More known than understood

Joseph Schumpeter occupies a curious place in the history of economic thought. His name is widely known among economists, yet his work has never really been absorbed into the mainstream of the discipline. He is regarded as an original thinker, yet relatively few could summarise the arguments of his key writings.

Yuichi Shionoya, a deep admirer of Schumpeter, has attempted to produce what, according to the claims of the publisher, should be "a standard reference on Schumpeter scholarship for years to come". The book deals briefly with his life then proceeds through the whole, expansive range of his work, providing a full listing of his academic publications.

But Shionoya has chosen a rather eccentric way of seeking to enlighten the profession about his hero. The book is intended to present a new analytical interpretation of Schumpeter's accomplishments. This goal is certainly achieved. But it is debatable whether the reader is left any the wiser for it.

The problem is twofold. First, in a manner that is familiar in literary theory but much less so in economics, the author attempts to re-interpret Schumpeter in ways that may have left the great man himself somewhat bemused. We are told, for example, that "to understand the rationale for Schumpeter's thinking, one must reconstruct a scientific system by examining the implicit habits and styles of thoughtI these steps are all the more necessary because Schumpeter deliberately avoided reflecting upon his own scientific system".

The second difficulty is the prism through which Shionoya filters Schumpeter's thought. Much is made of the concept of "habitus", articulated by the French sociologist Pierre Bourdieu. Habitus is defined as "systems of durable, transposable dispositions, structural structures predisposed to function as structuring structures". It could be that something has been lost in the translation from the French. But to grasp the meaning of this sentence has, regrettably, proved to be beyond the ability of this reviewer.

The obscurantist nature of the organising principles of the book detracts considerably from its inherent merits. Of particular interest is the way in which Shionoya relates Schumpeter's work to that of other leading social scientists, mainly of the first half of this century, but also before. A diverse range is covered, from David Ricardo and Karl Marx to Vilfredo Pareto and Max Weber. These contrasts and comparisons of Schumpeter's thinking with that of other social scientists are illuminating. But their value is limited by the failure of the author to set Schumpeter's ideas in the context of developments since his death in 1950, which further restricts the book's general appeal.

Perhaps the most interesting of these sections, and one that is all too short, expounds the criticisms that Schumpeter made of John Maynard Keynes, particularly after the publication of the latter's General Theory. Schumpeter and Keynes developed different views. Keynes's were accepted by the majority of their contemporaries; Schumpeter's were not. But with the passage of time, and placing Shionoya's exposition in the context of subsequent developments in economics, it is Schumpeter who appears the more incisive of the two in several key respects.

Shionoya identifies three main points that Schumpeter raised against Keynes. First, that the so-called General Theory was nothing of the kind, but merely an advocacy of policies that were valid only for the unique circumstances of the Great Depression. With the benefit of 60 years of history - a long time in the comparatively short life of capitalism - we can see that the 1930s were unique. Neither before nor since has the world economy collapsed in such a spectacular fashion.

Schumpeter's second criticism focused on the aggregate nature of Keynes's analysis, arguing that an economic system can be understood only in terms of the interdependence of microeconomic agents. This idea is now widely accepted in economics. Recent advances in computer technology enable realistic models of the business cycle to be built, for example, that have sound micro-foundations based on non-rational agents.

The third point of dispute was seen as the most serious by Schumpeter himself. Keynes did not address the phenomenon of long-term growth, which is the feature that distinguishes capitalism most clearly from all other systems of economic organisation. And in recent decades, growth theory has come to occupy a crucial place in economics.

The book has many short passages, and even single sentences, that sparkle, amuse and give general food for thought. And Shionoya brings out well Schumpeter's acerbic style of criticism. For example, in some of his very last writings he singled out Adam Smith and Alfred Marshall from all economists for special praise. For their major books were "the result of work of decades and fully matured, the product of minds that took infinite care, were patient of labour and indifferent to the lapse of years". This eulogy had the secondary, or possibly even primary purpose of damning by implication Schumpeter's intellectual enemies who pronounced extensively on contemporary economic policy, whether in his own lifetime, such as Keynes, or who were long dead, such as Ricardo.

But, to set against these sections, there are much more sober discussions of topics such as "Beyond the Methodenstreit", "The classical situation and the filiation of ideas" and "Schmoller's research program and the German historical school".

The book is undoubtedly a required purchase for any avid enthusiast for Schumpeter's writings. But its appeal beyond this group of devotees is limited. Indeed, the more general social scientist wishing to increase his or her knowledge of Schumpeter would probably find it more profitable to read his major works directly.

Paul Ormerod is chairman, Post-Orthodox Economics.