Schumpeter’s Vision of Socioeconomics

RICHARD SWEDBERC”
Stockhoh University

ABSTRACT Just as Schumpeter many years ago had a brilliant vision of a new and
broad kind of economics (what he called Sozialijkonomik), so do many socioeconomists
today have a similarly grand vision. Will they be able to implement it and translate it into
important scientific works, on a par with the grandeur of the vision? Schumpeter’s work
may be relevant to answering this important question. Schumpeter experimented in his
lifetime with two versions of socioeconomics, which were not equally successful. In his
youth, he advocated a form of economic imperialism and erased the boundary between
socioeconomics and the other social sciences. Later, however, Schumpeter accepted the
valuable contributions that the noneconomic social sciences can also make to the under-
standing of economic phenomena, coming to advocate a collaboration between
economics, sociology, economic history, and statistics.

INTRODUCTION
The last 10 to 15 years have witnessed a strong interest in broadening the field of
economics and introducing a social perspective into it. A society exclusively
devoted to “socioeconomics” has been created which holds yearly conferences
and has a considerable international following (for programmatic statements, see
Etzioni, 1988; Biirgenmeier, 1992). Somewhere in the background to this and
similar enterprises is a vision that economics, by broadening its scope to include
a truly social perspective, will be better able to analyze economic phenomena and
serve society. Will the socioeconomists and similarly oriented economists be able
to implement their vision and translate it into important scientific works, on a par
with the grandeur of their vision ? This is indeed the question-and only the
future, of course, will be able to furnish an answer. This article points out that the
idea of “socioeconomics” is not new to the 1980s or 1990s but has a long and
fascinating history. In particular, it is argued that what Joseph Schumpeter had to

* Direct all correspondence to: Richard Swedberg, Department of Sociology (B-933), Stockholm University, S-
10691 Stockholm. Sweden.

Journal of Socio-Economics, Volume 24, No. 4, pp. 52.5-544

Copyright 0 1995 JAI Press Inc.
All rights of reproduction in any form reserved.
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526 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. 4/l 995

say about socioeconomics is relevant to judging the prospects for the socioeco-
nomics movement. One reason for this is that Schumpeter experimented with two
different versions of socioeconomics during his lifetime-and they were not
equally successful. Also, Schumpeter was very interested in the general process
of how to go from having a vision to implementing it-from having the original
idea to fleshing it out in research. On both scores, it is argued here, we can learn
from Schumpeter.

SCHUMPETER’S CONCEPT OF VISION AND THE IDEA OF

“SOCIOECONOMICS” BEFORE SCHUMPETER
Before discussing in more detail what Schumpeter’s vision of socioeconomics
looks like and how it changed over the years, some preliminary remarks on the
very notion of “socioeconomics” in the economics literature are needed. It is
also necessary to say a few words about Schumpeter’s notion of vision-a con-
cept that deserves to be much more discussed and analyzed than it has before
now.
Let me, therefore, start with some remarks on Schumpeter’s notion of
“vision’‘-a word that he usually wrote with a capital “V” to indicate his opinion
of its great importance. A vision, to cite Schumpeter’s well-known definition in
History of Economic Analysis, consists of a “preanalytic act that supplies the raw
material for the analytic effort” (Schumpeter, 1954, p. 41, emphasis added). The
first thing to note about this definition is that the successful scientific effort, as
Schumpeter saw it, consequently consists of two steps. It all begins with Step 1, or
the vision itself: “the thing that comes first is a Vision” (Schumpeter, 1954, p. 561).
This is followed by Step 2 or “the analytic effort.” A vision is described by Schum-
peter as a way to “visualize a distinct set of coherent phenomena as a worthwhile
object of our analytic efforts” (Schumpeter, 1954, p. 41). A vision usually also
entails a statement about the structure of the phenomenon in question-its parts
“must be recognized as related-so that we may separate them from others”
(Schumpeter, 1949, p. 350). Let me illustrate Schumpeter’s train of thought on this
point by using one of his examples-namely, a “comprehensive vision of the eco-
nomic process” (Schumpeter, 1954, p. 95). The vision, in brief, would supply an
overall conception of the economic process plus roughly indicate its constituent
parts and their basic interaction.
The words “roughly indicate” are more appropriate than “precisely state”
because having a vision is not really part of science according to Schumpeter; it
rather precedes the creation of science. At this stage of the process, there is no
“observation or experimentation [or] orderly logic-chopping” (Schumpeter, 1954,
p. 113). Instead, there is something “intuitive” which is “akin to artistic creation”
(Schumpeter, 1954, pp. 113, 562). Schumpeter does not say much more than this,
however, about the first and deeply creative phase of the scientific process. This is
a great pity and one would, for example, like to have known how Schumpeter him-
Schumpeter’s Vision of Socioeconomics 527

self got his own brilliant intuitions about the entrepreneur and the economy as a
dynamic and constantly changing socioeconomic process. One can perhaps guess
what Schumpeter might have said about these matters, if he had decided to write
on them-that the result would have been similar to what someone like Max
Weber has said about intuition and scientific creativity. In “Science as a Vocation,”
Weber (1991 [ 19191) says, for example, that we are not very likely to get our great-
est ideas when we toil at work, but rather when we do something else and expect
them the least. One of the examples he gives is of the scientist relaxing after dinner,
smoking a cigar on the sofa (Weber, 1946, p. 136). Maybe this anecdote about
being inspired and having great thoughts while reclining on the sofa can help us to
make sense of the following story about Oskar Morgenstem’s first meeting with
Schumpeter, an anecdote that is usually told to illustrate Schumpeter’s eccentricity
and exhibitionism:
Oskar Morgenstem [one of Morgenstem’s students tells us] was fond of recounting his
first meeting with Schumpeter in pre-World War I Vienna. He was ushered into a large
mirrored and darkened room candle-lit with elaborate wall sconces and candelabra, to
be received by the maestro reclining on a recamier in his dressing gown. Schumpeter
explained to the astounded Oskar Morgenstem that it all aided his contemplations
(Becker, 1983, p. 143).

But to get back the main argument, namely, that one can distinguish betweeen
two different steps in the creative scientific process, according to Schumpeter. The
vision or the preanalytic cognitive act, to recapitulate, is followed by Step 2, when
science is made. Two activities actually take place at this latter stage: there is first
a “conceptualizing of the contents of the vision” and then a “hunt for further empir-
ical data (facts) with which we enrich and check the ones originally perceived”
(Schumpeter, 1954, p. 45). Though Schumpeter in principle separated these two
scientific activities-theory construction and fact gathering-he also stressed their
fundamental unity and that both are equally essential to science. Note also that
both of these activities, according to Schumpeter, help to rationalize the initial
vision-making it more logical and reasonable but also less intuitive and extraor-
dinary. Borrowing from Nietzsche, we could say that Step 1 or the initial, deeply
creative phase-having the Vision-is Dionysian, while Step 2 or the analytic
effort that comes after the vision is more Apollinian in nature. The analytic part is
more Apollinian in the sense that while being creative in its own way, it lacks some
of the raw energy of the vision; it is more measured and controlled-but also more
harmonious.
But not only will the inevitable rationalization take some energy and luster away
from the original vision, there is also the fact that the performance of the economist
is not always up to his or her vision. In other words, Step 2 or “the analytic effort”
does not automatically follow Step 1 or “the preanalytic cognitive act.” What may
prevent this full or two-step sequence from taking place, according to Schumpeter,
are such things as “lack of “technical training,” lack of “mathematical training,” or
528 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. 4/1995

lack of “aptitude for an effective argument” (e.g., Schumpeter, 1954, pp. 847-848).
The History of Economic Analysis, where we can find most of Schumpeter’s
thoughts on the role of vision, abounds with examples of successfully executed
visions, of not very successfully executed visions, and of visions that were totally
bungled.’ John Maynard Keynes was to Schumpeter’s mind an economist who
both had a vision and succeeded in translating it into effective science (e.g.,
Schumpeter, 1954, p. 1171). Friedrich List, on the other hand, had “a grand vision”
in economics, but his work in this field was “not . . . a scientific achievement”
(Schumpeter, 1954, p. 504). The reason for List’s relative failure on this score, we
are told, is that “the individual pieces of [his] analytical apparatus were not partic-
ularly novel.” As an example of an economist who totally bungled his vision,
Schumpeter cites someone you are not very likely to have heard of: Henry Carey
(1793- 1879), American economist and author of Principles of Social Science plus
a few other forgotten works. Carey had “a grand vision in the same sense as had
List,” we are told, but it was accompanied by a “deplorable analytic implementa-
tion” (Schumpeter, 1954, pp. 5 16-5 17). Schumpeter approvingly cites John Stuart
Mill’s verdict on Carey’s Principles: “it is [the] worst book on political economy I
have ever toiled through” (Schumpeter, 1954, p. 516).
Let us now turn to the content of the vision, as opposed to the mechanisms
through which it comes into being and is translated into science. Here, Schumpeter
makes clear that most visions-even the great ones-do not usually result in
totally new additions to science; they rather “add to and perhaps partly displace
[already existing] scientific material” (Schumpeter, 1954, p. 45). This observation
is also a clue, I suggest, for how to properly approach Schumpeter’s own vision of
socioeconomics. The first thing we consequently have to do-since, after all, we
want to be able to judge Schumpeter’s originality on this score-is to look at the
ideas about “socioeconomics” that already existed when Schumpeter began his
own work in the field, so that we will be in a better position to decide how he
“added to and displaced” this material. The additional question of whether Schum-
peter was directly inspired by earlier theories of socioeconomics can also be
discussed in this context, and we shall do well to remember that Schumpeter was a
voracious reader of the economics literature since early on. One of his very first
books was a superb little history of economics (Schumpeter, 1914).
The history of “socioeconomics” has not yet been written-but if this task were
ever undertaken, it would no doubt have to confront the usual difficulties that
enterprises of this kind have to struggle with. Which countries, for example, should
be included in the study? What should be done about the fact that some socioeco-
nomic literature appears under other labels than “socioeconomics” (and,
conversely, some of the literature that labels itself “socioeconomic” has little to do
with this field)? With all these reservations in mind, let me nonetheless embark on
a brief history of socioeconomics, including its birth and earliest developments, in
order to provide something of a background to Schumpeter’s ideas on this topic.
Schumpeter’s Vision of Socioeconomics 529

It is generally agreed that the first person to advocate something called “socio-
economics” was Jean-Baptiste Say (e.g., Dietzel, 1895, p. 54). Though the idea of
socioeconomics was to some extent already present in his Truite’ of 1803, accord-
ing to Say, it was only in his later works that it appeared in full force (Say, 1837, p.
6). What characterizes socioeconomics, Say says, is its broad-based nature and that
it looks at the “anatomy” and “physiology” of society. More precisely, in Say’s
view socioeconomics is a general science of society whose natural point of gravity
is the economy. Society is seen as an organism, consisting of a number of organs.
The following famous quote from Cours complet d’konomie politique pratique
supplies us with the desired definition: “The study that has been made of the nature
and functions of the different parts of the social body has created a number of con-
cepts [and] a science to which one has given the name konomie politique, but
which it would have been better to call Cconomie sociale” (Say, 1837, p. 5).
Whether inspired by Say or not, the term “socioeconomics’‘-as opposed to the
popular term “political economy” (supposedly first used by Montchretien in
1615)-soon spread to England, Germany, and Italy where it was used by a few
economists in the 1840s and 1850s (see, e.g., the authors cited in Dietzel, 1895, p.
54). It is often noted at this point that the term was introduced during this period
into English by John Stuart Mill, who used socioeconomics in more or less the
same sense as Jean-Baptiste Say-namely, to denote a general science of society
(Mill, 1844, pp. 135-137). According to Mill, the study of man belongs to “the
moral sciences,” and the study of man “living in a state of society” belongs to
“social economy.” The latter science deals with “[the] laws of human nature on the
social state” and includes (as “a [special] branch”) what Mill calls “political econ-
omy,” which only deals with that part of man’s social behavior that is oriented to
“wealth.” Mill gives the following definition of “social economy”: “These laws, or
general truths [of ‘human nature in the social state’], form the subject of a branch
of science which may be aptly designated from the title of social economy” (Mill,
1844, p. 135).
The first great paradigm of socioeconomics was consequently one where socio-
economics was viewed as a general science of society, with the study of the
economy as its natural center of attention. Schumpeter was quite influenced by this
early theory of socioeconomics, especially as a young man. A second paradigm of
socioeconomics, however, was to appear during the second half of the 19th cen-
tury, and this paradigm also was to influence Schumpeter’s vision of
socioeconomics. But before describing this second paradigm, it must be added that
a third version of socioeconomics can be found in the economics literature from
the 19th century, even though it was never to become as popular as the other two.
This is the idea of socioeconomics as a scientific and deeply ethical enterprise; it
is perhaps best exemplified by the work of Walras.*
According to Walras, one part of economics-which he called “e’conomie
sociale”-should have “justice as its guiding principle” and be devoted to “the sci-
530 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. 4/l 995

ence of the distribution of wealth” (Walras, 1954 [1874], p. 79; cf. Walras, 1936).
To introduce value judgments directly into the scientific analysis was, however,
utterly alien to Schumpeter, and I will therefore not say anything more about this
version of socioeconomics. It should, however, be noted that Walras’ position on
this score is close to that of several prominent scholars in today’s socioeconomic
movement. These include Amitai Etzioni and Beat Btirgenmeier-(see the latter’s
fine study of Walras and &conomic sociale in Biirgenmeier, 1991)
The emergence of the second paradigm of socioeconomics in the 19th century
can best be followed in Germany. In 1873, Eugen Dtihring captured one of its dis-
tinguishing traits when he described Socialiikonomie as being limited to the
economy itself, as opposed to dealing with society in general (Dtihring, 1876).3
The person who is usually credited with having popularized the notion of Social-
iikonomik in German economics is, however, Heinrich Dietzel, and he did this
through an article from 1883 and a book from 1895 (Winkelmann, 1986, p. 12; for
Dietzel, see, e.g., Arndt, 1935). Like Dtihring, Dietzel did not equate socioeco-
nomics with a general science of society but argued instead that it should only deal
with the economy. Dietzel defined Socialiikonomik (or Sozialwirtschafslehre, as
he also called it) as the doctrine that deals with “the economic life of society”
(Dietzel, 1883, p. 3). He also emphasized strongly that terms such as Nation-
aliikonomik or politische Oekonomie were not suitable names for economics, since
this science “has nothing at all to do with either ‘nations’ or ‘politics”’ (Dietzel,
1895, pp. 56-57).
If the first distinguishing element of the second paradigm of socioeconomics
is that it limited itself to the area of the economy, the second is that it advo-
cated the use of several social science disciplines to explore the economy. The
idea of using several disciplines can be found in Dietzel (and other thinkers;
see, e.g., Dietzel, 1895, p. 60)4 but was to reach its most brilliant expression in
the work of Max Weber. Schumpeter, as we know, worked very closely with
Weber: he wrote a volume for Weber’s Grundriss der Sozialiikonomik; he
served on the board of Archiv fiir Sozialwissenschaft und Sozialpolitik together
with Weber; and when Weber died in 1920, Schumpeter wrote a moving arti-
cle about him. All of this interaction between Schumpeter and Weber makes it
more than likely that Schumpeter was familiar with Weber’s ideas on socioeco-
nomics. There is, of course, much complexity in Weber’s concept of
socioeconomics, but also the kind of simplicity that one often finds in the
work of great thinkers. By way of a background to Weber’s concept of socio-
economics, it should be noted that Weber was horrified by the destruction
brought about by the Methodenstreit and felt that it had broken economics into
“two sciences”+ne that was historical (and close to Schmoller) and one that
was theoretical (and close to Menger; Weber, 1949 [1904], p. 63). To Weber,
this constituted a deplorable state, and he spent much effort in trying to bring
together the two warring factions of economics under the umbrella of what he
Schumpeter’s Vision of Socioeconomics 531

called Sozialiikonomik. The notion that one must draw on several social sci-
ences in analyzing economic phenomena became an important part of the
program of Archiv fir Sozialwissenschaft as well as one of the guiding princi-
ples of the giant handbook of economics-Grundriss der Sozialiikonomik-that
Weber began to work on in 1908 and to which Schumpeter contributed his
early history of economics (Schumpeter, 1914).5
To make a long and complicated story short, Weber advocated-as a solution to
the Methodenstreit, among other things-a kind of umbrella-like type of econom-
ics, which he called Sozialiikonomik and which defined the economic problems to
be researched in a very broad manner. In order to study “economic phenomena,”
“economically relevant phenomena,” and “economically conditioned phenom-
ena,” it was necessary, according to Weber, to draw on a plurality of social
sciences--especially economic theory, economic history, and economic sociol-
ogy.6 What has been called here the second great paradigm of socioeconomics
reached its most creative and brilliant expression before World War I in the work
of Weber. But it was also surrounded by a certain ambiguity and lack of clarity in
Weber’s work, both of which the next great contributor to this type of socioeco-
nomics-the mature Schumpeter-was to successfully eliminate.

SCHUMPETER’S VISION OF SOCIOECONOMICS:

INTRODUCTORY REMARKS
Let us then return to Schumpeter and his contribution to socioeconomics. What
was earlier referred to as Schumpeter’s vision of socioeconomics now needs to be
defined. By “socioeconomics” in this context, I mean the following: “a general
view of the economic process, whose main characteristic is that this process can
ultimately be understood only as an expression of an interaction between eco-
nomic and social elements.” This is a rather loose definition (and, hence, some-
what unsatisfactory), but this is due to the fact that it needs to encompass the fact
that Schumpeter changed his ideas on socioeconomics rather dramatically, some-
where in the period between the late 1910s and the mid- 1920s. It is also a defini-
tion that does not explicitly mention what some of us would see as central to
Schumpeter’s work-namely, his analysis of the dynamic and discontinuous
nature of the economic process. The reason for keeping to this definition, however,
is that the part of Schumpeter’s vision that is the focus of this article, is situated at
a different level of abstraction than that part of his work which deals with eco-
nomic change.7 A couple of years before his death in 1950, Schumpeter said that
his research program “varied but always stayed the same-that of evolving a com-
prehensive sociology with a single aim” (Schumpeter, 1944). We realize that
Schumpeter is here talking of his approach to economics on a very general level-
and it is exactly this level that is the focus of this article.
532 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. 4/l 995

Schumpeter’s Early Vision of Socioeconomics

During his career as an economist, Schumpeter developed two very different
approaches to socioeconomics, one as a young man and another when he was in
midlife. Schumpeter’s early vision of socioeconomics came to its first, and also its
finest, expression in his second book, the famous Theorie der wirtschuftlichen
Entwicklung (1911).* Schumpeter wrote this work when he was only in his 20s
and the first edition (which is the one of interest here) seems to have been written
in a burst of youthful enthusiasm and is infused with something akin to a Diony-
sian quality. The ideas expressed in this work add up to a vision of socioeconomics
that is close to what was called above the first great paradigm of socioeconomics.
The central idea of this paradigm, to recall, is that socioeconomics is seen as a gen-
eral social science whose natural point of gravity is the economy. As opposed to
later in life, Schumpeter does not explicitly use the expression “socioeconomics”
in Theorie but instead speaks of “the overall picture of the economy” plus “the
social culture of a people” (Schumpeter, 1911, pp. 463, 545).9 These two expres-
sions more or less cover the same area as “socioeconomics” in its original
meaning.
Reading Theorie from the viewpoint of socioeconomics, it should be noted, is a
somewhat different experience from reading it in the usual manner, since we now
are mainly interested in Schumpeter’s ideas on such issues as the totality of social
life and how economic and social factors interact. That Schumpeter had a socio-
economic approach in Theorie is clear from the way that the book begins. To cite
the famous opening lines of chapter 1:
The social process is really one indivisible whole. Out of its great stream the classifying
hand of the investigator artificially extracts economic facts. The designation of a fact as
economic already involves an abstraction, the first of the many forced upon us by the
technical conditions of mentally copying reality. A fact is never exclusively or purely
economic; other-and often more important-aspects always exist (Schumpeter, 1911,
p. 1; for the English translation, see Schumpeter, 1934, p. 3).

From this quote, it is clear that Schumpeter wants to: begin his analysis in Theo-
rie from the viewpoint of the totality of social life; then indicate how one can
isolate “economic facts”; and then analyze these-while emphasizing that in
reality there exist no “purely economic facts.”
Let us now continue our rereading of Schumpeter’s book from a socioeconomic
perspective by moving to its heart, the famous second chapter, where Schumpeter
presents his theory of the entrepreneur. The main intuition behind this chapter has
been described by Schumpeter himself in the following way: “I felt very strongly
that [it] was wrong [to view the economy as stationary] and that there was a source
of energy within the economic system which would of itself disrupt any equilib-
rium” (Schumpeter, 1989 [1937], p. 166). This emphasis on energy-this
Dionysian element-is also expressed in Schumpeter’s book through his argument
that there can be no equilibrium in a dynamic economy: “Development ultimately
Schumpeter’s Vision of Socioeconomics 533

consists of the disturbance of an existing static equilibrium, and it does not have a
tendency to return to a previous or to any other equlibrium,” and: “On the contrary,
an equlibrium only exists in a static economy” (Schumpeter, 1911, p. 489).
The main figure in chapter 2 and in Schumpeter’s whole book is, of course, the
entrepreneur; and it is clear that Schumpeter mixed social and economic elements
in a very potent brew in his theory of the entrepreneur. When Schumpeter, for
example, talks about the resistance that the entrepreneur encounters in the form of
economic traditionalism, is he then not introducing a social element into the eco-
nomic analysis? And does he not also go beyond mere economic motivation in his
famous description of what drives and inspires the entrepreneur ( “the dream,” “the
will to conquer,” and “the joy of creation”; Schumpeter, 1934, p. 93, 1911, p. 134
ff.)?
Since most are familiar with Schumpeter’s analysis of the entrepreneur in chap-
ter 2 and other parts of Theorie, I shall stop here and instead turn to a chapter that
few people know about since it was not included by Schumpeter in the second edi-
tion. It was eliminated, in other words, from the edition of Theorie that is
commonly used by those who read Schumpeter in German (Schumpeter, 1926b) as
well as in English (Schumpeter, 1934). The chapter in question is the last chapter
in the 1911 book and it is called “An Overall Picture of the Economy” ( “Das Ges-
amtbild der Volkswirtschaft”; Schumpeter, 1911, pp. 463-548). The relevance of
this chapter for Schumpeter’s work as a whole has recently been made clear in an
interesting article by Yuichi Shionoya (1990). What Schumpeter does in this chap-
ter is also of particular interest to our pursuit in this article-namely, he leads the
reader back to “the social process” mentioned in the opening sentence of chapter
1, after having discussed “the economic fact” in great detail in the chapters that
constitute the bulk of the work.
Let us now see how Schumpeter does this in the final chapter of Theorie-how
he re-embeds, so to speak, the economic facts in the original “social process.”
After having discussed how statics and dynamics can be used in order to make
sense of “economic facts,” Schumpeter looks at the boundaries between the econ-
omy and other areas in society. It may well be true, he says, that we have to
separate out something called “economic facts” if we want to be able to make a
certain kind of analysis. This, however, should not prevent us from realizing that
in actual reality, economic and noneconomic activities are intimately related to
one another. More precisely, they are related to one another in two ways: they may
spill over into one another, and they display interesting analogies with one another.
To begin with the spillovers. The success of the entrepreneur within the econ-
omy, Schumpeter says, also impresses and fascinates outside the economy:
The leader in a primitive society was held in more or less universal esteem, and some-
thing similar is also true for the leader in a modem economy. Success in the area of the
economy assures him of influence in other areas as well. He is [for example] listened
534 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. 4/l 995

to in political questions. . Art and literature-social life in general-reacts to him, just

like medieval society reacted to the knight (Schumpeter, 1911, p, 526).

But the fact that an entrepreneur’s success on the stock exchange and elsewhere
has an impact beyond the narrow confines of the economy, does not mean that
one can use economic methods of analysis to understand these spillovers. This is
brought out with great clarity in Schumpeter’s discussion of social class, a phe-
nomenon where social and economic elements are organically mixed. It is true,
Schumpeter says, that economic elements do play a role in the constitution of
some classes (say, a landowning class or a capitalist class), but to focus exclu-
sively on these elements will not take us very far. There is, for example, also the
important “sense of community” that can be found in each social class and that
has little to do with economic factors. “Social classes,” Schumpeter (1911, p.
529) concludes, “are complicated [and] surely not purely economic . . . phenom-
ena.”
There also exist areas of society where the economic element is even weaker
than in social class (but is still present), such as art, politics, science, and morality
(e.g., Schumpeter, 1911, p. 536). All of these areas are characterized by what
Schumpeter calls “relative autonomy” (e.g., Schumpeter 1911, p. 545). Nonethe-
less-and we now come to a very central part of Schumpeter’s early vision of
socioeconomics-all of these noneconomic areas display “remarkable analogies”
to the economy (e.g., Schumpeter, 1911, p. 535; emphasis added). This analogy
consists of the fact that just as economic facts can be analyzed using a static and a
dynamic approach, so can art, politics, science, and morality. Schumpeter writes,
“We can distinguish between two different problems, not only when it comes to
the theory of economic life, but also when it comes to researching all the other
areas in the life of a nation: namely to explain [l] things that tend to equilibrium,
and [2] those that lead to development” (Schumpeter, 1911, p. 540). The dynamic
between static and dynamic elements, Schumpeter continues, has its roots in the
fact that leaders and followers also exist in the noneconomic areas of society, and
it is their activities that propel1 things onwards:
Groups in every area [of society] fall into two clearly discernable parts, just like eco-
nomic men. . In each area there are statically oriented inviduals as well as leaders. The
former are characterized by the fact that they essentially do what they have learnt; that
they move within the traditional framework; and that their views, disposition and behav-
ior are determined by what happens in the static parts of society. The latter [or the lead-
ers] are characterized by the fact that they see new things and alter the traditional
framework of their activity and the static parts of society (Schumpeter, 1911, pp. .542-
543).

After discussing the noneconomic areas of society in terms such as these,

Schumpeter ends Theorie by discussing how all the various areas of society come
together in what he calls “the organic unity of a culture” (Schumpeter, 1911, p.
546). Schumpeter also uses the expression “the social culture of a people” to
Schumpeter’s Vision of Socioeconomics 535

denote this totality, and he affirms that there is something to its unity that cannot
be explained by a static approach. There is this unexplicable something, he says,
which drives the whole culture onwards; and by looking at the total social phenom-
enon in this manner, “we thereby liberate things from their restrictive chains of
causality and give them back their life” (Schumpeter, 1911, p. 547). The circle is
now closed, and we are back to where we started in Schumpeter’s book-“the
social process is . . . one indivisible whole.”

Schumpeter’s Mature View of Socioeconomics

It is now time to pass on to Schumpeter’s second attempt to develop a socioeco-
nomic science or what constitutes his mature vision of socioeconomics. By calling
it “mature,” it is not necessarily meant that his second attempt is superior to his
youthful attempt, but rather that Schumpeter settled for this second attempt when
he was in his 30s and then stuck to it for the rest of his life. Indeed, this vision
comes to its fullest theoretical expression in Schumpeter’s posthumously pub-
lished History of Economic Analysis with its introductory statement on what he
called “(scientific) economics” in English and “Sozialiikonomie” in German, and
which consists of four major fields: economic history, statistics, economic theory,
and economic sociology (Schumpeter, 1954, p. 21).
Before describing Schumpeter’s second vision of socioeconomics in the final
form it acquired in his very last work, something needs to be said about its early
development. The first time that the term socioeconomics or Sozialiikonomik
appears in one of Schumpeter’s writings is a few years after the publication in 19 11
of Theorie, more precisely, in the history of economics that Schumpeter wrote for
Weber’s handbook of economics (Schumpeter, 1914). Did Schumpeter chose to
use this term by himself or did he use it because Weber asked him to do so-
Weber’s handbook was, after all, called Grundriss der Sozialiikonomik? This ques-
tion is unfortunately impossible to answer since the correspondance between
Weber and Schumpeter is not currently available.” What is clear from Schum-
peter’s book, however, is that Schumpeter interpreted his task as being much
broader than just tracing the history of economics in the conventional manner. In
sketching the history of economics from Antiquity to modern times, for example,
Schumpeter discusses not only the economic ideas of various economists but also
their views on society.
But even if the roots of Schumpeter’s second view on socioeconornics stretch
relatively far back in time, it was not till the middle of the 1920s that there appears
what we can speak of as a clear break with his first view on socioeconomics. It is
also around this time that we get the first sense for what Schumpeter’s new para-
digm was to be like. His novel approach came to an expression in two pieces of his
writings that both appeared in 1926, namely, the second edition of Theorie and a
programmatic article entitled “Gustav v. Schmoller und die Probleme von heute”
(Schumpeter, 1926a, 1926b). The decision to stop trying to produce a general sci-
536 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. 4/l 995

ence of society and instead scale down his ambitions to just cover the economy,
comes to a very clear expression in the new edition of Theorie, where the last chap-
ter on “The Overall Picture of the Economy” now has been eliminated. As the main
reason for omitting this chapter, Schumpeter mentions that it had drawn attention
away from his attempts to solve economic-theoretical problems. But one also
senses other reasons for getting rid of this chapter. In the 15 years that had elapsed
between the first and the second editions of Theorie (1 st edition 19 11; 2nd edition
1926), Schumpeter had grown into a mature man. There was also the fact that the
times did not much appreciate grandiose philosophical systems any longer; the
optimism of the pre-World War I days ( “la belle epoque”) had been replaced by
despair, revolution, and inflation in the postwar world. In preparing the second edi-
tion of Theorie, Schumpeter also eliminated those parts that suffered from what he
called “the indulgence of youth,” and he gave a new, scientific-sounding subtitle to
his work-all to make Theorie more professional looking (Schumpeter, 1926, p.
xiii). The only trace left over, in the English translation of the second edition, of the
earlier ambition to sketch a general theory of society is one single sentence which
says that “the theory of cultural evolution . . . in important points presents striking
analogies with the economic theory of this book” (Schumpeter, 1934, p. xi). The
86 pages of the last chapter in Theorie from 1911 had, in other words, become just
one sentence in the second edition of Theorie.
If Schumpeter’s first big step towards his new paradigm in socioeconomics con-
sisted of his decision to exclusively focus on the economy, as opposed to society as
a whole, the second was to acknowledge that social sciences other than economics
are also needed to analyze economic phenomena. Originally, Schumpeter had
taken a militant stance in the Methodenstreit, siding wholeheartedly with Menger
and belittling the historical camp (see, e.g., Schumpeter, 1908). As time went on,
however, Schumpeter gradually changed his attitude, and this process culminated
in the 1926 article on Schmoller. “Gustav v. Schmoller und die Probleme von
heute” contains extremely high praise of Schmoller, whose work is said to embody
“the Sozialokonomie of today and tomorrow” (Schumpeter, 1926a, p. 381).
Schumpeter discusses three approaches to economics, all of which he says can be
of help in understanding economic phenomena-economic theory, economic his-
tory, and economic sociology. Economic theory (or theoretische Sozialiikonomie,
to use Schumpeter’s preferred term) has to be very closely related to facts; he also
calls it “concretized theory” (Schumpeter, 1926a, pp. 353, 367). And history is
now presented as a very worthwhile and pro-theoretical enterprise in its own right,
not just as some kind of “anti-theoretical description” (Schumpeter, 1926a, p. 375).
Schumpeter’s article also contains praise for what he calls “economic sociology,”
a new subdiscipline which he says Schmoller has invented.
By the mid-1920s in other words, the two key pieces of Schumpeter’s new
approach to socioeconomics were both in place: the decision to scale down the the-
ory from all of society to the more manageable area of just the economy, and the
Schumpeter’s Vision of Socioeconomics 537

decision to study the economy with the help of several social sciences, not simply
economics. During the rest of Schumpeter’s life, he was to stick to this position,
and he also let this concept of socioeconomics guide his analysis in such famous
works as Business Cycles (1939) and Capitalism, Socialism and Democracy
(1942). The way he did this was complicated, and in order to keep this article tol-
erably short a discussion of these works will be omitted and I shall simply proceed
to the place where Schumpeter’s new concept is discussed in most detail, namely,
History ofEconomic Analysis (for an attempt to analyze Business Cycles and other
works by Schumpeter from the perspective of his theory of socioeconomics, see
Swedberg, 1991).
History of Economic Analysis was Schumpeter’s last work-he never had time
to complete it before he died in 1950~and in it, he tried to express what a life,
spent as an economist, had taught him. There is little point, he noted, in trying to
give a precise definition of economics; all that one can say is that economics is “an
agglomeration of ill-co-ordinated and overlapping fields of research in the same
sense as is ‘medicine”’ (Schumpeter, 1954, p. 10). The fields that make up eco-
nomics also shift with time: “[a field] may be added to or dropped from any
complete list that might be drawn up as of today” (Schumpeter, 1954, p. 10).
The sum total of these fields, Schumpeter said, “we call (scientific) economics”
(Schumpeter, 1954, p. 21). This term is of relatively recent origin and its use was
established from the 1890s onwards by Alfred Marshall. “Later on,” Schumpeter
says, “a parallel usage was introduced, though less firmly established, in Germany.
The word was Social Economics, Sozialokonomie, and the man who did more than
any other to assure some currency to it was Max Weber” (Schumpeter, 1954, p.
21). The fields that make up “(scientific) economics” or “social economics” are,
according to Schumpeter in History of Economic Analysis: “economic history,”
“statistics,” “economic theory,” and “economic sociology.”
A few words need to be said about each of these four fields if we are to under-
stand Schumpeter’s theory of socioeconomics. The first field is that of economic
history, and it is in the History of Economic Analysis that we find Schumpeter’s
famous statement, “I wish to state right now that if, starting my work in economics
afresh, I were told that I could study only one of the [fundamental fields in eco-
nomics] but could have my choice, it would be economic history that I should
choose” (Schumpeter, 1954, p. 12). Schumpeter gives three main reasons why eco-
nomic history is so important to socioeconomics. First, since economic events do
take place in historical time, history is needed. Second, economic facts are not iso-
lated items but embedded in social reality-hence, history is “the best method for
understanding how economic and noneconomic facts are related to one another
and how the social sciences should be related to one another” (Schumpeter, 1954,
p. 13). And third, most errors in economics are committed because the analyst
lacks sufficient knowledge of economic history. It should also be added that
Schumpeter’s praise for economic history was mainly directed at the economic
538 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. 4/l 995

theorists of his own days. At one point in History of Economic Analysis, Schum-
peter jokes and says a propos of his American students that since they lack a sense
of history, it is easier to make theorists out of them than economists (Schumpeter,
1954, p. 472).
The second field of socioeconomics that Schumpeter discusses in the History of
Economic Analysis is that of statistics. His main point here is not that the econo-
mist should use statistics-that is taken for granted-but that the economist must
be so well acquainted with statistics that he or she understands exactly how the
facts have been compiled, how the methods work, and what their epistemological
underpinnings are. If the economist does not do this, he or she will run the risk of
“producing nonsense” (Schumpeter, 1954, p. 14).
In discussing economic theory-“the third fundamental field [of socioeconom-
its]“-Schumpeter is especially concerned to make the reader understand that
theory is by no means identical to the framing of hypotheses (on this point, see also
the brilliant methodological introduction to Business Cycles). The real work in the-
ory consists rather of conceptualizing the various mechanisms that exist in
economic life. It is by work of this kind that we will be able to add to “the box of
tools” that one must use in order to frame a hypothesis in the first place (Schum-
peter, 1954, pp. 14 ff.). It should also be noted that Schumpeter does not say
anything about economic theory being the most important part of socioeconomics.
In other words, economic theory is just one of the several fields that make up
socioeconomics: it is indispensible to economics, but it does not constitute its only
key.
Finally, there is the field of economic socioZogy. While economic theory looks
at economic behavior as this takes place “within the social framework,” economic
sociology deals with the social framework itself-or, at least, with those parts of it
that are of special relevance to the economy (such as government, property, inher-
itance, and contract; Schumpeter, 1954, pp. 20-21, 509, 547-550). Economic
sociology is closely related to economic history and it constitutes “a sort of gener-
alized or typified or stylized economic history” (Schumpeter, 1954, p. 20).
How are the fields that Schumpeter talks about related to one another and when
should one approach be used rather than another? In brief, how can one analyze a
concrete economic problem according to Schumpeter’s theory of socioeconomics?
This is obviously an extremely important question, and Schumpeter’s whole the-
ory of socioeconomics can even be said to stand or fall with the answer.
Schumpeter, however, does not give us much of an answer. At one point in History
of Economic AnaZysis he says, for example, that economic history needs the help
of economic theory, and at another he warns that too much “cross-fertilization”
between economics and sociology may lead to “cross-sterilization” (Schumpeter,
1954, pp. 13, 27). A few more hints can also be found in Schumpeter’s own stud-
ies, as opposed to his more programmatic statements-but that is about all (see,
e.g., Swedberg, 1993). Schumpeter’s silence on this point is, of course, to be
Schumpeter’s Vision of Socioeconomics 539

regretted; one is tempted to say that he stopped when things were getting really
interesting. Then again, we should not demand the impossible of Schumpeter, and
he should be applauded for having developed his vision of socioeconomics as far
as he did.

CONCLUDING REMARKS
In the final part of this article, it is appropriate to compare Schumpeter’s two
paradigms of socioeconomics and also to relate both of them to the current state
of socioeconomics. Today’s socioeconomics, as was noted in the introduction, is
infused by a vision of a new type of economics, and it is also in the process of
translating this vision into reality, in the form of scientific work. The question
then becomes: Is there something to be learned from Schumpeter’s similar
attempt to go from a youthful and enthusiastic vision of socioeconomics to a
more tempered and reduced version of socioeconomics later on in life?
By way of an answer, compare Schumpeter’s two paradigms. In his early and
somewhat Dionysian version of socioeconomics, Schumpeter tried not only to sup-
ply a key to all of economics, in the form of a theory of the entrepreneur, but also
to supply a key to all areas of society. No doubt this was an expression of youthful
hubris, and Schumpeter was later to beat a quick retreat on both accounts. That
Schumpeter’s decision to give up on the enormously ambitious program of his
youth was indeed wise, becomes clear when we contemplate the alternative course
of action. If Schumpeter had continued to work along the lines of his first para-
digm, he would have had to develop a novel approach to practically every problem
in economics as well as to all other areas of society. He would have had to push
aside whatever accumulated knowledge existed in the economic and in the noneco-
nomic social sciences; he would have placed himself outside the economic
discourse of his time; and he might very well have ended up with an unwieldy and
peculiar project, such as that of Auguste Comte.
Compared to these rather dismal prospects, the course that Schumpeter actually
chose to take-namely, to scale down his socioeconomics from a general science
of society to a science that only deals with the economy (and does this by drawing
on the insights generated by sociologists, historians, and so on)-was undoubtedly
the right one. It is obvious that Schumpeter’s latter approach is superior to his first
alternative, and I shall therefore spell out what Schumpeter’s final version of
socioeconomics may mean for a successful socioeconomics today:

1. No problem in economics can, given the advanced state of knowledge in the

noneconomic social sciences, be solved exclusively by drawing on economics.
There also has to be an input from the other social sciences;
2. The economist should make an effort to become what Schumpeter called an “all-
round economist” and, hence, try to learn economic theory, economic history,
economic sociology, and statistics;
540 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. 4/l 995

3. There should be open boundaries between economics and the other social sci-
ences so that information and people can flow forth and back. Perhaps, econom-
ics departments should be staffed not only with economists but also with
sociologists and economic historians (and vice versa);
4. Sustained attention has to be directed at the problem of multidisciplinary
research-as opposed to interdisciplinary research. The difference between these
two approaches is that the former allows the individual disciplines to remain
essentially the same (though opening them up to influences from the outside),
while in interdisciplinary research, the ultimate aim is to create a new science.

Phrased in this manner, Schumpeter’s later version of socioeconomics clearly

wins out over his original version. A socioeconomics that follows the later
Schumpeter, I would argue, will always be able to find a place in the world of
thought and academia since it represents a reasonable and intelligent approach to
the study of economic phenomena.
But, then, there is the nagging thought: Have we not also lost something pre-
cious in Schumpeter’s thought by so wholeheartedly siding with his second and so-
called mature view? What became of the entrepreneur, of economic dynamics, and
of economic evolution in the program for socioeconomics that we find in History
ofEconomic Analysis? The answer is simple: they are not there. In creating his last
version of socioeconomics, Schumpeter eliminated many of his own most precious
contributions to economics, speaking only of the “field” of economic theory and
presumably letting the reader fill in with whatever he or she desires at this point.
But this is sacrificing far too much of what is genial in Schumpeter, and I therefore
suggest that we correct Schumpeter’s second theory of socioeconomics in the fol-
lowing manner. Let us reintroduce into its very middle the attempt, spelled out for
the first time in Theorie in 19 11, to create a dynamic theory of economic change.
For there to be a live and vibrant socioeconomics, we need to keep a bit of the orig-
inal Schumpeterian Vision and add some of its Dionysian energy to its later and
more Apollinian version. To the four principles suggested above for today’s socio-
economics, I therefore think we should add a fifth one that reads:

5. Innovations, economic change, and economic dynamics all represent key prob-
lems in modern economies. Socioeconomics is particularly well equipped to
study problems of this type, and they therefore should constitute its main focus.

Acknowledgment: This article is based on a talk given at the Conference on Socio-Economic

Approaches in Vienna, April 27-30, 1994, which was organized by Egon Matzner. The author is
grateful for comments by Karl S. Althaler, Beat Btirgenmeier, and Egon Matzner.

NOTES
1. Schumpeter also wrote on vision in other places than History of Economic Analysis (see, e.g.,
Schumpeter, 1989, p. 278). It should also be mentioned that one aspect of Schumpeter’s ideas
Schumpeter’s Vision of Socioeconomics 541

on vision, which is not touched upon at all in this article but was very important to Schumpeter,
has to do with the general affinity between vision and ideology.
2. Again, it has to be emphasized that it is difficult to draw a line between what is “socioeconom-
ic? because it calls itself socioeconomics, and works that use a different label but nonetheless
belong to the socioeconomics camp. For example, Adolph Wagner (1907) talks interchange-
ably about “Volkswirtschaftslehre oder Sozialokonomik.” It should be noted that, in a more
general sense, one is of course justified in describing the German Historical School as having a
“socioeconomic” approach. Doing so in this article, however, would unduly expand its
length-and also gloss over the fact that this school did not define itself in these terms.
3. Diihring spoke of “Nationalokonomie” and “Socialokonomie,” as the title of one of his works
makes clear (Dtihring, 1876). The latter type of economy had, for example, an international
dimension that the former lacked.
4. It may be mentioned that someone like Carl Menger also was of this opinion (see, e.g.,
Menger, 1985)-which again raises the question of how to write the history of a special school
in economics-here, that of socioeconomics.
5. For Weber’s theory of Sozialiikonomik, see Weber (1949a, 1949b). In the preface to the first
volume of Grundriss der Sozialiikonomik, Weber expressed his hope “that all [the different]
roads [to economics] in the last end will come together” (Weber, 1914, p. viii).
6. “Economic phenomena” are defined as those phenomena that “primarily interest us with
respect to their economic significance. ” “‘Economically relevant’ phenomena” do not interest
us for this reason but rather because they “have consequences which are of interest from the
economic point of view.” “Economically conditioned phenomena,” finally, are not economic
(in Weber’s sense) nor do they have economic effects-but “in individual instances [they] are
. . . more or less strongly influenced in certain important aspects by economic factors” (cf.
Weber, 1949a, pp. 64-65).
7. Schumpeter himself used the notion of an economist’s vision in a broad way, as I am doing
here. In History of Economic Analysis, Schumpeter, for example, speaks of Marx’s vision of
the economic future without thereby having exhausted its use in connection with Marx’s work
(Schumpeter, 1954, p. 573).
8. It should be noted that, contrary to some scholars, such as the prominent Japanese economist
Yuichi Shionoya (1990) I do not think that Schumpeter’s very first book-Das Wesen und der
Hauptinhalt der theoretischen Nationaliikonomie (1908~should be seen as part of his
attempt to create a broad-based socioeconomic science. Shionoya argues that what he calls
Schumpeter’s “research program” for a “universal social science” includes the main thrust of
Das Wesen, which was to advocate the use of a static approach a la Walras to certain problem
in economics (for Schumpeter’s one and only use of the term “universal social science,” see
Schumpeter, 1926a, p. 365). It seems clear to me that Shionoya is right in arguing that Schum-
peter always saw a role for the static approach in his own economics, albeit a small and proba-
bly also a decreasing one. Nonetheless, I would argue that Schumpeter’s first book does not
express Schumpeter’s ambition to create a broad-based and general economics. The reason for
this has nothing to do with Schumpeter’s advocacy (in certain situations) of the static approach
but rather with his explicit hostility in this work to any collaboration whatsoever between eco-
nomics and the other social sciences. As Jtirgen Osterhammel(l987) has pointed out, Schum-
peter in his first book advocated breaking ofJal1 relations between economics and the other
social sciences-something that Schumpeter referred to as “the Monroe Doctrine [ofl econom-
ics” (Schumpeter, 1908, p. 536; cf. Osterhammel, 1987, p. 48). It should also be added to the
record that Schumpeter later in life described his book as “a methodological writing on the rel-
ative merits of historical and theoretical economics,” adding, “I have no copy [of it] and [I]
have been trying to atone for this effort of my youth since it was issued’ (Schumpeter, 1944;
542 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. 4/l 995

the first part of the quote is not a direct quote by Schumpeter himself but can nonetheless be
ascribed to Schumpeter since the reporter is unlikely to have read Das Wesen in the original).
A qualification to what I have just said is perhaps in order at this point: namely, that Schum-
peter from an early age on was very interested in all the social sciences, not just economics. The
knowledgeable way in which he, for example, refers to the other social sciences in his first book
surely makes the reader realize that its author was well acquainted with, for example, sociology.
And this is true indeed-Schumpeter himself said in an autobiographical statement that “my
interest in sociology and philosophy emerged while in high school” (cited in Swedberg, 1991,
p. 11). He considered himself capable of lecturing in sociology when he received his Hubilitu-
tion (qualification to teach at the university) in 1908-with Das Wesen as his
Habilitutionsschrifr (required second Ph.D dissertation)! Many other examples can be given of
Schumpeter’s proficiency in the social sciences (see, e.g., Swedberg, 1991, chs. 5,8). The issue
here is not, however, Schumpeter’s knowledge of the social sciences but whether he had a broad
concept of economics and his advocacy of cooperation between economics and the social sci-
ences when solving economic problems.
9. Later-for example, in the preface to second edition of 1926Schumpeter added “Kultursozi-
ologie” or “sociology of culture” (Schumpeter, 1926, p. xi).
10. This correspondence will eventually appear in the Gesamtnusgabe (Collected Works) of
Weber’s work that is being prepared. According to Prof. Wolfgang Mommsen (in a conversa-
tion with the author), its content is, however, of little interest.
It should be added that even though Schumpeter now eliminated these ideas from his
agenda, he was not to give them up totally. They continued as a subterranean current in his work
and surfaced occasionally, for example, in his very last writing, “American Institutions and
Economic Progress” (Schumpeter, 1991). The general idea of there being “striking analogies”
between, say, economics and politics also constitutes the basis for Schumpeter’s brilliant anal-
ysis of democracy in Cupitulism, Socialism and Democrucy (cf. Schumpeter, 1975, pp. 250-
283).

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