Dear Pat,

You're right about the two types of economists, and about Schumpeter's 
tangled feelings towards the two.  I'd call the one 
neoclassical/old-Marxist and the other Austrian/pomo-marxist.  Put that 
way it seems that the difference is the weight each gives to new ideas 
in explaining the modern world, namely, zero and 80%.  I would quarrel 
only with your kindly treatment of new growth theory, whose conception 
of human capital has no space for ideas: it's just one high-school 
graduate piled on top of another!

Once the ideas are there we will all accede to accumulationist notions 
of how they spread.  After all, the high-pressure steam engine needed to 
be invented only once.  What is hard to formulate---and what Schumpeter 
was groping for, I think---is an account of the First Industrial 
Revolution that is not mechanical.  A mechanized view---that, say, the 
original accumulation of capital did the trick---runs up against the 
objection that original accumulations were available in ancient Egypt or 
in medieval France or in Ming China, and none resulted in an explosion 
of the production possibility curve.  So to make sense of 1700-1900 in 
Europe and its offshoots a really new, Kirznerian alertness, Hayekian 
discovery, true creativity (thus pomo marxists) seems to be required, 
eh?  And those seem to entail a free society.
 
Like most economists, Schumpeter loved the "precise" machinery (look at 
his advocacy of econometrics: would he approve of the monster he helped 
create?).  But his Romantic attachment to innovation and new ideas as an 
explanation for the success of capitalism led him in another direction, 
didn't it?

Regards,


Deirdre McCloskey