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Published by nieschopwit
Notes on Schumpeter
Notes on Schumpeter

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Published by: nieschopwit on May 25, 2014
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Capitalism, Equilibrium and History: A Theoretical and Practical Analysis of Schumpeter’s Methodoloy and
Thus, development and equilibrium in the sense that we have given these terms are therefore opposites, the one excludes the other. Neither is the static economy being characterized by a  static equilibrium, nor is the dynamic economy characterized by a dynamic equilibrium; an equilibrium can only exist at all in the one sense mentioned before. The equilibrium of the economy is essentially a static one.`!"Theorie, ch.#$%ith this we really get closer to reality. &n particular, we win a clearer insight into that peculiar 'umble of conditioning and freedom, which economic life shows us. The static circular flow and the static  phenomena of adaptation are dominated by a logic of things, while it is completely irrelevant for the general problem of freedom of will, nevertheless in practice ( with fixed given social relationships ( it leaves as good as no manoeuvering room for individual freedom of will. This can be demonstrated and yet it was always a point of criticism, since
the free creative work of the individual
was so obviously visible. %e )now now that the latter observation is correct. *et, this observation does not contradict the theorems of statics. %e can
 precisely describe
 place and function
 of this
creative work 
. +f course, in development the logic of things is not missing; and  'ust as one cannot demonstrate with the static conception the case for philosophical determinism, one cannot maintain the case against it with the dynamic conception. ut despite this we have  shown that an element is present in the economy, which cannot be explained by ob'ective conditions and we have put it in a precise relationship to those ob'ective conditions.- /Theorie,!-, ch.#0
Damit kommen wir der Wirklichkeit tatsachlich naher. Besonders gewinnen wir einen klarern Einblick in das eigenturmliche Gemisch von Bedingtheit und Freiheit das uns das Wirtschaftsleben zeigt. Der statische reislauf und die statischen !npassungserscheinungen sind von einer "ogik der Dinge beherrscht# die fur das $roblem der Willensfreiheit zwar ganz irrelevant ist# aber praktisch % bei fest gegebenen sozialen &erhaltnissen % so gut wie keinen 'pielraum fur individuelle Willkur lasst. Das ist nachweisbar und war doch stets ein 'tein der !ntstosses# das man das individuelle freie 'chaffen ganz deutlich am werken sah. Wir wissen nun dass der letztre Beobachtung richtig ist und ()*+ den ,heoremen der 'tatik nicht wiederspricht# wir vermogen prazise $latz und Funktion dieses 'chaffens anzugeben. -aturlich fehlt auch in der Entwicklung die "ogik der Dinge nicht und ebensowenig man mit der statischen !uffassung etwas fur  philosophischen Determinismus beweisen kann# kann man mit der dynamischen etwas gegen ihr ausrichten. !ber dennoch haben wir ein durch sachlichen Bedingungen nicht erklarbares Element in der Wirtschftlichen nachgewiesen und mit diesen sachlichen Bedingungen in eine prazise Beziehung gebracht.
 A. Equilibrium and History: Conceptual and Political Aspects of Bourgeois Economic !eory
/lassical and -eoclassical $olitical Economy from !dam 'mith to "eon Walras is founded on the a0iomatic static e1uilibrium of the marketplace economic system. 2et this clashes most violently with the empirically evident instability of the capitalist economy and its e1ually violent convulsions and# worse still# its transformations intended not 3ust in the sense of
5 but actual
5# with its
# with its
. ,he static6stationary# a0iomatic6analytical# anatomical and ob3ective schema of bourgeois e1uilibrium economic theory is evidently and empirically shattered then by the dynamic6historical# metabolic and sub3ective unfolding or evolution of its real operation. ,he end of history that the bourgeoisie always desperately seeks has been 7greatly e0aggerated8 yet again. ,he 1uestion here is9 can history be reduced to science: !nd then again# is it indeed science or logic that is opposed to history in the bourgeois interpretation of economic systems: ,he con6
 of science and logic in the sphere of economic analysis was evident already in !dam 'mith;s theorization of market capitalism. 'mith;s 7invisible hand8 was a necessary
deus absconditus / 
hidden god5
 because the circularity of his reasoning reduced science to logic
6 to a tautology in fact9 prices are determined by value which is determined by the 1uantity of labour# whose price is determined by the market which determines prices. ,he problem lies in the definition of 7market89 if indeed the 7market8 is made up of entirely self6interested atomistic individuals# then it is impossible to see how such in6dividuals could ever reach the 7agreement8 that is indispensable to determine 7prices8< =n other words# 7the rules of market competition8 have to be set or agreed upon by market agents even before market competition takes place. But this is impossible by definition# because any restriction on the 7self6interest8 of market agents turns the entire e0ercise into a meaningless and purposeless tautology<
G. >yrdal insightfully seized on this point# in
The 2olitical 1lement in the 3evelopment of 1conomic Theory
. >yrdal# however# like all economics theoreticians after him# totally failed to see the
 political element 
  behind the tautologous
 of e1uilibrium theory % a 7political element8 that was to be the very ob3ect of his study<
 ,hus# 3ust like e1uilibrium analysis# 'mith;s theorization of market capitalism left no space at all for the 7co6ordination8 of the actions of are a0iomatically atomic in6dividual market agents % which is why# 3ust as "eibniz needed a divine 7pre6established harmony8 to co6ordinate his 7windowless monads8# so did 'mith need his 7invisible hand8 to co6ordinate the actions of his 7windowless8# 7monadic8 market agents. General e1uilibrium analysis# too# will later
 with this re1uirement# without thereby
 it# by postulating the 7syn6chronicity8 of all 7actions8 in market e0change. But the formal e1uivalence of all a0iomatic market agents in both theories means that they are left without a 7purpose8 once the 7frozen8 state of e1uilibrium is reached. =n other words# e1uilibrium is a state of complete in6action# given that at e1uilibrium market agents no longer have any need or space to change their decisions. !t e1uilibrium there is and there can  be no 7market8.
!rrow and ?ahn were demonstrably right to insist#
 "awson in 7,he /onfused 'tate of E1uilibrium !nalysis8# that !dam 'mith is the father of e1uilibrium analysis (in
4eneral 5ompetitive 6nalysis
+. ,he fact that# as "awson argues# 'mith constructed his theory from historical and sociological observations does not cure its 7closedness8 or tautological nature. ?ypocrisy was written all over the author of
Theory of 7oral 8entiments
 % something that >andeville delighted in e0posing9 his penchant for sociological observation#  based mostly on !dam Ferguson;s
 6n 1ssay on 5ivil 8ociety
# only served to disguise the aporetic and apologetic character of his economic theory. =ncidentally# "awson;s definition of a 7closed system8 as one that can be reduced to the proposition 7whenever 0# then y8 is manifestly wrong because this kind of  proposition is essential to the testing of scientific hypotheses in both natural and social science 4one need only read any book on the philosophy of science to understand this point5. @uite contrary to "awson;s contention# a 7closed system8 must be of the type 7whenever 0# then y# where 0 is a function of y89 it is the classic
circulus vitiosus
 or tautology# 6 nothing more nothing less.
,he problem with e1uilibrium analysis is that it reduces economic 7science8 to 7logic8 % literally# to
 4retrospective e0amination or
5# that is to say# to the formal mathematical e1uivalence of all its
# which leads to the meaningless paralysis of tautology. ,he essential aim of any economic theory worthy of the name must be to e0plain how economic actions can be co6ordinated and to point to the 7what8# the 7thing8# the common substance or 7value8 that allows this 7co6ordination8 to take place. /o6ordination is not meant here as 7static e0change8 and is not meant to be confined to 71uantitative values8. =f we read Walrasian e1uilibrium# which is made up of a series of simultaneous e1uations# as a simple functional plan or classification of an economy# then it is not tautological but purely classificatory or illustrative. =f instead it is intended to show how a real economy functions# that is to say# how the independent decisions of individual market agents can be
 by 7the market8# then it is entirely tautological because# as ?ayek showed# 7
its conclusions are implicit in its assumptions
!s = have suggested elsewhere in this volume#A
the tautological method 
 which is appropriate and indispensable for the analysis of individual action seems in this instance to have been illegitimately e0tended to problems in which we have to deal with a social process in which the
decisions of many individuals influence
one anot!er 
 and necessarily succeed one another in time
. ,he economic calculus 4or the
 2ure 9ogic of 5hoice
5 which deals with the first kind of problem consists of
an apparatus of classification
 of possible human attitudes and  provides us with a techni1ue for describing
the interrelations of the different parts of a single plan
conclusions are implicit in its assumptions: the desires and the )nowledge of the facts, which are assumed to be simultaneously present to
a single mind 
 , determine a unique solution. The relations discussed in this type of analysis are logical relations, concerned solely with the conclusions which follow for the mind of the  planning individual from the given premises.
 &ndividualism and 1conomic +rder 
# p.).5
Even so# ?ayek;s analysis of general e1uilibrium is still incorrect because for 7a single mind8 Walrasian e1uilibrium is merely 7classificatory8 but not 7tautological8. Even for a single mind no
 can be made in e1uilibrium analysis because simultaneous e1uations involve a 7semaphoric8# logical 7re6classification8 of information that is independent of 7time8 as a concept. Walrasian e1uilibrium is tautological only if it pretends to e0plain# as it does# how 7many minds8 can co6ordinate their economic decisions. Where a single mind is concerned# however# e1uilibrium theory does not involve a 7single plan8 or any 7plan8 at all 4<5 because that would imply the possibility of
< But the point to a 7classificatory8 or 7semaphoric8 4or functional or illustrative or anatomical5 schema is that no 7decision8 is involved because there is and there can be no 7time8 involved in such an ana6lytical 7sketch8 or 7blueprint8 or 7map8. ! map is 7timeless89 it is not a 7plan8 in the sense of 7a se1uence of decisions8< But ?ayek and all e1uilibrium theoreticians after him# have shifted the sub3ect6matter# the ground# the sub6stance# the substratum and
# the 7whatness8 of economics from 7prices and 1uantities8# which involve those material human interests that are and must be the indispensable foundation of all theories that even pretend to be 7economic8# to the mere 7semaphoric8 world of 7information8 and 7co6ordination8< =n the words of Brian "oasby#
The co-ordination of economic activities, of course, is what economics is overwhelmingly about, (
Equilibrium and Evolution
, p.9).
,he problem with this is that economics can never be reduced to a simple matter of 7co6ordination8  because it must always e0plain the real material
 of 7co6ordination8# what makes it 7
 co6ordination8< !nd the 7economic8 here stands for
# the actual creation of 7goods and services8 which ultimately involve human living labour and therefore social relations of production that relate to the interaction of human beings amongst themselves as well as with their living environment< ?ayek correctly captures the point that Walrasian e1uilibrium cannot 7co6ordinate8 a 7market8 in which different individuals decide the market action of that 7single mind8 would still depend on the decisions of at least one other 7single mind8 to make an 7economic decision8. For the single mind to make an economic decision and to evade tautology# it needs to be confronted with the independent plan of 7another mind8# which is what general e1uilibrium is constitutionally incapable of doing because 7its conclusions are (
+ implicit in its assumptions8 and no 7time8 can logico6conceptually be present< ,his e0plains the retreat of e1uilibrium theoreticians like Frank ?ahn from the sphere of 7prices and 1uantities8 of real goods and services performed by human living labour to the semaphoric or semiotic sphere of 7ideas and actions8. For ?ahn#
an economy is in equilibrium when it generates messages which do not cause [its agents to change the theories which they hold or the policies which they pursue, (quoted in !oasby, op.cit. at pp."#-$).
But here the legerdemain# the subtle trick that ?ahn has performed becomes absolutely evident % because ?ahn has not specified a
 but rather an
# a 7
 of theories and  policies8< =n other words# not only does e1uilibrium now e0clude even the most phantomatic e0change of 7goods and services8# which re1uire human living labour# but it even re1uires the ultimate
9 e1uilibrium finally assumes the stagnant and stationary position not 3ust of tautology but of the most unthinkable
rigor mortis
 % sheer death< For the modern  bourgeoisie and its idiotic charlatans# economic e1uilibrium is the most perfect -irvana in which
absolutely Nothing happens

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