ERIC Number: ED199182
Record Type: RIE
Publication Date: 1978-Feb-15
Reference Count: 0
The Schumpeterian Model of the Cyclical Process in the Evolution of American Capitalism, 1786-1939.
Hawley, John B.
This paper describes the Schumpeterian schema of capitalist business cycles. The creator of the model, Joseph A. Schumpeter (1883-1950), was a Czech-born and Viennese-educated theoretical economist who emigrated to the United States in the 1930s and taught at Harvard University for 18 years. He is particularly remembered in economic circles for discussions of historical data in the context of his theory. Schumpeter defined competitive capitalism as that form of private-property economy in which innovations had been carried out by means of borrowed money. His model is based on a three-step process. First, he identified a primary business cycle consisting of prosperity and recession (called the First Approximation), by introducing entrepreneurial innovation into a situation of general equilibrium; second, he identified a four-phase cycle consisting of prosperity, recession, depression, and recovery (the Second Approximation); finally, he concluded that several cycles of different lengths emerged from the innovation process and operated simultaneously. In Schumpeter's view, competitive capitalism was an economic system which was neither pure nor perfect and which experienced fluctuations, upswings, contractions, and booms and busts. Many factors were responsible for these cycles, including wars, social unrest, and social movements such as Prohibition (external factors); changes in taste and in the quantity and quality of production forces, and changes in the methods of supplying commodities (internal factors). Tabular data are presented on the more than 50 major and minor cyclical industries which Schumpeter analyzed to provide evidence for his theory. The document concludes with a bibliography of Schumpeter's works and of tables relating to business cycles during various time periods. (DB)
Publication Type: Opinion Papers; Guides - Classroom - Learner
Education Level: N/A
Authoring Institution: N/A
Identifiers: Schumpeter (Joseph)