Analysis Of Joseph A. Schumpeter's Ideas

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1. Identify at least one point in this paper that the author claims is important for understanding what role entrepreneurship plays in society.

The main point which Schumpeter emphasizes is that capitalism is an evolutionary process. He describes how it is an always moving concept and it "not only is but never can be stationary." Schumpeter goes on to state that the evolutionary process of capitalism is not due to the fact that the "economic life goes on in a social and natural environment," meaning that the main reason for capitalism’s constant evolution is not because of the things like wars and revolutions that pick up or bring now the economy. The reason capitalism is an evolutionary process, he says, is because of the constant spew of new consumers’ goods that are put on the market, new systems of production and/or transportation of all goods, creation of new markets, and new methods of industrial organization. All of these things are creating new goods, or different ways of using and handling them. Schumpeter states that all of these things are ways that capitalism transforms the formation of the economic structure "from within," which continuously creates new structures of the economy while at the same time destroys the old, previous structure that stood before it. Schumpeter emphasizes that this happens every time something new is created or a new way of producing, packaging, transporting or organizing something is created. He coins the term Creative Destruction for this process that he describes and believes it is "the essential fact about capitalism." Furthermore, Schumpeter believes that one cannot assess the economy or capitalism "ex visu" or at one certain point in time. This is because everything that happens does not always make it’s effects clear right away, changes in the economy take "considerable time" to expose their true effects, and he believes that when theorists or government commissioned reports are created they do not try to see the effects of the situation over a period of time. He believes most of these reports only try to understand how "capitalism administers existing structures" but what they should really be doing is understanding how capitalism creates and destroys the existing structures. It is more powerful to understand the capitalistic economy through how something is created and replaced or destroyed over a period of time then it is to understand how it is run when it is existing.

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