samuelson, October 20, 1976.

Money and Government: The Past and Future of Economics by Robert Skidelsky

"Friedman doctrine" OR "shareholder theory", Alan Greenspan, anti-globalists, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, barriers to entry, Basel III, basic income, Bear Stearns, behavioural economics, Ben Bernanke: helicopter money, Big bang: deregulation of the City of London, book value, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, constrained optimization, Corn Laws, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Graeber, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, Donald Trump, Eugene Fama: efficient market hypothesis, eurozone crisis, fake news, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, forward guidance, Fractional reserve banking, full employment, Gini coefficient, Glass-Steagall Act, Goodhart's law, Growth in a Time of Debt, guns versus butter model, Hyman Minsky, income inequality, incomplete markets, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Rogoff, Kondratiev cycle, labour market flexibility, labour mobility, land bank, law of one price, liberal capitalism, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, long and variable lags, low interest rates, market clearing, market friction, Martin Wolf, means of production, Meghnad Desai, Mexican peso crisis / tequila crisis, mobile money, Modern Monetary Theory, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, new economy, Nick Leeson, North Sea oil, Northern Rock, nudge theory, offshore financial centre, oil shock, open economy, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, placebo effect, post-war consensus, price stability, profit maximization, proprietary trading, public intellectual, quantitative easing, random walk, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, rising living standards, risk/return, road to serfdom, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, shareholder value, short selling, Simon Kuznets, structural adjustment programs, technological determinism, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, tontine, too big to fail, trade liberalization, value at risk, Washington Consensus, yield curve, zero-sum game

Pure research has long been recognized as an independent intellectual pursuit; its hallmark, disinterestedness; its purpose, the search for truth. The pecuniary interest of scholars is not directly involved in either the direction of their enquiry or its results. At the same time, there is what Joseph Schumpeter called the ‘sociology of success’. Put crudely, why are some ideas acceptable, and others rejected or marginalized? In the natural sciences this question is relatively easy to answer: newer ideas bring us closer to reality than 11 I n t roduc t ion the older ones. For this reason, quantum physics replaced classical physics.

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But as long as the central bank had the means of regulating the rate of money creation by the commercial banks, the existence of credit money seemed to pose no danger to its ability to control prices. The heroic faith in the QTM as a short-run stabilization policy instrument, even though the QTM was palpably untrue in the shortrun, is explained by the urgency of its therapeutic ambitions. Even economists such as England’s Dennis Robertson and the Austrian Joseph Schumpeter, for whom the business cycle was caused by ‘real’ shocks like technical innovations, thought that intelligent monetary policy could prevent the rocking tendency from becoming too violent. But as Eprime Eshag wrote, the QTM was ‘somewhat wanting and to a large extent irrelevant as an instrument of analysis of shortrun unemployment and production problems which became the primary concern of the economists during and after the [Great Depression]’.26 A pp e n di x 3.1: F ish e r’s E quat ion Fisher built up his equation as follows:27 MV = ∑pQ On the left, we have M for the money supply and V for the velocity of circulation.

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Keynes’s alternative view was that it was the Fed’s misguided raising of its discount rate, from 3.5 per cent to 5 per cent in January 1928, which led to the collapse of a healthy investment boom. It turned him permanently against the use of ‘dear money’ as a boom-control mechanism.15 ‘Never waste a recession,’ Joseph Schumpeter is said to have said. On the Austrian analysis, recessions give a chance to re-allocate ‘malinvested’ productive factors to efficient uses. They should therefore be allowed to run unhindered until they have done their work. Economists whose common sense had not been completely destroyed by their theories rejected the drastic cure of destroying the existing economy in order to rebuild it in the correct proportions.

The Great Reset: How the Post-Crash Economy Will Change the Way We Live and Work by Richard Florida

"World Economic Forum" Davos, Alan Greenspan, banking crisis, big-box store, bike sharing, blue-collar work, business cycle, car-free, carbon footprint, collapse of Lehman Brothers, company town, congestion charging, congestion pricing, creative destruction, deskilling, edge city, Edward Glaeser, falling living standards, financial engineering, financial innovation, Ford paid five dollars a day, high net worth, high-speed rail, Home mortgage interest deduction, housing crisis, if you build it, they will come, income inequality, indoor plumbing, interchangeable parts, invention of the telephone, Jane Jacobs, Joseph Schumpeter, knowledge economy, Lewis Mumford, low skilled workers, manufacturing employment, McMansion, megaproject, Menlo Park, Nate Silver, New Economic Geography, new economy, New Urbanism, oil shock, Own Your Own Home, pattern recognition, peak oil, Ponzi scheme, post-industrial society, postindustrial economy, reserve currency, Richard Florida, Robert Shiller, scientific management, secular stagnation, Silicon Valley, Silicon Valley startup, social intelligence, sovereign wealth fund, starchitect, the built environment, The Wealth of Nations by Adam Smith, Thomas L Friedman, total factor productivity, urban decay, urban planning, urban renewal, white flight, young professional, Zipcar

Despite the massive deprivation and human suffering they caused, these crises played a fundamental role in propelling the economy forward. They were critical moments when existing economic and social arrangements were remade, enabling new periods of economic growth. Born in the same year that Marx died, the great theorist of innovation and entrepreneurship, Joseph Schumpeter, used the phrase “creative destruction” to describe how economic crises sweep away old firms and outmoded economic systems and practices, clearing the way for entrepreneurs to introduce new technologies and even entirely new industries and setting into motion a new era of growth. John Maynard Keynes saw in these crises the need for government spending to essentially protect capitalism from itself.

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It would never grow rapidly again, he believed, because all the ingredients for growth, including technological innovation and population growth, had been exhausted, and deficit spending by the government was the only way out. The Great Depression set the stage for the Second Great Reset. Just as Hansen and others were advancing this theory and capturing the attention of policy makers and the public, his Harvard colleague Joseph Schumpeter was developing his own, more accurate assessment of the role of innovation in overcoming economic crises. Schumpeter, notes Field, had a much “better fix on what was going on. He developed his homage to the power of creative destruction against the backdrop of what has turned out to be the most technologically dynamic epoch of the twentieth century.”4 Field’s contention about the innovativeness of the Second Reset is based on detailed and meticulous research.

Broken Markets: A User's Guide to the Post-Finance Economy by Kevin Mellyn

Alan Greenspan, banking crisis, banks create money, Basel III, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, bond market vigilante , Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, business cycle, buy and hold, call centre, Carmen Reinhart, central bank independence, centre right, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, compensation consultant, corporate governance, corporate raider, creative destruction, credit crunch, crony capitalism, currency manipulation / currency intervention, currency risk, disintermediation, eurozone crisis, fiat currency, financial innovation, financial repression, floating exchange rates, Fractional reserve banking, Glass-Steagall Act, global reserve currency, global supply chain, Home mortgage interest deduction, index fund, information asymmetry, joint-stock company, Joseph Schumpeter, junk bonds, labor-force participation, light touch regulation, liquidity trap, London Interbank Offered Rate, low interest rates, market bubble, market clearing, Martin Wolf, means of production, Michael Milken, mobile money, Money creation, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Nixon triggered the end of the Bretton Woods system, Paul Volcker talking about ATMs, Ponzi scheme, profit motive, proprietary trading, prudent man rule, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, rising living standards, Ronald Coase, Savings and loan crisis, seigniorage, shareholder value, Silicon Valley, SoftBank, Solyndra, statistical model, Steve Jobs, The Great Moderation, the payments system, Tobin tax, too big to fail, transaction costs, underbanked, Works Progress Administration, yield curve, Yogi Berra, zero-sum game

The markets and the largest investment-banking operations increasingly came to believe that the authorities would step in to prevent any reckoning for financial bets gone wrong. In this sense, the Great Moderation was at least as much a product of governments as it was of markets, something that pains the heart of free-market fundamentalists. The problem is that in a free market, everyone is free to fail. Indeed, something that Joseph Schumpeter called “creative destruction” is essential to economic progress.The Great Moderation was largely a one-way bet for market participants. Financial crises of one sort or another, which affected companies ranging from Japanese and Swedish banks to Long Term Capital, an American hedge fund, continued to occur.

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Price signals, while imperfect, communicate information relevant to investors and entrepreneurs, who essentially make bets on the future. Profits arise when change occurs in the market and someone seizes the opportunity before others. It is all a big experiment, but millions of autonomous decisions by buyers, sellers, and entrepreneurs sort out what works and what doesn’t, and the economy advances. Another great Austrian, Joseph Schumpeter, called this process “creative destruction,” in which enterprises are constantly dying and being born. The tidy minds of educated elites have always rebelled at this wasteful process. Surely science and analysis, supported by ever-better models and data, can do better than the random judgment of the financial markets.

The Global Auction: The Broken Promises of Education, Jobs, and Incomes by Phillip Brown, Hugh Lauder, David Ashton

active measures, affirmative action, An Inconvenient Truth, barriers to entry, Branko Milanovic, BRICs, business process, business process outsourcing, call centre, classic study, collective bargaining, corporate governance, creative destruction, credit crunch, David Ricardo: comparative advantage, deindustrialization, deskilling, disruptive innovation, Dutch auction, Ford Model T, Frederick Winslow Taylor, full employment, future of work, glass ceiling, global supply chain, Great Leap Forward, immigration reform, income inequality, industrial cluster, industrial robot, intangible asset, job automation, Jon Ronson, Joseph Schumpeter, knowledge economy, knowledge worker, low skilled workers, manufacturing employment, market bubble, market design, meritocracy, neoliberal agenda, new economy, Paul Samuelson, pensions crisis, post-industrial society, profit maximization, purchasing power parity, QWERTY keyboard, race to the bottom, Richard Florida, Ronald Reagan, shared worldview, shareholder value, Silicon Valley, sovereign wealth fund, stem cell, tacit knowledge, tech worker, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, transaction costs, trickle-down economics, vertical integration, winner-take-all economy, working poor, zero-sum game

Trump cards held by workers in the competition for high-value work have been reshuffled as they have been throughout the history of capitalism. Governments have a political duty to privilege their citizens, but capitalism has no such loyalty. Where it is given room to breathe, it tirelessly accumulates capital in whatever ways it can with scant regard for existing arrangements. Joseph Schumpeter highlighted a relentless capitalism, which “is by nature a form or method of economic change.”1 If alive today, even Schumpeter may have been surprised by the scale of “perpetual commotion” in the economy in recent decades. He would also have been reminded of Karl Marx and Friedrich Engels’s words that under capitalism “all that is solid melts into air, all that is holy is profane, and man is at last compelled to face with sober senses, his real conditions of life, and his relations with his kind.”2 The real condition confronting many well-qualified Americans is an economy of knowledge caught in two minds.

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So we will continue in the hope that Americans, along with other developed and emerging nations, will ultimately rise to the national as well as global challenges that will shape the quality of life for the next generation. 164 The Global Auction Notes Chapter One 1. Alexis de Tocqueville, Democracy in America, vol. 2 (New York: Harper and Row, 1966 [1835]). 2. See Richard Rosecrance, The Rise of the Virtual State: Wealth and Power in the Coming Century (New York; Basic Books, 1999), xi. 3. Joseph Schumpeter, Capitalism, Socialism and Democracy (New York: Harper, 1947), chap. 7. 4. Ed Michaels, Helen Handfield-Jones, and Beth Axelrod, The War for Talent (Boston, Mass.: Harvard Business School Press, 2001). 5. Here “low wages” is a relative concept relating to the expectations of the rewards and career prospects associated with professional and managerial occupations.

Good Profit: How Creating Value for Others Built One of the World's Most Successful Companies by Charles de Ganahl Koch

Abraham Maslow, Albert Einstein, big-box store, book value, British Empire, business process, commoditize, creative destruction, disruptive innovation, do well by doing good, Garrett Hardin, global supply chain, hiring and firing, income per capita, Internet of things, invisible hand, Isaac Newton, Joseph Schumpeter, low interest rates, oil shale / tar sands, personalized medicine, principal–agent problem, proprietary trading, Ralph Waldo Emerson, risk tolerance, Salesforce, Solyndra, tacit knowledge, The Wealth of Nations by Adam Smith, Tragedy of the Commons, transaction costs, transfer pricing

To make matters even worse, Hinkel’s had to pay transaction fees to banks on those card purchases (often as high as 5 percent), so its net gain from charge cards turned into a net loss. That pretty much finished off Hinkel’s and countless family-owned department stores like it, long before the Internet threatened brick-and-mortar retailers with creative destruction. Successful businesspeople stand on ground that is “crumbling beneath their feet,”2 said Joseph Schumpeter, who taught at Harvard in the 1930s and ’40s and is one of the most important economists of the twentieth century. His observation about the tenuousness of success is a tough fact every established business faces. At Koch, we’ve known for a long time that there is no getting around this reality.

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Chapter 2: KOCH AFTER FRED 1. F. A. Harper, Why Wages Rise (New York: The Foundation for Economic Education, 1957), p. 36. Chapter 3: QUEENS, FACTORY GIRLS, AND SCHUMPETER 1. Joseph A. Schumpeter, Capitalism, Socialism, and Democracy (New York: Harper Perennial, 2008), p. 67. 2. Cited in “Joseph Schumpeter: In Praise of Entrepreneurs,” Books and Arts section, The Economist, April 28, 2007, p. 94. 3. Schumpeter, Capitalism, Socialism, and Democracy, p. 84. 4. Ibid., p. 83. 5. Letter from Fred Koch to Dr. Walter F. Rittman. 6. http://www.freetheworld.com​/2014/EFW2014-POST.pdf. 7. Based on data available through the year 2012.

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

"Friedman doctrine" OR "shareholder theory", Abraham Wald, activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, Andrei Shleifer, AOL-Time Warner, asset allocation, asset-backed security, bank run, beat the dealer, behavioural economics, Benoit Mandelbrot, Big Tech, Black Monday: stock market crash in 1987, Black-Scholes formula, book value, Bretton Woods, Brownian motion, business cycle, buy and hold, capital asset pricing model, card file, Carl Icahn, Cass Sunstein, collateralized debt obligation, compensation consultant, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, democratizing finance, Dennis Tito, discovery of the americas, diversification, diversified portfolio, Dr. Strangelove, Edward Glaeser, Edward Thorp, endowment effect, equity risk premium, Eugene Fama: efficient market hypothesis, experimental economics, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, George Akerlof, Glass-Steagall Act, Henri Poincaré, Hyman Minsky, implied volatility, impulse control, index arbitrage, index card, index fund, information asymmetry, invisible hand, Isaac Newton, John Bogle, John Meriwether, John Nash: game theory, John von Neumann, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Arrow, libertarian paternalism, linear programming, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, market bubble, market design, Michael Milken, Myron Scholes, New Journalism, Nikolai Kondratiev, Paul Lévy, Paul Samuelson, pension reform, performance metric, Ponzi scheme, power law, prediction markets, proprietary trading, prudent man rule, pushing on a string, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, road to serfdom, Robert Bork, Robert Shiller, rolodex, Ronald Reagan, seminal paper, shareholder value, Sharpe ratio, short selling, side project, Silicon Valley, Skinner box, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, statistical model, stocks for the long run, tech worker, The Chicago School, The Myth of the Rational Market, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, Thorstein Veblen, Tobin tax, transaction costs, tulip mania, Two Sigma, Tyler Cowen, value at risk, Vanguard fund, Vilfredo Pareto, volatility smile, Yogi Berra

In 1930 he had published The Theory of Interest, a polishing and rethinking of his earlier writings on financial economics that today is seen as his most important contribution to the field.23 And the mathematical approach he favored had finally begun to gain traction, especially in Europe. The wealth of 1920s America lured European scholars across the Atlantic. One of them, Norwegian future Nobelist Ragnar Frisch, persuaded Fisher to join him in launching an association of mathematically minded economists. Harvard’s Joseph Schumpeter, an Austrian-educated scholar who didn’t do much math himself but admired those who did, signed on as a cofounder. They dubbed their new group the Econometric Society, and began to hold occasional small meetings where papers were presented. They didn’t have the money to do much more. A letter arrived in Fisher’s mailbox from Cowles.

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Williams’s Theory was more congenial in its approach. Williams had been a junior investment banker in Boston when the great crash came. He stayed on at his firm until 1932, and then enrolled in Harvard’s economics Ph.D. program in hopes that he would learn to “understand the workings of the economy as a whole.” His faculty adviser Joseph Schumpeter was worried that Williams’s conservative political beliefs might rub others on the dissertation committee the wrong way and urged him to focus on a subject that no one would dare challenge him on.14 The result was The Theory of Investment Value. “Rational men, when they buy stocks and bonds, would never pay more than the present worth of the expected future dividends,” Williams wrote, “…nor could they pay less, assuming perfect competition, with all traders equally well informed.”15 The book was thus a guide to valuing stocks on the basis of projected future dividends, much as Irving Fisher had outlined back in 1906.

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The full text of Theory of Interest is available online at the Library of Economics and Liberty, www.econlib.org. 24. According to various Cowles Commission reports, attendees at the summer conferences, which ran from 1935 through 1940, included economists Ragnar Frisch, Trygve Haavelmo, Nicholas Kaldor, Oskar Lange, Wassily Leontief, Abba Lerner, Paul Samuelson, and Joseph Schumpeter; statistician-geneticist R. A. Fischer; statistical quality control pioneer Walter Shewhart; statisticians Corrado Gini (of “Gini coefficient” fame), Harold Hotelling, and Jacob Wolfowitz (who fathered a famous son named Paul); and mathematicians Karl Menger and Abraham Wald. 25. Alfred Cowles III, “Can Stock Market Forecasters Forecast?”

Race Against the Machine: How the Digital Revolution Is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy by Erik Brynjolfsson

Abraham Maslow, Amazon Mechanical Turk, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, business cycle, business process, call centre, combinatorial explosion, corporate governance, creative destruction, crowdsourcing, David Ricardo: comparative advantage, driverless car, easy for humans, difficult for computers, Erik Brynjolfsson, factory automation, first square of the chessboard, first square of the chessboard / second half of the chessboard, Frank Levy and Richard Murnane: The New Division of Labor, general purpose technology, hiring and firing, income inequality, intangible asset, job automation, John Markoff, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Khan Academy, Kickstarter, knowledge worker, Loebner Prize, low skilled workers, machine translation, minimum wage unemployment, patent troll, pattern recognition, Paul Samuelson, Ray Kurzweil, rising living standards, Robert Gordon, Robert Solow, self-driving car, shareholder value, Skype, the long tail, too big to fail, Turing test, Tyler Cowen, Tyler Cowen: Great Stagnation, Watson beat the top human players on Jeopardy!, wealth creators, winner-take-all economy, zero-sum game

Making progress in these two areas will be the best way to allow human workers and institutions to race with machines, not against them. Fostering Organizational Innovation How can we implement a “race with machines” strategy? The solution is organizational innovation: co-inventing new organizational structures, processes, and business models that leverage ever-advancing technology and human skills. Joseph Schumpeter, the economist, described this as a process of “creative destruction” and gave entrepreneurs the central role in the development and propagation of the necessary innovations. Entrepreneurs reap rich rewards because what they do, when they do it well, is both incredibly valuable and far too rare.

How Capitalism Saved America: The Untold History of Our Country, From the Pilgrims to the Present by Thomas J. Dilorenzo

air traffic controllers' union, Alan Greenspan, banking crisis, British Empire, business cycle, California energy crisis, collective bargaining, Cornelius Vanderbilt, corporate governance, corporate social responsibility, electricity market, financial deregulation, Fractional reserve banking, Hernando de Soto, Ida Tarbell, income inequality, invisible hand, Joseph Schumpeter, laissez-faire capitalism, McDonald's hot coffee lawsuit, means of production, medical malpractice, Menlo Park, minimum wage unemployment, Money creation, Norman Mailer, plutocrats, price stability, profit maximization, profit motive, Ralph Nader, rent control, rent-seeking, Robert Bork, rolling blackouts, Ronald Coase, Ronald Reagan, scientific management, Silicon Valley, statistical model, Tax Reform Act of 1986, The Wealth of Nations by Adam Smith, transcontinental railway, union organizing, Upton Sinclair, vertical integration, W. E. B. Du Bois, wealth creators, working poor, Works Progress Administration, zero-sum game

The result is that the average American working person today lives better in many ways than kings did several hundred years ago, with his automobiles, central heating and air conditioning, swimming pools and hot tubs, inexpensive food, and all the other “necessities” of modern life that those kings would have considered miracles. All of this is the product of capitalism. The economist Joseph Schumpeter summed up how capitalism benefits the masses: The capitalist engine is first and last an engine of mass production which unavoidably also means production for the masses. . . . It is the cheap cloth, the cheap cotton and rayon fabric, boots, motorcars and so on that are the typical achievements of capitalist production, and not as a rule improvements that would mean much to the rich man.

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Neela Banerjee and David Firestone, “New Kind of Electricity Market Strains Old Wires Beyond Limits,” New York Times, August 24, 2003, 1. CHAPTER ONE: WHAT IS CAPITALISM? 1. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (New York: Random House, 1937), 422. 2. Ludwig von Mises, Liberalism: In the Classical Tradition (San Francisco: Cobden Press, 1985), 32. 3. Joseph Schumpeter, Capitalism, Socialism, and Democracy, 3rd ed. (New York: Harper and Row, 1962), 62. 4. Ludwig von Mises, Human Action: A Treatise on Economics (Auburn, AL: Ludwig von Mises Institute, 1998), 270. 5. Ibid., 272. 6. For the classic refutation of socialism as an economic system see Ludwig von Mises, Socialism (Indianapolis: LibertyClassics, 1981), first published in 1922.

A Little History of Economics by Niall Kishtainy

Alvin Roth, behavioural economics, British Empire, Capital in the Twenty-First Century by Thomas Piketty, car-free, carbon tax, central bank independence, clean water, Corn Laws, Cornelius Vanderbilt, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Dr. Strangelove, Eugene Fama: efficient market hypothesis, first-price auction, floating exchange rates, follow your passion, full employment, George Akerlof, Great Leap Forward, greed is good, Hyman Minsky, inflation targeting, invisible hand, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Arrow, loss aversion, low interest rates, market clearing, market design, means of production, Minsky moment, moral hazard, Nash equilibrium, new economy, Occupy movement, Pareto efficiency, Paul Samuelson, Phillips curve, prisoner's dilemma, RAND corporation, rent-seeking, Richard Thaler, rising living standards, road to serfdom, Robert Shiller, Robert Solow, Ronald Reagan, sealed-bid auction, second-price auction, The Chicago School, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade route, Vickrey auction, Vilfredo Pareto, washing machines reduced drudgery, wealth creators, Winter of Discontent

The gist of it was that because the economy couldn’t right itself, the government had to. It had to take on a larger role in the economy than ever before, in the hope that a disaster like the Great Depression would never happen again. Capitalism survived the storm, but it was changed forever. CHAPTER 19 Creative Destruction The Austrian economist Joseph Schumpeter (1883–1950) loved to show off his brilliant intellect and keen wit. He once said that he had three ambitions: to be the greatest economist in the world, the finest horseman in Austria and the best lover in Vienna. He regretted, he said, that he’d only succeeded in two of them, adding that, unfortunately, things hadn’t been going so well with the horses lately.

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The French economist Thomas Piketty (b. 1971) published a book in 2014, Capital in the Twenty-First Century, which examined the rise of the rich and confirmed fears about how fast they were pulling ahead of everybody else. How did the giants get so huge? Karl Marx said that they’re the capitalists who exploit the workers to make money; Joseph Schumpeter, that they’re bold people who take risks and get rich when they get lucky. Conventional economics has a less colourful story. The question is what determines wages, most people’s source of income. Economics says that workers are paid what they contribute to production. Educated people have skills that make them more productive, so they earn more.

How Much Is Enough?: Money and the Good Life by Robert Skidelsky, Edward Skidelsky

banking crisis, basic income, Bertrand Russell: In Praise of Idleness, Bonfire of the Vanities, call centre, carbon credits, creative destruction, critique of consumerism, David Ricardo: comparative advantage, death of newspapers, Dr. Strangelove, financial innovation, Francis Fukuyama: the end of history, full employment, Great Leap Forward, guns versus butter model, happiness index / gross national happiness, Herbert Marcuse, income inequality, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, market clearing, market fundamentalism, Meghnad Desai, Paul Samuelson, Philippa Foot, planned obsolescence, precautionary principle, profit motive, purchasing power parity, Ralph Waldo Emerson, retail therapy, Robert Solow, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, union organizing, University of East Anglia, Veblen good, wage slave, wealth creators, World Values Survey, zero-sum game

Aristotle is the classic source of pre-modern economic thought, for two reasons. First, unlike his more radical predecessor Plato, he did not try to conjure a social ideal out of pure reason. His goal was simply to organize the opinions of his educated contemporaries, to forge them into a system. Joseph Schumpeter’s description of his economic writings as “decorous, pedestrian, slightly mediocre, and more than slightly pompous common sense” is a caricature, but not a complete distortion.1 Second, and related to this, Aristotle was the dominant influence on all economic theorizing from the twelfth to the seventeenth century.

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Herbert Marcuse, One-Dimensional Man: Studies in the Ideology of Advanced Industrial Society, ed. Douglas Kellner (Boston: Beacon Press, 1991), pp. xlii, xxx. 52. Ibid., p. 246. 53. Herbert Marcuse, Eros and Civilization (New York: Random House, 1961), p. 48. 54. Ibid., p. 260. CHAPTER 3. THE USES OF WEALTH 1. Joseph Schumpeter, History of Economic Analysis (New York: Oxford University Press, 1954), p. 57. 2. Aristotle, Nicomachean Ethics, tr. Christopher Rowe and Sarah Broadie (Oxford: Oxford University Press, 2002), p. 251. In Aristotle’s other major ethical work, the Eudemian Ethics, he is more even-handed between the active and the philosophical life. 3.

Stuffocation by James Wallman

3D printing, Abraham Maslow, Adam Curtis, Airbnb, Alvin Toffler, back-to-the-land, Berlin Wall, big-box store, Black Swan, BRICs, carbon footprint, Cass Sunstein, clean water, collaborative consumption, commoditize, creative destruction, crowdsourcing, David Brooks, Fall of the Berlin Wall, Future Shock, Great Leap Forward, happiness index / gross national happiness, hedonic treadmill, high net worth, income inequality, Intergovernmental Panel on Climate Change (IPCC), James Hargreaves, Joseph Schumpeter, Kitchen Debate, Martin Wolf, mass immigration, McMansion, means of production, Nate Silver, Occupy movement, Paul Samuelson, planned obsolescence, post-industrial society, post-materialism, public intellectual, retail therapy, Richard Florida, Richard Thaler, sharing economy, Silicon Valley, Simon Kuznets, Skype, spinning jenny, Streisand effect, The future is already here, The Signal and the Noise by Nate Silver, The Theory of the Leisure Class by Thorstein Veblen, Thorstein Veblen, Tyler Cowen, Tyler Cowen: Great Stagnation, World Values Survey, Zipcar

Once you had noticed this happening with the process of producing yarn, you would also see that it was a natural part of the progress of other industries. Once someone discovered that making railroads with steel was better than iron, for instance, the iron tracks were obsolete. Actually, while you were about it, this theory did not just sound like a number of industries, it sounded a lot like capitalism. The Austrian American economist Joseph Schumpeter noticed this. “The same process of industrial mutation – if I may use that biological term,” Schumpeter wrote, “incessantly revolutionises the economic structure from within, incessantly destroys the old, incessantly creating a new one. This process of Creative Destruction is the essential fact about Capitalism.”

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“The same process of industrial mutation – if I may use that biological term,” Schumpeter wrote, “incessantly revolutionises the economic structure from within, incessantly destroys the old, incessantly creating a new one. This process of Creative Destruction is the essential fact about Capitalism.” From Joseph Schumpeter, Capitalism, Socialism and Democracy (New York: Harper, 1942). Christine Frederick For more on Christine Frederick, read Christine McGaffey Frederick, Selling Mrs. Consumer (New York: Business Borse, 1929); also Janice Rutherford, Selling Mrs. Consumer: Christine Frederick and the Rise of Household Efficiency (Athens, Georgia: University of Georgia Press, 2003).

The Politics Industry: How Political Innovation Can Break Partisan Gridlock and Save Our Democracy by Katherine M. Gehl, Michael E. Porter

Affordable Care Act / Obamacare, barriers to entry, business cycle, capital controls, carbon footprint, collective bargaining, coronavirus, COVID-19, David Brooks, deindustrialization, disintermediation, Donald Trump, first-past-the-post, future of work, guest worker program, hiring and firing, Ida Tarbell, illegal immigration, immigration reform, Joseph Schumpeter, Kickstarter, labor-force participation, Menlo Park, military-industrial complex, Multics, new economy, obamacare, pension reform, Ronald Reagan, Silicon Valley, stem cell, Steve Jobs, Upton Sinclair, zero-sum game

: A Second Look (Chicago: University of Chicago Press, 2011); Frances McCall Rosenbluth and Ian Shapiro, Responsible Parties: Saving Democracy from Itself (New Haven: Yale University Press, 2018). 4. The early twentieth-century economist Joseph Schumpeter is often credited with first recognizing this analogy, relating parties to firms, voters to customers, votes to currency, and policies to products. See Joseph Schumpeter, Capitalism, Socialism, and Democracy (New York, Harper and Brothers, 1942). For good recent summaries, see Ian Shapiro, The State of Democratic Theory (Princeton, Princeton University Press, 2003), 50–77; Jeffrey Edward Green, The Eyes of the People: Democracy in an Age of Spectatorship (New York; Oxford: Oxford University Press, 2010), 171–177. 5.

Consumed: How Markets Corrupt Children, Infantilize Adults, and Swallow Citizens Whole by Benjamin R. Barber

"World Economic Forum" Davos, Abraham Maslow, addicted to oil, AltaVista, American ideology, An Inconvenient Truth, AOL-Time Warner, Berlin Wall, Bertrand Russell: In Praise of Idleness, Bill Gates: Altair 8800, bread and circuses, business cycle, Celebration, Florida, collective bargaining, creative destruction, David Brooks, delayed gratification, digital divide, do well by doing good, Donald Trump, double entry bookkeeping, Dr. Strangelove, G4S, game design, George Gilder, Gordon Gekko, greed is good, Herbert Marcuse, Hernando de Soto, illegal immigration, informal economy, invisible hand, John Perry Barlow, Joseph Schumpeter, laissez-faire capitalism, late capitalism, liberal capitalism, Marc Andreessen, McJob, microcredit, Naomi Klein, new economy, New Journalism, Norbert Wiener, nuclear winter, Panopticon Jeremy Bentham, Paradox of Choice, pattern recognition, presumed consent, profit motive, race to the bottom, Ralph Nader, retail therapy, road to serfdom, Robert Bork, Ronald Reagan, Saturday Night Live, Silicon Valley, SimCity, spice trade, Steve Jobs, telemarketer, The Fortune at the Bottom of the Pyramid, the market place, The Wisdom of Crowds, Thomas L Friedman, Thorstein Veblen, trade route, Tyler Cowen, vertical integration, Virgin Galactic, X Prize

As Neal Gabler argues in his ongoing examination of Walt Disney’s world, when Steve Jobs (the key figure at Apple Computer and then Pixar Animation Studios) came to Disney in the Disney/Pixar merger, he brought along a democratic “bravado and disdain for traditional business practices.”27 This bravado is typical of many who work the web, whether as bloggers, program developers or, like Joe Trippi, Howard Dean’s campaign manager and web enthusiast, as new digital politicos. After all, the architecture of the web is horizontal, and many of its other features lend themselves both to leveling and resistance against authority. Can it be then that the new technologies are proof of the force Joseph Schumpeter called creative destruction: the capacity of capitalism to cure is own maladies through tumultuous developments it has itself produced? Perhaps. Yet it is important to recognize that democratic and felicitously anarchic as their architecture may be, new electronic technologies (like all technologies) ultimately tend to reflect the cultures that generate them.

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Also see Ulf Hannerz, Cultural Complexity: Studies in the Social Organization of Meaning (New York: Columbia University Press, 1992). 10. Tyler Cowen, Creative Destruction: How Globalization Is Changing the World’s Cultures (Princeton, N.J.: Princeton University Press, 2002), p. 22. Cowen’s title is drawn from classical economist Joseph Schumpeter’s description of the dialectic in which capitalism “creatively” destroys the stages it traverses as it evolves. For a detailed critique of Cowen, see my review “Brave New McWorld,” Los Angeles Times Book Review, February 2, 2003. 11. Cowen, Creative Destruction, p. 44. 12. Constance Classen, “Sugar Cane, Coca-Cola and Hypermarkets: Consumption and Surrealism in the Argentine Northwest,” in Howes, ed., Cross-Cultural Consumption, p. 39.

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Gabler’s Walt Disney: The Triumph of the American Imagination (New York: Knopf, 2006) makes a case along the lines of Thomas Frank’s argument introduced above treating certain archetypical business figures in the 1960s advertising industry as innovators and rebels against traditional business culture. Capitalism here seems to work at curing itself of its maladies through that creative destruction about which Joseph Schumpeter writes. 28. In the case of Howard Dean’s campaign, however, it did attempt to explore and exploit citizen-to-citizen communication in which elites and leaders were less central than civic community-building. This turned out, in political terms, to be something other than a virtue, as Dean found out in the Iowa caucuses.

Multitude: War and Democracy in the Age of Empire by Michael Hardt, Antonio Negri

"World Economic Forum" Davos, affirmative action, air traffic controllers' union, Berlin Wall, Bretton Woods, British Empire, business cycle, classic study, conceptual framework, continuation of politics by other means, David Graeber, Defenestration of Prague, deskilling, disinformation, emotional labour, Fall of the Berlin Wall, feminist movement, Francis Fukuyama: the end of history, friendly fire, global village, Great Leap Forward, Howard Rheingold, Howard Zinn, illegal immigration, Joseph Schumpeter, land reform, land tenure, late capitalism, liberation theology, means of production, military-industrial complex, Naomi Klein, new economy, Paul Samuelson, Pier Paolo Pasolini, post-Fordism, post-work, private military company, race to the bottom, RAND corporation, reserve currency, Richard Stallman, Slavoj Žižek, the Cathedral and the Bazaar, The Chicago School, The Structural Transformation of the Public Sphere, Thomas Malthus, Thorstein Veblen, Tobin tax, transaction costs, union organizing, War on Poverty, Washington Consensus

In effect, when scholars use the term anarchy to characterize such periods they usually refer not to an absence of power but merely to institutional chaos, excesses or defects of the production of norms, or conflicts among powers—and all of this was certainly present in England’s seventeenth-century interregnum as it is in today’s era of globalization. As Joseph Schumpeter says, just when it seems that the field is clear and empty, there are really already the seeds of “a tropical growth of new legal structures.”76 Our contemporary interregnum, in which the modern national paradigm of political bodies is passing toward a new global form, is also populated by an abundance of new structures of power.

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For the “republican” line, see the various publications that refer to “global civil society,” such as Mary Kaldor, Global Civil Society: An Answer to War (Cambridge: Polity, 2003); and the annual journal Global Civil Society, which began publication in 2001. 75 On the limitations of the “domestic analogy,” which attempts to link political forms on the global scene with those in the national framework, see Empire, 3-21. 76 Joseph Schumpeter, Capitalism, Socialism, and Democracy (New York: Harper and Brothers, 1942), 141. 77 See Saskia Sassen, “The State and Globalization,” in Rodney Hall and Thomas Biersteker, eds., The Emergence of Private Authority in Global Governance (Cambridge: Cambridge University Press, 2002), 91-112. See also our Empire. 78 For a good summary of the theories of uneven development and unequal exchange, see B.

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To the extent that Leo Strauss is an intellectual point of reference for these neoconservatives, one might have suspected such a development after having read Strauss’s book on Spinoza, in which he gives a nihilistic interpretation of the ontology, a skeptical reading of ethics, and a cold reception of prophetic Judaism. It is an interpretation remarkably close to Schmitt’s reading of Hobbes. 118 See Joseph Schumpeter, Business Cycles (New York: McGraw-Hill, 1939). For Schumpeter’s theory of crisis, see also “The Analysis of Economic Change,” Review of Economic Statistics 17, (May 1935): 2-10; and “Theoretical Problems of Economic Growth,” Journal of Economic History 7 (November 1947): 1-9. 119 See Antonio Damasio, Looking for Spinoza: Joy, Sorrow, and the Feeling Brain (New York: Harcourt, 2003). 120 Eric Raymond, The Cathedral and the Bazaar (Sebastopol, CA: O’Reilly, 1999).

Animal Spirits by Jackson Lears

1960s counterculture, Alan Greenspan, bank run, banking crisis, behavioural economics, business cycle, buy and hold, California gold rush, clockwork universe, conceptual framework, Cornelius Vanderbilt, creative destruction, cuban missile crisis, dark matter, Doomsday Clock, double entry bookkeeping, epigenetics, escalation ladder, feminist movement, financial innovation, Frederick Winslow Taylor, George Akerlof, George Santayana, heat death of the universe, Herbert Marcuse, Herman Kahn, Ida Tarbell, invisible hand, Isaac Newton, joint-stock company, Joseph Schumpeter, Lewis Mumford, lifelogging, market bubble, market fundamentalism, Mikhail Gorbachev, moral hazard, Norman Mailer, plutocrats, prosperity theology / prosperity gospel / gospel of success, Ralph Waldo Emerson, RAND corporation, Robert Shiller, Ronald Reagan, scientific management, Scientific racism, short selling, Shoshana Zuboff, Silicon Valley, source of truth, South Sea Bubble, Stanislav Petrov, Steven Pinker, Stewart Brand, Strategic Defense Initiative, surveillance capitalism, the market place, the scientific method, The Soul of a New Machine, The Wealth of Nations by Adam Smith, transcontinental railway, W. E. B. Du Bois, Whole Earth Catalog, zero-sum game

We can but praise the high courage of the road breakers, admitting as we infallibly must in Gertrude Stein’s own words, and with true Bergsonian faith—‘Something is certainly coming out of them.’” The “Bergsonian faith” reflected the characteristic progressive belief that breakage and difficulty are mere products of the transition to Something Better. Technophiles and plutocrats would one day appropriate this strategy for their own purposes, and the economist Joseph Schumpeter would summarize it in his own influential phrase, “creative destruction.” Meanwhile Luhan summed up the Armory Show with characteristic self-dramatization, striking a revolutionary pose that was sharply at odds with her motto “Let it happen”: I felt as though the exhibition were mine. I really did.

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Not to mention a tolerance for radical uncertainty, from the outset. It all sounds a little like an expedition to the South Pole. Such were the possibilities of enterprise animated by animal spirits. Keynes’s discussion of animal spirits and long-term investment reveals him to be far more philosophically and psychologically interesting than Joseph Schumpeter, the economist who in recent years has been credited with displacing him as the presiding spirit of our entrepreneurial age. Schumpeter’s ideal entrepreneur turns out to be little more than a capitalist embodiment of conventional male will, spearheading the relentless forward march of technological innovation, leaving a trail of “creative destruction” in his wake.

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“Many roads are being broken”: Dodge to Stein, quoting Art and Decoration, March 1913, in ibid., 273. “the sound of breaking”: Virginia Woolf, “Mrs. Bennett and Mrs. Brown” [1926], in her The Captain’s Deathbed and Other Essays (1956), 115–17. “And out of the shattering”: Dodge to Stein, in A History, 273. “creative destruction”: Joseph Schumpeter, Capitalism, Socialism, and Democracy [1942] (third ed., 1950), 81. “I felt as though”: Luhan, Intimate Memories, 112. “Imagine suddenly”: Ibid., 134. “He is the most natural”: John Reed, “With Villa in Mexico,” Metropolitan 39 (Feb. 1914) 72. “Darktown Follies drew space”: James Weldon Johnson, Black Manhattan (1930), 192.

Milton Friedman: A Biography by Lanny Ebenstein

Abraham Wald, affirmative action, Alan Greenspan, banking crisis, Berlin Wall, Bretton Woods, business cycle, classic study, Deng Xiaoping, Fall of the Berlin Wall, fiat currency, floating exchange rates, Francis Fukuyama: the end of history, full employment, Hernando de Soto, hiring and firing, inflation targeting, invisible hand, Joseph Schumpeter, Kenneth Arrow, Lao Tzu, liquidity trap, means of production, Modern Monetary Theory, Mont Pelerin Society, Myron Scholes, Pareto efficiency, Paul Samuelson, Phillips curve, Ponzi scheme, price stability, public intellectual, rent control, road to serfdom, Robert Bork, Robert Solow, Ronald Coase, Ronald Reagan, Sam Peltzman, school choice, school vouchers, secular stagnation, Simon Kuznets, stem cell, The Chicago School, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thorstein Veblen, zero-sum game

This is an epochmaking contribution to the tools of economic analysis, analogous to, but even more important than, Marshall’s discovery of the demand function.”6 Developed economies are, Hansen and other Keynesians believe, subject to long-term stagnation as a result of attempted excess savings. According to Joseph Schumpeter, who was often considered with Keynes to have been one of the two leading contemporary economists in the first half of the twentieth century, Keynes’s was a “doctrine that... can easily be made to say both that ‘who tries to save destroys real capital’ and that, via saving, ‘the unequal distribution of income is the ultimate cause of unemployment.’

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According to Henry Spiegel, a wellread and judicious historian of economic thought: “At the time when Viner taught at Chicago, the designation ‘Chicago School’ was not yet a commonly used term.”12 No reference to the “Chicago school” has been found in histories of economic thought written before the mid-1950s, including Joseph Schumpeter’s massive History of Economic Analysis, Joseph Dorfman’s multivolume The Economic Mind in American Civilization, and Paul Homan’s Contemporary Economic Thought. Similarly, there is apparently no reference to a “Chicago school” in the American Economic Review or Journal of Political Economy before the 1950s.

Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe by Greg Ip

Affordable Care Act / Obamacare, Air France Flight 447, air freight, airport security, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, behavioural economics, Boeing 747, book value, break the buck, Bretton Woods, business cycle, capital controls, central bank independence, cloud computing, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Daniel Kahneman / Amos Tversky, diversified portfolio, double helix, endowment effect, Exxon Valdez, Eyjafjallajökull, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, foreign exchange controls, full employment, global supply chain, hindsight bias, Hyman Minsky, Joseph Schumpeter, junk bonds, Kenneth Rogoff, lateral thinking, Lewis Mumford, London Whale, Long Term Capital Management, market bubble, Michael Milken, money market fund, moral hazard, Myron Scholes, Network effects, new economy, offshore financial centre, paradox of thrift, pets.com, Ponzi scheme, proprietary trading, quantitative easing, Ralph Nader, Richard Thaler, risk tolerance, Ronald Reagan, Sam Peltzman, savings glut, scientific management, subprime mortgage crisis, tail risk, technology bubble, TED Talk, The Great Moderation, too big to fail, transaction costs, union organizing, Unsafe at Any Speed, value at risk, William Langewiesche, zero-sum game

Several Austrian-born economists led by Friedrich Hayek argued that economic booms bred overinvestment in dubious or unprofitable projects, and reasoned that the economy required a slump to clear away this overhang of unneeded assets. “Depressions are not simply evils, which we might attempt to suppress,” wrote another of the Austrians, Joseph Schumpeter, “but forms of something which has to be done, namely, adjustment to change.” Anything that remedied the Depression would interfere with this necessary adjustment. This ecological view was shared by Andrew Mellon, Herbert Hoover’s Treasury secretary. He welcomed the cleansing effect of the Great Depression.

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Louis). 11 Wilson was quite taken: Woodrow Wilson, Papers of Woodrow Wilson, February 24, 1898, 440. 12 “What we are proceeding”: Ibid., December 23, 1913, 65. 13 “The whole country”: Quoted in “About… Robert Latham Owen,” accessed at http://www.kansascityfed.org/publicat/TEN/pdf/Fall2007/Fall07About.RobertOwen.pdf. 14 “forms of something which has to be done”: Joseph Schumpeter, “Depressions,” in Economics of the Recovery Program (New York: McGraw-Hill, 1934). 15 “liquidate labor, liquidate stocks”: Whether Mellon actually said this is unknown. It was attributed to him by Herbert Hoover in The Memoirs of Herbert Hoover, The Great Depression 1929–1941 (New York: Macmillan, 1952), 30. 16 had to restore prices and end deflation: Fisher’s views are well captured in Robert Loring’s Irving Fisher: A Biography (Hoboken, N.J.: Wiley, 1993), 240. 17 It was the engineer’s duty: Hoover wrote this in 1954 in Engineer’s Week.

Leading From the Emerging Future: From Ego-System to Eco-System Economies by Otto Scharmer, Katrin Kaufer

Affordable Care Act / Obamacare, agricultural Revolution, Albert Einstein, Asian financial crisis, Basel III, behavioural economics, Berlin Wall, Branko Milanovic, cloud computing, collaborative consumption, collapse of Lehman Brothers, colonial rule, Community Supported Agriculture, creative destruction, crowdsourcing, deep learning, dematerialisation, Deng Xiaoping, do what you love, en.wikipedia.org, European colonialism, Fractional reserve banking, Garrett Hardin, Glass-Steagall Act, global supply chain, happiness index / gross national happiness, high net worth, housing crisis, income inequality, income per capita, intentional community, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Johann Wolfgang von Goethe, Joseph Schumpeter, Kickstarter, market bubble, mass immigration, Mikhail Gorbachev, Mohammed Bouazizi, mutually assured destruction, Naomi Klein, new economy, offshore financial centre, Paradox of Choice, peak oil, ride hailing / ride sharing, Ronald Reagan, Silicon Valley, smart grid, Steve Jobs, systems thinking, technology bubble, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, Tragedy of the Commons, vertical integration, Washington Consensus, working poor, Zipcar

Capital is an entrepreneurial capacity that propels the economy and drives the transformative process of value creation. Financial capital allows entrepreneurs to take an idea and move it toward action: to hire people, build a product that they envision, and create the infrastructure required to sustain a business. As described by the economist Joseph Schumpeter, this process is “creative destruction.”38 What drives it? In Schumpeter’s view, it is the entrepreneur. Schumpeter thought that capitalism would eventually destroy itself by crowding out entrepreneurs from increasingly bigger and more bureaucratic companies.39 While his view on entrepreneurs rings true to many, there is an even deeper force at work that drives entrepreneurial activity and value creation across all sectors of society.

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., 20 Business Alliance for Local Living Economies (BALLE), 89–90, 218–219 Capital, 75, 77, 241 collectively creating, 100–102 myths about, 102 natural, human, industrial, and financial, 91–92 origin, history, and meanings of the term, 91 reclaiming our ownership of, 102–103 relinking financial with real, 90–103 Capitalism, 90 current crisis of, 137 evolution of, as evolution of consciousness, 51, 52f, 53–57 Joseph Schumpeter on, 96 Max Weber on, 79 shared ownership and, 135 stakeholder, 54 (see also Society 3.0) Capitalism 2.0, 92, 187 Capitalism 3.0, 92, 187 Cardoso, Fernando Henrique, 63 Cardoso, Marcelo, 222–223 Catholic Church, 32 Challenge-response model of economic evolution, 51, 52f, 55–56 Cheney, Dick, 20 Chernobyl disaster, 34–36 China, 60–61, 141 Chinese government, leading learning communities in the, 215–217 Cicero, 130 Citigroup, 10 Civil society movements, problems with the first wave of, 41 Civil society organizations (CSOs), 227 Climate and Development Knowledge Network (CDKN), 181 Action Lab Event, 181–182 Climate change, 37, 174 shifting the conversation on, 180–182 Clinton, Bill, 58 Closed heart, 32, 33 Closed-loop designs, 81–82 Closed mind, 32, 33 Closed will, 32, 33 “Closing-in” points, 240.

The End of Accounting and the Path Forward for Investors and Managers (Wiley Finance) by Feng Gu

active measures, Affordable Care Act / Obamacare, Alan Greenspan, barriers to entry, book value, business cycle, business process, buy and hold, carbon tax, Claude Shannon: information theory, Clayton Christensen, commoditize, conceptual framework, corporate governance, creative destruction, Daniel Kahneman / Amos Tversky, discounted cash flows, disruptive innovation, diversified portfolio, double entry bookkeeping, Exxon Valdez, financial engineering, financial innovation, fixed income, geopolitical risk, hydraulic fracturing, index fund, information asymmetry, intangible asset, inventory management, Joseph Schumpeter, junk bonds, Kenneth Arrow, knowledge economy, moral hazard, new economy, obamacare, quantitative easing, quantitative trading / quantitative finance, QWERTY keyboard, race to the bottom, risk/return, Robert Shiller, Salesforce, shareholder value, Steve Jobs, tacit knowledge, The Great Moderation, value at risk

See Feng Gu and Baruch Lev, “Overpriced Shares, Ill-Advised Acquisitions, and Goodwill Impairment,” The Accounting Review 86 (2011): 1995–2022. 3. This brings to mind the great economist (“creative destruction”) Joseph Schumpeter: “Success in conducting a business enterprise depends under present conditions much more on the ability to deal with labor leaders, politicians and public officials than it does on business ability . . . Hence, except in the biggest concerns [companies] that can afford to employ specialists of all kinds, leading positions tend to be filled by “fixers” and “trouble shooters” rather than by “production men.” In Joseph Schumpeter, Capitalism, Socialism, and Democracy, 3rd ed. (New York: HarperPerennial, 1950), 386. 4.

Stealth of Nations by Robert Neuwirth

accounting loophole / creative accounting, big-box store, British Empire, call centre, collective bargaining, corporate governance, digital divide, full employment, Hernando de Soto, illegal immigration, income inequality, independent contractor, informal economy, invisible hand, Jane Jacobs, jitney, Johannes Kepler, joint-stock company, Joseph Schumpeter, megacity, microcredit, New Urbanism, off-the-grid, Pepto Bismol, pirate software, planned obsolescence, profit motive, Shenzhen special economic zone , Shenzhen was a fishing village, Simon Kuznets, special economic zone, The Wealth of Nations by Adam Smith, thinkpad, upwardly mobile, Vilfredo Pareto, yellow journalism