From Creative Action to the Social Rationalization of the Economy: Joseph A. Schumpeter's Social Theory

Abstract

Schumpeter's writings on the transition from capitalism to socialism, on innovative entrepreneurship, on business cycles, and on the modern corporation have attracted much attention among social scientists. Although Schumpeter's theoretical and sociological writings resemble the works of Marx, Durkheim, and Weber in that they further our understanding of the rise and nature of modern society, his contribution to social theory has yet to be assessed systematically. Arguing that Schumpeter's perspective, if understood in social theoretical terms, provides a promising starting point for the sociological analysis of the changing relationship between economy and society, I concentrate on two elements of his work that are of value to theoretical sociology today: the distinction between creative action and rational action that is fundamental to his theory of the entrepreneur, and his thesis that the success of the capitalist system leads to its demise. Joseph Schumpeter's work is widely received as paradoxical and contradictory.' He was the conservative champion of innovative entrepreneurship whose lifework culminated in the thesis that the success of the capitalist economy leads to the downfall of the capitalist social order. For decades, readers of his works have tried unsuccessfully to reconcile the tension between his attitudes toward, and his analyses of, capitalism and socialism. Schumpeter's diverse writings are read most often by economists whose familiarity with the history of the social sciences is too narrow to encompass his work. When read from a social theoretical perspective, however, his work gains greater coherence as a compelling interpretation of the social and economic transformations of capitalism in the twentieth century. Schumpeter was one of this century's most complex economists. His view of economics was unconventional, as shown by this quote from the History of Economic Analysis: [S]cience as a whole has never attained a logically consistent architecture; it is a tropical