Joseph Schumpeter was born in Triesch, Moravia (now in the
Czech Republic). He was a university professor and later a
minister of finance in Austria. In 1932, he emigrated to the
United States to avoid the rise to power of Adolf Hitler. He
spent his remaining years at Harvard University.
Schumpeter, a pioneering theorist of innovation, emphasized
the role of the entrepreneur in economic development. The
existence of the entrepreneur meant continuous innovation and
waves of adaptation to changing technology. He is best known
for his theory of “creative destruction,” where the prospect of
monopoly profits provides owners the incentive to finance
inventions and innovations. One monopoly can replace another
with superior technology or a superior product, thereby
circumventing the entry barriers of a monopolized industry. He
criticized mainstream economists for emphasizing the static
(allocative) efficiency of perfect competition—a market
structure that would, if it could ever be achieved, retard
technological change and economic growth.
Schumpeter’s best known works are The Theory of Economic
Development (1911), Business Cycles (1939), and Capitalism,
Socialism and Democracy (1943).