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Book Review: The Theory of Economic Development by Joseph Schumpeter

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Joseph Schumpeter is known as the “Prophet of Innovation” and published his work The Theory of Economic Development at 28 years of age ( 1 ). As an economist he didn’t receive much attention because he wasn’t in alignment with the popular Keynesian Economics of the time ( 2 ).   His greatest achievement being the meshing of sociology with economics to make a system of development. The chapters of the book are: (I) The Circular Flow of Economic Life as Conditioned by Given Circumstances; (II) The Fundamental Phenomenon of Economic Development; (III) Credit and Capital; (IV) Entrepreneurial Profit; (V) Interest on Capital; (IV) The Business Cycle. Schumpeter believed in a perfect equilibrium where there are no profits, no savings, no new products, no voluntary unemployment, or need. It is a system of economic flow where there is no need to adapt, adjust, or change because everything is running smoothly. This perfect equilibrium either never existed or