Some wisdom from Schumpeter

by Russ Roberts on October 9, 2007

in Podcast

The latest EconTalk is a conversation with Thomas McCraw about the life and ideas of Schumpeter based on his recent bio of the man. The book is beautifully written and McCraw is very articulate. Schumpeter’s dynamic view of competition is his single most important contribution to economics but because it is not easily formalised in mathematics, it has been ignored by most modern economists.

Here are three wonderful quotes from Schumpeter. The first is from Capitalism, Socialism, and Democracy. The last two are from his diary, quoted by McCraw.

There are no doubt some things available to the modern workman that
Louis XIV himself would have been delighted to have—modern dentistry
for instance. On the whole, however, a budget on that level had little
that really mattered to gain from capitalist achievement. Even speed of
traveling may be assumed to have been a minor consideration for so very
dignified a gentleman. Electric lighting is no great boon to anyone who
has enough money to buy a sufficient number of candles and to pay
servants to attend them. It is the cheap cloth, the cheap cotton and
rayon fabric, boots, motorcars and so on that are the typical
achievements of capitalist production, and not as rule improvements
that would mean much to the rich man.  Queen Elizabeth owned silk
stockings. The capitalist achievement does not typically consist in
providing more silk stockings for queens but in bringing them within
reach of factory girls in return for steadily decreasing amounts of

Humanity does not care for freedom. The mass of the people realize they are not up to it: what they want is being fed, led, amused, and above everything, drilled. But they do care for the phrase.

Politicians are like bad horsemen who are so preoccupied with keeping in the saddle that they can’t bother about where they go.

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M. Hodak October 9, 2007 at 12:41 pm

Contrast that with a quote from John Steele Gordon that went something like this:

Prince Esterhazy could hear Haydn any time he wish. He just had to summon up his orchestra for a performance. Today, anyone can do this with a recording. The fidelity isn't perfect like a live concert, but it's very good and it doesn't require an afternoon of preparation to hear. But today's kid (with an iPod) can do something Esterhazy could never dream of–they can summon the dead. Anyone can hear Louis Armstrong or Judy Garland with the push of a button…

Darren October 9, 2007 at 1:49 pm

That second quote (about freedom) is interesting. It's something that keeps occurring to me as I observe the world but that my optimism continues to file under "Couldn't possibly be true."

Dr. Troy Camplin October 9, 2007 at 5:31 pm

All people want are bread and circuses. It is and has aleays been the minority who fought for freedom for them.

tiger October 10, 2007 at 7:55 am

I can't agree that humanity doesn't want freedom. Sure, a human being must have food, shelter, companionship to survive and will therefore be drawn to that before anything else. But history has proven time and again that in the end, most humans have figured out that to be fed, led and amused, the essential ingredient is freedom.

Student October 10, 2007 at 11:49 am

Quotes like the second really rub me the wrong way. *Hummanity* doesn't want freedom? Does that mean Schumpeter didn't want freedom either? Or is Schumpeter just that much better than the rest of us that he considers himself as a higher class of ape?

I have a hard time figuring out why Roberts thinks this quote is wonderful. I mean, how can you support expanding economic freedom if you think your fellow man is too dim to "get it"?

Well, I take that back. I know exactly why Roberts likes it. He is one of those special apes that will teach the rest of us how we really should live our lives. Who said paternalism is dead?

Dr. Troy Camplin October 10, 2007 at 3:41 pm

The desire for freedom of the kind we are talking about here has always come about when certain social conditions existed — and disappeared when they disappeared. That is why it arose after the Renaissance and has bene disappearing in the 20th century. It is a gross simplificaiton to say that people want freedom. It has always been a small group of rabble-rousers who changed society, our mythologies to the contrary notwithstanding. History shows that people always vote away their freedoms. If they always vote them away, what does that say about their wanting to be free?

vidyohs October 10, 2007 at 5:43 pm

Actually when I read the second quote, I agreed with it wholeheartedly and here is why.

True freedom is not license.

License means that you can do anything covered by the license and not have any responsibility.

Freedom on the other hand carries with it the burden of responsibility; foremost of which is self responsibility, and then to observe the principles of natural law which lay the responsibility on the individual to not infringe on other's natural rights as they do not infringe on yours.

I long ago came to the same conclusion because of my own personal observations, most people are quite content to give up freedom for security and lack of personal responsibility. This is the precise reason we see nearly half the population as followers of the Socialist Church.

Freedom is risky, the individual is exposed to change, chance, competition, and is responsible for making his own way through the turbulence created by those conditions. To many individuals that proposition is truly frightening, better to have the state take over, place a nylon collar on you, and give you a long leash so you can pretend to be free without having to take the responsibilities of that freedom.

muirgeo October 11, 2007 at 12:50 am

"…most people are quite content to give up freedom for security and lack of personal responsibility.."

Said the guy who joined the military and lived in this socialistic authoritarian society for 20+ years while receiving cradle to grave benefits paid for by all us taxpayers.

So how much DO we front you a month for your pension oh great individualist guy and man of extreme independence?

Bears Beats Battlestar Galactica funny!

vidyohs October 11, 2007 at 6:18 am

Ahhh muirduck,
My years of experience in small town Texas told me long ago that we must always expect the village idiot to turn up every time intelligent people get together.

So, good morning muirduck. Be a good girl and play nice while I am off being a capitalist today.

See you later, kiddo.

onlyhalfimpressed October 11, 2007 at 7:43 pm

Dr. Troy, have you considered putting both the Dr. prefix and the Ph.D. at the end of your name? That would be doubly impressive.

John Reed October 11, 2007 at 9:21 pm

Why can you not just cheer the statement by vidyohys? If you object to what he says, spit it out. If you agree, say so. But please leave off with the snide comments about having served in the military.

Troy Camplin, Ph.D. October 12, 2007 at 10:09 am

I've noticed that including either one is typically sufficient to prevent idiotic comments like yours and gets people to focus more on the actual content of what I say.

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