Showing posts with the label The Theory of Economic Development

Book Review: The Theory of Economic Development by Joseph Schumpeter

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