Apropos of the discussion about Schumpeter's theory of economic development with its
central focus on innovation, I would like to mention one anomaly that is striking in
comparing him and Marx as metatheorists. Marx has many detailed, realistic, and
convincing examples of the factory system and the industrial process in his
discussion of capitalist mode of production. For all his emphasis on innovations and
technological change, it is hard to find many examples in Schumpeter, besides the
now famous cliche about the horse carriage and the automobile.
 
Still, I would like to suggest that Schumpeter was a far more complex and
accomplished economist than the disapproval of his politics, with which I heartily
concur, warrants. Even Solow concedes in couple of places in his review of the
McCraw biography that basically Schumpeter was right on the whole about important
issues: For instance:
 
"Schumpeter had a rise-and-fall mechanism in mind. The monopoly profits collected by
a successful entrepreneurial firm attract imitators and competitors, many of which
are financed by fresh credit. This activity eventually erodes the initial profits;
and then the time is ripe for another innovation, if one comes along. There is
obvious truth to this story, but it is far from being a theory of economy-wide
fluctuations."

And, "Capitalism, Socialism, and Democracy is a well-done polemic from a supremely
sophisticated Central European. I don't know if it can be classified as social
science, but I do think that most of it is true."

I was left wondering if Solow was objecting to Schumpeter's method more than to his
explanation of the capitalist economy. 

Sumitra Shah