Schumpeter

Prophet of Development?

Joseph Alois Schumpeter (1883-1950) is often said to be one of the greatest economists of the twentieth century. He certainly thought very highly of himself. The old joke goes that he wanted to be the best economist in the world, the best horseman in Austria, and the greatest lover in Europe. Supposedly, the only one of those ambitions he did not achieve was the last one. He is certainly, in my view, the best of the Austrian Economics School. He is also the most overrated economist of the twentieth century.

I often joke with my students that I had to go to therapy to deal with my relationship with Schumpeter, and to some extent to shed the influence that many of my professors suggested was central. This is also connected to the idea that there are heterodox components in Schumpeter, something that is, I think, very hard to defend.[1]

He is mostly remembered for Capitalism, Socialism and Democracy (CSD). His more theoretical works – The Theory of Economic Development and Business Cycles – are still highly respected, as is his massive History of Economic Analysis. But these books are not nearly as widely read as CSD, or at least the relevant chapters associated with technological innovation. Much of the rest of the book is probably skipped by most readers.

In CSD, there is a thorough discussion not just of his views of economic theory, but also of the causes for the rise and for the demise of capitalism. Marx was the starting point, perhaps as a result of what he saw as Marx’s negative influence on younger generations. But the focal point of his criticism is John Maynard Keynes, and the Keynesian economics that came to dominate the profession by the end of his life, and for what he saw as its influence in the New Deal and the rising social democratic regimes in Western Europe.[2]

By the time he was writing it, he was at Harvard and was disillusioned with the direction of the New Deal. If the American and French Revolutions can be seen as the central political events in the rise of modernity, that gave political rights to the people, the New Deal, resulting from the Great Depression, can be placed as the key event providing economic rights to workers. This was the great political and economic event of Schumpeter’s lifetime, and he was clearly against it. Not only he thought the New Deal was misguided, and would have terrible consequences, but he thought it contributed to the forces that would lead to the collapse of capitalism.

This short note is simply to clarify some notions about Schumpeter and Schumpeterian economics that remains popular both among mainstream and heterodox economists, like Keynes, and unlike Marx, who has remained truly a heretic. In fact, Schumpeterian economists recently received the Bank of Sweden Prize in Memory of Alfred Nobel. I will do some reflection on his differences with Keynes, and also between the different kinds of Schumpeterians; the heterodox ones style themselves as neo-Schumpeterians. To do this I will discuss Schumpeter in more or less the same categories he used for Marx in the first part of CSD. He discusses Marx as prophet, sociologist, economist, and teacher. I am going to discuss Schumpeter as economist, sociologist, and prophet, in reverse order from his analysis of Marx in CSD, but leaving aside Schumpeter as teacher. I should say, as a small aside, that my teacher Robert Heilbroner was a student of Schumpeter at Harvard, and Heilbroner seemed to remember him fondly. Also, one of Schumpeter’s favorite students was Paul Sweezy, a Marxist economist, with whom he obviously disagreed, but still promoted and debated publicly. There is no reason to think he was anything but a generous and effective teacher, open to reasonable disagreement. That is not a small quality, for those that know academia.

Schumpeter the Economist

Schumpeter, as an economist, was essentially an Austrian economist. Austrians are marginalists and part of the mainstream of the profession, even if sometimes they think they are neither. Austrian economists, in particular after their immigration to the United States, adopted some of the characteristics of what Richard Hofstadter called the paranoid style. They often see their role as part of a moral crusade against infidels, see themselves as victims of a vast conspiracy to exclude their views from the dominant, liberal – meaning progressive or socialist in their view – mainstream of the profession, and have a somewhat apocalyptic view of the future.[3] Schumpeter has affinities with all these traits, as I will suggest, but he was always more subdued.

Not surprisingly, Austrians themselves often dislike that label being applied to Schumpeter, particularly the more radical Austrian economists associated with Ludwig von Mises and his student Friedrich Hayek, who tend to have a dim view of Schumpeter. He is often seen as different from them because, while accepting most of the ideas associated with Austrian economics and its version of marginalism, he was not necessarily a radical laissez-faire thinker. He did see, under certain circumstances, the need for government intervention as an acceptable element of the functioning of the economy, which was also true in the Cambridge version of marginalism associated with Keynes mentor, Alfred Marshall. In modern language, one could say that he accepted, to some extent, that market failures do occur, although of course he did not use that term.

Thomas McCraw, in his massive biography Prophet of Innovation, suggests that Schumpeter saw Mises and his radical laissez-faire views with some amusement and did not take him too seriously. Contrary to Mises and Hayek, he accepted a limited role for government relief measures, particularly to deal with the social consequences of mass unemployment. He did reject large-scale stabilization policies, as supported by Keynes.

Schumpeter, Mises, Rudolf Hilferding, and Otto Bauer were all students in Eugen von Böhm-Bawerk’s seminar, and, in many ways, the ideas in Schumpeter’s first major book, The Theory of Economic Development, the book that made him an academic star early in life and led to his later international career, were shaped by that intellectual environment. That book appeared in 1911 and was only translated into English later, in the 1930s.

If one looks at that book carefully, it is very clear – although I never heard this from my professors, I am sorry to say – how much it must have been shaped by Böhm’s seminar. In many ways, the theory discussed there is not very different from what had already been presented, and in much more detailed and clear fashion, by Knut Wicksell in 1906 in his Lectures on Political Economy. Wicksell too had been a student of Böhm-Bawerk, though at an earlier time.

Essentially, Schumpeter presents a theory in which real shocks, especially shocks to productivity that increase the marginal productivity of capital, that is, the profitability of investment, have disruptive effects, which move the economy away from its Walrasian circular flow equilibrium. Of course, there can also be monetary shocks, but the real shocks were the dominant ones, and the monetary side of the economy must adjust to them. These shocks caused not only transformations in the economic structure, but also disruptions in the short run that led temporarily to unemployment. After a real shock, the economy eventually adjusted with the monetary variables, the bank rate, adjusting to the real variables, the natural rate, in Wicksell’s story. In Schumpeter’s analysis this was seen as a movement from a Walrasian circular flow to another, with the kind of adjustment toward full employment that is presupposed by marginalist economics. One might add that all the other Austrian cycle stories are very similar, with most of them, like Hayek, emphasizing monetary rather than real shocks.

Sure enough, Schumpeter suggests that the disruption is the central phenomenon of capitalism, and he makes a big deal out of it. The technological innovation is the central dynamic phenomenon of capitalism. There is, also, in the way Schumpeter describes this process of technological change, a greater concern with long-term trends of growth than one finds in Wicksell. But there are really no significant analytical differences. But the mechanism is essentially the same as in Wicksell and all other Austrians. Most differences and disputes can be chalked to the fact that marginalism was still developing when these books were written.

His historical analysis, especially in Business Cycles, is more detailed. There is greater concern with empirical research on short, medium, and long cycles – Kitchin cycles, Juglar cycles, and Kondratiev cycles, the last being the long cycles. But at the end of the day, beyond some emphasis on the importance of the transition from one equilibrium to other rather than on the equilibrium itself, there is nothing especially new in Schumpeter. As an economist, Schumpeter was not an innovator (pun intended).

Note that for Schumpeter economic development is purely a supply-side phenomenon. Fully dependent on technological innovations that were not caused by demand pressures. He believed in Say’s Law both in the short and in the long run.[4] Even the source of technological innovation is purely supply-side based. There is no hint of the notion that demand pressure puts pressure on supply chains, and requires more efficient use of resources, something that was quite well-known by historians of the Industrial Revolution. His hero is the entrepreneur, the innovator that has a light bulb moment and comes up with transformative innovations that change everything.

If one wants a demand side story, at the firm level, for innovation, Schumpeter is not your man, Jacob Schmookler is instead. Schumpeter viewed innovation primarily as the result of entrepreneurial initiative and technological opportunities. In his view, entrepreneurs introduce new combinations, and these innovations often create new demand through the process of creative destruction. Innovation is therefore largely technology-push. Schmookler, by contrast, argued that innovation is mainly demand-pull. Firms and inventors develop new technologies when expanding markets create profitable opportunities to do so. In his empirical studies, innovation tended to increase in industries experiencing rapid demand growth. Schmookler’s ideas, together with the work of Petrus Johannes Verdoorn and later Nicholas Kaldor, led to models that emphasize the role of demand and market expansion in driving productivity growth and technological change.[5]

A relevant question then is why his very conventional views on growth, cycles and technological innovation are seen as innovative and somewhat heterodox. The answer lies in that later on, when Schumpeter discussed competition and in particular the idea of creative destruction in CSD, he brought in several ideas associated with classical political economy, in particular the idea of free entry, and said a few positive things about Marx.

He said some positive things about Marx’s view of capitalism, in particular that “Marx saw this process of industrial change more clearly and he realized its pivotal importance more fully than any other economist of his time.” The next line, though, reads: “[t]his does not mean that he correctly understood its nature or correctly analyzed its mechanism.” He also praised Marx as one of the first, if not the first, to think clearly about business cycles, not in empirical matters, since Clement Juglar was the pioneer, he argued. At any rate, that praise of Marx generated a lot of confusion. Some people came to think there was something fundamentally different or heterodox in Schumpeter’s understanding of capitalism. However, his basic idea was that technological innovation raises the marginal productivity of capital and drives the system forward was neither especially unorthodox, nor justifies the view that he was an original economic thinker.

On his views of capitalism, he decries Marx’s materialism, praises Max Weber’s upside-down idealistic view of the system – namely, that it is the cultural aspects that determine the objective material development of the economy. On the cultural aspects of the rise of capitalism, the ideas of Joel Mokyr, and even of Deidree McCloskey, on bourgeois values, seem very Schumpeterian. Schumpeter goes on to suggest that the conflict tradition, to which both Marx, but also all preceding classical political economy was built upon, was nonsensical. For him, “there was, if anything, less of absolute nonsense in the old harmonistic view – full of nonsense though that was too – than in the Marxian construction of the impassable gulf between tool owners and tool users.” As it should be for a marginalist author concerned with individual decisions – Schumpeter coined the term methodological individualism in his massive and very problematic History of Economic Analysis – and the rugged individualism of the entrepreneur, the rise of capitalism did not generate any relevant antagonism between classes.

Schumpeter the Sociologist

Schumpeter shines in this field, and perhaps this was a lost vocation. It is the only part of Schumpeter’s work that I think deserves significant praise, in particular his contribution to fiscal sociology. His interest in fiscal sociology was connected to his increasing political influence during the period that followed the Great War. As noted in McCraw’s biography, Schumpeter began his career in a relatively distant university on the fringes of the Austro-Hungarian Empire, but even before the war he was climbing the academic ladder. The war, the subsequent economic crisis, associated to defeat and the collapse of the empire created political opportunities for him. Crises often do.

He came from a family that was bourgeois, but through his mother’s marriage he acquired something of an aristocratic tinge, and he saw himself as part of the Austrian elite. Yet, paradoxically, he really rose to power within a socialist government, through the good offices of Hilferding, who was in Germany and would later become finance minister during the Weimar Republic, and, more importantly Bauer, a key Austrian-Marxist intellectual that had become the foreign minister of the Social Democratic government headed by Karl Renner. Schumpeter himself briefly served as finance minister of Austria in 1919, and he owed it to a great extent to his Marxist friends.

Right before becoming finance minister, he wrote what in my view is the best paper he ever wrote: original, well written, insightful, and with conclusions that are essentially correct. This is his essay on the rise and crisis of the tax state, titled “The Crisis of the Tax State,” [Die Krise des Steuerstaats] translated into English much later, after his death by two disciples, Wolfgang Stolper and Richard Musgrave. The purpose of the essay was essentially to suggest that Austria was not broken, that despite the devastation of the war and the collapse of the empire, there remained room for government policy to pull the country out of crisis. Central to that was war reparations had to be kept to reasonable levels.[6]

His discussion of the tax state is based on fiscal sociology and praises the work of Rudolf Goldsheid, who was in his view the first to note that “the budget is the skeleton of the state stripped of all misleading ideologies”.[7] The important point is that for Schumpeter fiscal sociology lies at the very center of understanding society.

A famous passage from “The Crisis of the Tax State” suggests:

“…fiscal measures have created and destroyed industries, industrial forms, and industrial regions even where this was not their intent, and have in this manner contributed directly to the construction (and distortion) of the edifice of the modern economy and through it of the modern spirit. But even greater than the causal is the symptomatic significance of fiscal history. The spirit of a people, its cultural level, its social structure, the deeds its policy may prepare- all this and more is written in its fiscal history, stripped of all phrases. He who knows how to listen to its message here discerns the thunder of world history more clearly than anywhere else” (Schumpeter, 1918).

What he is saying is that the budget, who is taxed, how taxes are spent, and so on, reveals the real workings of society without ideological disguise. In fiscal history, one can see in black and white how the government operates, who bears the burden, who benefits, and what kind of society is being built.

Schumpeter argues that earlier political systems, feudal states, relied mainly on tribute, and feudal obligations, rather than systematic taxation. However, as warfare changed between the fifteenth and seventeenth centuries, the costs of maintaining professional armies, fortifications, and military logistics increased dramatically. This transformation made the older sources of revenue insufficient. States therefore had to develop regular and permanent systems of taxation, which gradually became the foundation of modern public finance. He highlights the Ottoman military pressure on Central Europe, especially on the Habsburg territories, as a key historical trigger for this fiscal transformation. The need for a centralized government and a standing army led the state to tax elites, particularly through land taxes. In that sense, the rise of the tax state is inseparable from the emergence of the modern state itself.

This is central for any understanding of fiscal policy in modern societies. As I have argued elsewhere, the tax state emerges in the transition from feudalism to capitalism, and by the late nineteenth and early twentieth centuries, the very period in which Schumpeter was writing, it evolves into what would be later called the welfare state.[8] This is, of course, a long historical process, and it is only in the postwar period that the welfare state fully consolidates. But its rise is already visible from the late nineteenth century through the crisis of the Great Depression, and Schumpeter, somewhat ironically, despite seeing the relevance of the tax state, was very much opposed to the rising welfare state.

The key insight that comes from his analysis is that what matters is not just fiscal policy in the narrow sense, changing a tax bracket here or a spending category there in a given year, but the fiscal regime, in other words to understand who is taxed, for what purpose and under what social agreement or arrangement. In other words, it is one thing to tax landlords and peasants in order to defend against external military threats, it is quite another to tax workers and the middle classes, in order to finance social benefits that address the fundamental problems of modern industrial society: old age, unemployment, illness, education, and so on.

Interestingly enough, for someone that was quite clear about the rise of the tax state, and about the role of technological innovation as the central dynamic phenomenon of capitalism, there is a deafening silence about the role of the state in technological innovation. Note that he was writing at the time that the US government, the military-industrial complex, as it was later named by president Dwight Eisenhower, was developing both the bomb and the computer.[9] That is clearly a major indictment on his contributions as a sociologist of technology.

Schumpeter the Prophet

The fears of the welfare state and its socialist undertones, brought about his last intellectual iteration, Schumpeter the prophet. If Marx thought that capitalism was doomed because of its own internal contradictions, Schumpeter, who agreed that capitalism was doomed, believed that it was because of its strengths. For him, capitalism was an efficient system, but it created instability and social dislocation. Ultimately, capitalism created the forces (intellectuals, bureaucracy) that eroded its own social foundations and the basis for its success, the entrepreneur. The entrepreneur would lose its social role and vanish. Ayn Rand would have approved.

Schumpeter’s view of the rise of capitalism is, to some extent, a heroic view centered on the great captains of industry. His heroes are the Vanderbilts, the Carnegies, and the Rockefellers. In CSD, he presents a Carlylean vision of the hero as maker of history. He says:

“If capitalist evolution – ‘progress’ – either ceases or becomes completely automatic, the economic basis of the industrial bourgeoisie will be reduced eventually to wages such as are paid for current administrative work, excepting remnants of quasi-rents and monopoly gains that may be expected to linger on for some time. Since capitalist enterprise, by its very achievements, tends to automatize progress, we conclude that it tends to make itself superfluous—to break to pieces under the pressure of its own success. The perfectly bureaucratized giant industrial unit not only ousts the small or medium-sized firm and expropriates its owners, but in the end it also ousts the entrepreneur and expropriates the bourgeoisie as a class, which in the process stands to lose not only its income but also, what is infinitely more important, its function” (Schumpeter, 1942: 134).

The sociological function of the entrepreneur is threatened by the very development of capitalism itself. One might say that Schumpeter, who in some ways was Weberian in his account of capitalist development, thought capitalism would destroy itself through rationalization. It would become too efficient, too bureaucratized, too routinized.

He saw the entrepreneur as the central sociological figure of capitalism. Much of the contemporary literature on entrepreneurship in business schools is ultimately Schumpeterian. What matters for development is the person with the idea who can make it happen in the market. The capitalist, in the narrower sense, may simply be the owner of capital or the provider of credit. But Schumpeter’s true hero is the entrepreneur, the Robber Baron. He would have been a cheerleader of the current techno-bros. And yet he sees the success of capitalism eventually leading to its destruction. As corporations become more bureaucratized and innovation becomes routinized, the dynamism of the system would collapse. Capitalism would then be superseded by socialism and planned economies.

This is, in the end, not all that different from Hayek’s slippery-slope argument in The Road to Serfdom, which appeared two years after Capitalism, Socialism and Democracy. That is the underlying logic. As I noted he was also, fundamentally, in CSD attacking Keynesianism, and to a lesser extent the institutionalist that were still relevant in American academia and the New Deal bureaucracy at this time.[10]

He was deeply distressed that students never really embraced his view of the business cycle. Even if one moves beyond the simplistic notion that the Great Depression was caused by the unfortunate coincidence of short, medium, and long cycles, his theory basically suggested that the Depression was the result of technological innovations, and that once the temporary supply side shock passed the economy would be fine again. Heilbroner, who was his student in the 1930s, used to say that he referred to the Depression as a cold douche, and that they didn’t know what a douche was. At the end of the day, although he was not a radical anti-interventionist like Hayek or Mises, he still believed that capitalist disruptions would eventually disappear. Innovation may destroy jobs, but new sectors, new products, and new sources of income and consumption would arise. The capitalist system, its dynamism renewed, would return to full employment in a new equilibrium. In that sense, we move from one Walrasian equilibrium to another Walrasian equilibrium.

The fact remains that his theory was not taken very seriously. Everyone was reading The General Theory, including his students. Schumpeter didn’t have anything good to say about Keynes’s General Theory. He liked Keynes’ previous book, not surprisingly, since The Treatise on Money was a Wicksellian book like his Theory of Economic Development. He claimed in CSD that Keynes had a stagnationist theory, which is debatable, and he argued that the social reforms of the New Deal would lead to a crisis of capitalism even worse than the Depression itself. He saw wage increases as one of the principal obstacles to recovery, a very conventional argument, and one that Keynes explicitly tried to refute in The General Theory.

Schumpeter, the defender of capitalism, the opponent of the New Deal, and someone not particularly interested in extensive government intervention, except perhaps modest relief for the unemployed, was the one who saw capitalism as an unstable system that was doomed to fail. Keynes, by contrast, who is often interpreted as saying capitalism was fundamentally unstable and would collapse without government intervention, in fact thought capitalism was for the most part relatively stable in economic terms, as he explicitly says in the General Theory. The problem was that it tended to settle at suboptimal positions, especially below full employment, and that might generate political instability. What was needed, therefore, was not the replacement of capitalism, but modest interventions to restore full employment, not because of some ad hoc market imperfection story, but because effective demand governs the level of activity. The irony is that Schumpeter thought that markets were efficient and capitalism would collapse, while Keynes thought that markets produced suboptimal results, and that capitalism might survive.

History is harsh with prophecies, but with some more than others. If Schumpeter was a prophet, he was a failed one. The expansion of the New Deal did not destroy capitalism. Indeed, it helped create the conditions for the most impressive expansion of the global economy in modern history.

The global New Deal that began with the Marshall Plan and with the American invitation to development across much of the periphery in the face of the Soviet threat is what we tend to call the golden age of capitalism. To be sure, it was a period with many problems, in the United States especially for African Americans and women, and elsewhere for colonized peoples still struggling for decolonization. But it was undeniably a period of great prosperity. And that period of prosperity did not lead to the collapse of capitalism. By the 1980s, it led instead to the collapse of the Soviet system, which both Schumpeter and Keynes, incidentally, detested.

Keynes, on the other hand, was overall correct. Moderate intervention, higher social transfers, and government spending did sustain growth and saved capitalism from collapse. Capitalism was, for the most part, relatively stable, provided those interventions were made, because market economies do not automatically generate optimal utilization of resources, something Schumpeter assumed they did.

Final remarks

In terms of Schumpeter’s contributions to the social sciences, he was not a particularly original economist, he was an interesting sociologist, with significant limitations and a relatively limited contribution to the field, and he was a failed prophet of the future of capitalism. He was also, and here I go back to my discussion from the beginning on the paranoid style in academia, somewhat anti-intellectual and excessively pessimistic about democratic institutions. In this, like Keynes, he was an elitist, with a distrust of institutions that gave too much power to the people.

His rant on the growing hostility against capitalism is reminiscent of the infamous Powell Memo. He blames capitalism itself. He says that capitalism undermines the very institutions that provide its social and political foundation. In his words:

“… capitalism creates a critical frame of mind which, after having destroyed the moral authority of so many other institutions, in the end turns against its own; the bourgeois finds to his amazement that the rationalist attitude does not stop at the credentials of kings and popes but goes on to attack private property and the whole scheme of bourgeois values” (Schumpeter, 1942: 143).

In his final years, although he was one of the highest paid professors at Harvard, he felt mistreated, a victim. He almost decamped to Yale. He might have taught a young William F. Buckley, whose God and Man at Yale also ranted about the negative role of intellectuals in academia in destroying the very foundations of capitalism.

Endnotes

[1] On my definition of heterodoxy, see my recent paper in the Journal of Economic Issues. The argument is that heterodoxy fundamentally involves two core propositions: first, that distribution results from social conflict, a view rooted in classical political economy; and second, that demand is the fundamental driver of economic growth, as established in the Keynesian and Kaleckian traditions. By those standards, Schumpeter is not a heterodox author. He was a marginalist who admired Léon Walras, and the marginal theory of distribution, and held a supply-constrained view of economic growth.

[2] The book is more than an attack on Marx and radicalism, although it certainly begins there. Many heterodox readers, because Schumpeter says some positive things about Marx, tend to think that he was a balanced and judicious reader of Marx. However, his understanding of Marx was probably heavily influenced by the teachings of Eugen von Böhm-Bawerk, who saw Marx main contribution as being based on the Labor Theory of Value, and that his views would fall or stand with that theory. In fact, that incorrect view is explicitly discussed in CSD. The book is also a criticism of Keynesian economics, especially in its American version, associated with Alvin Hansen, his colleague at Harvard, and his stagnationist thesis. He refers to what he calls the “vanishing investment opportunity” theory, which is essentially a critique of stagnationism, that he attributes to Keynes himself.

[3] On that I highly recommend the recent book by Quinn Slobodian on Hayek’s Bastards. I discussed it here.

[4] In this sense, his theories are well-represented by the Schumpeterian authors Philippe Aghion and Peter Howitt, especially their 1992 model of growth through creative destruction. Endogenous growth occurs, as in Schumpeter, via innovation, essentially from firms investing in R&D to create new technologies rather than from exogenous technological progress, as in the Solow model. As in the Solow, neoclassical tradition, growth is supply-side determined and along a path of full employment, even if there might be disruptions in the short run. On Joel Mokyr, and his views on the culture of growth necessary for economic development, more below.

[5] In this sense, if neo-Schumpeterians want to claim to be heterodox – and several do, the main ones being Richard Nelson, Sidney Winter, Giovanni Dosi, Christopher Freeman and Carlota Perez – they should be followers of Schmookler. There is no neo-Schmooklerian school of thought, as far as I know.

[6] On this one might add that the notion that the ability of central economies, that have been defeated, to recover hinged on avoiding a Carthaginian peace, he was in complete agreement with Keynes. As he was on his diagnostic on inflation, based on the notion of excess demand. His solution, as finance minister, as discussed in McCraw’s biography, a massive capital levy, a tax, to reduce demand. His proposal for a recovery was based on measures to promote entrepreneurship, or the investment environment. Very orthodox measures.

[7] On the tax state, see my 2004 paper on the subject. The basic idea is that the tax state emerges in the transition from feudalism to capitalism and, by the late nineteenth and early twentieth centuries, increasingly evolves into the welfare state. What matters is not just fiscal policy in the narrow, year-to-year sense, but the broader fiscal regime: who is taxed, for what purposes, and with what social objectives.

[8] On the rise of the welfare state the work by Peter Lindert has been clarifying and influential.

[9] There is no hint of the state as the entrepreneur, as Mariana Mazzucato has forcefully and correctly pointed out, in Schumpeter’s analysis. He goes from firms as innovators in the Theory of Economic Development, essentially entrepreneurs introducing new combinations, i.e. new products, production methods, markets, sources of supply, or forms of organization, to emphasizing in CSD that innovation increasingly takes place inside large corporations with organized research laboratories. The state might have a role in education and universities, but his writings on the subject are meager at best, and he was a profound critic of universities and intellectuals, that he saw as one of the causes of the collapse of capitalism.

[10] His only quote on Veblen in CSD is to suggest that contrary to Marx (and Engels) that had high praise of the bourgeoisie in the Communist Manifesto, that is not the case for the “vulgarized Marxism of [his day] or from the Veblenite stuff of the modern non-Marxist radical.”