Birthday: February 8, 1883
Nationality: Austrian, Czech
Died At Age: 66
Sun Sign: Aquarius
Also Known As: Josef Aloys Schumpeter
Born Country: Czech Republic
Born in: Třešť, Czechia
Famous as: Economist
Spouse/Ex-: Elizabeth Boody Schumpeterm (m. 1937), Anna Reisingerm (m. 1925 – div. 1926), Gladys Ricarde Seaverm (m. 1907 – div. 1925)
father: Joseph Schumpeter Sr.
mother: Johanna Schumpeter
Died on: January 8, 1950
place of death: Taconic, Salisbury, Connecticut, United States
education: University of Vienna
Joseph Schumpeter was an Austrian political economist who also served as the finance minister of Austria in 1919. He joined ‘Harvard University’ as a professor in 1932 and remained there until the end of his career. Apart from ‘Harvard,’ he has also taught at reputed institutes such as the ‘University of Czernowitz,’ the ‘University of Graz,’ and the ‘University of Bonn.’ Some of his most notable students were Ferdinand A. Hermens, James Tobin, Paul Samuelson, Anne Carter, Paul Sweezy, Nicholas Georgescu-Roegen, Hyman Minsky. He is known to have popularized the term “creative destruction.” He is also known for his theories on capitalist development and business cycles. He is credited for introducing the concept of entrepreneurship.Some of his best-known works are ‘Business Cycles’ (1939), ‘Capitalism, Socialism, and Democracy’ (1942), and ‘History of Economic Analysis’ (1954). He had married thrice. His third wife, American economic historian Elizabeth Boody, helped release the book ‘History of Economic Analysis,’ posthumously. He is considered one of the most prominent economists of the 20th century, along with John Maynard Keynes.
Childhood & Early Life
Joseph Aloïs Schumpeter was born in Triesch, Habsburg Moravia (modern-day Třešť in the Czech Republic, which was then part of Austria–Hungary), on February 8, 1883, to Catholic German-speaking parents. His father was a cloth manufacturer. Schumpeter was the only son of his parents.
His father died in 1887, following which his mother moved to Graz. There, Schumpeter began his elementary education. In 1893, his mother got married to a military officer named Sigismund von Keler. Subsequently, the family settled in Vienna. Schumpeter then joined the reputed ‘Theresianum’ school.
After completing high school, Schumpeter joined the law faculty of the ‘University of Vienna’ in 1901. Initially, he was interested in history. However, Schumpeter developed an interest in economics after being influenced by his teachers, Eugen Philippovich, Eugen von Böhm-Bawerk, and Friedrich von Wieser. In February 1906, Schumpeter received his doctorate in law. Schumpeter then studied economics in Berlin, following which he went to England, researching on English common law.
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He moved to Cairo after getting married in 1907. There, he took up a job at an Italian law firm. However, that was when he completed his first work on economic methodology. Soon, he moved to Vienna.
In March 1909, he joined the ‘University of Czernowitz’ (east Galicia, present-day Ukraine) as an assistant professor. While teaching at ‘Czernowitz,’ he wrote ‘Theory of Economic Development ‘(1911), which contained his path-breaking theory of entrepreneurship. Schumpeter then joined the ‘University of Graz’ in 1911, as a full professor of economics.
He then spent a year (1913–1914) at ‘Columbia University,’ United States. After World War I broke out in 1914, Schumpeter's wife did not wish to return to Austria and returned to England by herself. They divorced soon after.
Following the war, toward the end of 1918, Schumpeter joined the ‘German Socialization Committee’ in Berlin (for Weimar Germany).
In 1919, he left Berlin to take up the position of the minister of finance in Austria.
He then taught briefly at ‘Graz.’ He quit teaching in 1921 and joined a small Viennese bank as its president. After the failure of the bank in 1924, he returned to academia, joining the ‘University of Bonn’ in Germany in 1925.
In 1932, realizing that his political beliefs might hinder his career in Germany, Schumpeter joined ‘Harvard University’ as a professor.
At ‘Harvard,’ he wrote three of his most groundbreaking books: ‘Business Cycles’ (1939), ‘Capitalism, Socialism and Democracy’ (1942), and ‘History of Economic Analysis’ (1954, published posthumously).
In the second book, he predicted the collapse of capitalism due to the efforts of intellectuals. He essentially developed a business cycle theory and merged it with a theory socio-economic evolution.
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At ‘Harvard,’ he worked as the faculty advisor for the ‘Graduate Economics Club.’ He also organized seminars and discussion groups
In 1939, he obtained U.S. citizenship, and in 1947, he became the first-ever immigrant in American history to become the president of the ‘American Economic Association.’
Schumpeter is known for his contribution to economic science and political theory. However, his most prominent contribution was a six-page chapter in his book ‘Capitalism, Socialism, and Democracy,’ titled “The Process of Creative Destruction.”
Schumpeter coined the term “creative destruction” to describe the process of the old being continuously replaced by the new. He offered a new perspective on the growth of economies and stated that economic progress was not a gradual process but was mostly disjointed.
Schumpeter was perhaps the first scholar to have developed theories on entrepreneurship. He coined the German word “Unternehmergeist,” which meant “entrepreneur-spirit.” He believed that such individuals held the reins of the economy because they were responsible for innovative and technological changes in the economic sphere.
He did not believe markets passively moved toward equilibrium. He stated that innovation and experimentation by entrepreneurs continuously destroy old methods and give rise to new equilibrium, thus creating better standards of living.
He also believed in business cycles. He stated that whenever an entrepreneur disrupts the existing market, the available sectors experiences a temporary period of loss. He, however, believed that these cycles let the available resources to be used more productively.
His views differed from those of John Maynard Keynes, another influential economist of the same era. Keynes believed in the efficiency of a stable equilibrium. Keynes also stated that centralized monetary policies had the potential to bring in permanent prosperity. However, Schumpeter believed that constant innovation was a better driver of the economy. Schumpeter also stated that government policies only manage to increase inflation and thus are harmful for the economy.
Family & Personal Life
Schumpeter was married thrice. His first wife, Gladys Ricarde Seaver, was almost 12 years older than him. Her father was an Anglican dignitary. They got married in 1907. However, they separated in 1913 and divorced in 1925.
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His second wife, Anna Reisinger, was 20 years younger than him. Her father was the concierge of the apartment he had grown up in. Both he and Anna had converted to Lutheranism to get married to each other in 1925. She died within a year, from complications due to childbirth.
Schumpeter married his third wife, American economic historian Elizabeth Boody, in 1937. She was instrumental in popularizing his work and edited his most important work, ‘History of Economic Analysis,’ which was published posthumously.
On January 7, 1950, Schumpeter died in his home in Taconic, Connecticut. He was 66 years old at the time of his death.
Robert Heilbroner, one of Schumpeter's most well-known pupils, wrote about him in ‘The Worldly Philosophers.’
Renowned economists Nicholas Georgescu-Roegen, John Kenneth Galbraith, and Hyman Minsky were his students. He had also taught Alan Greenspan, former chair of the ‘Federal Reserve of the United States’ and ‘Nobel’ laureate Robert Solow (when he was a student at ‘Harvard’).
The innovation program of the ‘European Union' and its primary development plan, the ‘Lisbon Strategy,’ were influenced by Schumpeter’s ideas.
The ‘Schumpeter Prize’ is awarded by the ‘International Joseph A. Schumpeter Society.’
In October 2008, the ‘Schumpeter School of Business and Economics’ opened at the ‘University of Wuppertal’ in Germany.
‘The Economist’ started a column on business and management, titled "Schumpeter," on September 17, 2009.