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Capitalist Dynamics: A Technical Note

Listed author(s):
  • Erik S. Reinert

Carl Menger, the founder of the Austrian School of Economics, had the ambition that economics should be a .map of the forces at workÿ. Standard textbook economics (.neo-classical economicsÿ) takes as its starting point a metaphor of .equilibriumÿ based on the state of the physics profession in the 1880s. This force towards equilibrium is, however, only one of many forces at work. The most fundamental feature of capitalism is change, and this change is only poorly reflected in standard economics. Financial crises are just one of the many things that happen in real life, but cannot happen in standard textbook economics. From the standpoint of Joseph Alois Schumpeter (1883-1950), Austrian economist and Harvard economics professor who spent much time at Harvard Business School, .equilibriumÿ is the opposite of economic development. Equilibrium theory therefore fails to reflect many of the mechanisms of industrial and economic dynamics that create economic welfare. This note attempts to outline some of these forces.

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Paper provided by TUT Ragnar Nurkse School of Innovation and Governance in its series The Other Canon Foundation and Tallinn University of Technology Working Papers in Technology Governance and Economic Dynamics with number 26.

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Length: 15 pages
Date of creation: Aug 2009
Handle: RePEc:tth:wpaper:26
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