HISTORICAL IMPLICATIONS OF THE THEORY OF ECONOMIC DEVELOPMENT

Abstract

T HE theory of economic development is rich in historical implications, and as it stands in Schumpeter's Business Cycles many of the more important historical implications are explicitly incorporated in the exposition. It was Schumpeter's deliberate intention to combine historical, statistical, and theoretical analysis in a comprehensive exposition, but he was too modest when he said, do I think that there is anything novel in my combination of historical, statistical, and theoretical analysis -as far as that goes I have merely moved with the general tendency toward their mutual peaceful penetration. ' His combination of the different techniques of analysis was in fact highly original. He broke new ground at many important points, in particular fields of analysis, as well as in the combination of the techniques. Few writers in any of the three fields made any serious effort to use more than a single technique of analysis. At no time during Schumpeter's career was there any established technique for the interpenetrating use of the different techniques outside the scope of the Marxian literature. This body of Marxian literature stands in a somewhat special class, because the principles of historical interpretation do not meet the requirements of empirical analysis and documentary verification. The doctrines mesh more adequately with theory than much of the work of the other historical schools because they are in effect sociological theories with historical elements. History and theory are brought together in what purports to be a unified system, but only by the sacrifice of many principles of criticism and interpretation that are essential to genuine analysis of the total array of historical events. The non-Marxian schools sacrificed theory to history, the Marxians sacrificed history to theory. These historical sociologies were useful in the preliminary classification and interpretation of historical materials, but there was no adequate concept of process, and historical analysis cannot rise above the level of wholly subjective narrative until there is some defensible and workable concept of process. The vital question for history is: How do things happen? The theory of economic development is addressed specifically to this question, and it offers the highly significant answer. The events of history find their movement and their meaning in the process of cumulative innovation. The processes of history are neither transcendental and unknowable, nor mechanical and foreordained. Such a concept of process affords a basis for the comprehensive analysis of events in terms of history, statistics, and theory. The underlying principles of Schumpeter's thought were thus far in advance of the historical sociologies of his contemporaries. The full compass of his vision is to be found in the introduction to the historical material in Business Cycles (Vol. I,