------------ EH.NET BOOK REVIEW --------------  
Published by EH.NET (August 2006)  
  
Arnold Heertje, _Schumpeter on the Economics of Innovation and the   
Development of Capitalism_. Cheltenham, UK: Edward Elgar, 2006. vii +   
142 pp. $90 (cloth), ISBN: 1-84542-445-X.  
  
Reviewed for EH.NET by Mark W. Frank, Department of Economics and   
International Business, Sam Houston State University.  
  
  
This book presents a collection of eleven reprinted essays written by   
Arnold Heertje (Professor Emeritus, University of Amsterdam), the   
outcome of twenty-five years of research on the work of Joseph   
Schumpeter. The book offers a solid introduction into the insights of   
Schumpeter's vision, as well as an interesting first-hand account on   
the evolution of Schumpeter's influence within economics over the   
past several decades.  
  
The book's eleven essays are organized into three thematic parts. The   
first part contains three essays which present a broad picture of   
Schumpeter's life and thoughts. The first essay is, in fact, a   
reprint of Heertje's wonderfully concise and informative biographical   
sketch of Schumpeter, originally published in _The New Palgrave_   
(1987). The second essay comments on Schumpeter's understanding of   
technical change in a dynamic economic system. The third offers   
insights into Schumpeter's role in the development of methodological   
individualism, a concept fundamental to the public-choice theory of   
James Buchanan and Gordon Tullock.  
  
The second part of the book consists of two essays which concern   
Schumpeter's view on the sustainability of capitalism, and a third   
essay, that deals almost exclusively with the work of Joseph   
Stiglitz. While the third essay (chapter 6, "From Schumpeter to   
Stiglitz") is largely out of place in a book on Schumpeter, the first   
two essays constitute the most provocative and insightful parts of   
the entire book. These essays concern Schumpeter's famous contention   
in _Capitalism, Socialism and Democracy_ (1942) that capitalism would   
fail, despite its successes, and be replaced by a socialist society.   
With the advantage of hindsight, Heertje argues Schumpeter largely   
missed the mark on this prediction, and considers inconsistencies in   
Schumpeter's thought to be the primary cause. In Heertje's view, the   
importance of small firms and new entrepreneurs, so prominent in   
Schumpeter's earlier work, is missing in his later work, replaced   
with the routine mechanization of large monopolistic firms. Had   
Schumpeter remained faithful to his original connotation of   
entrepreneurs, according to Heertje, he would not have lost faith in   
the creative destruction of capitalism. But such are the inherent   
contradictions of Schumpeter, in his writings as well as in his life.  
  
The third and final part consists of two essays concerning the role   
of technical change and economic growth in the writings of   
Schumpeter, one essay comparing Schumpeter's work with that of   
Keynes, and two essays reviewing more recent works by   
neo-Schumpeterians. Though the thematic connection of these five   
essays is less obvious, the attempt to place Schumpeter in a larger   
historical context is well valued. Heertje also shows us in these   
essays that he is no blind disciple of Schumpeter, despite devoting   
several decades to the study of his work. Heertje's repeated   
criticisms of Schumpeter's lack of mathematical rigor, for example,   
are quite striking (though justified). According to Heertje,   
Schumpeter's work should be seen as ramified analysis and   
description, not true economic theory. While Schumpeter's counterpart   
Keynes was able to successfully use the mathematical apparatus of   
this time, Schumpeter's visions of economic discontinuity lacked such   
rigor. Heertje views this as a clear limiting factor in the early   
acceptance of Schumpeter's work, though recent advances in endogenous   
growth theory, non-linear dynamics, and chaos theory have given rise   
to a new and promising generation of neo-Schumpeterians.  
  
On the whole, this book offers a nice presentation of Schumpeter's   
views on technical change, innovation, and entrepreneurs from one of   
the leading scholars on Schumpeter's life and work. The book will   
certainly be of value to scholars of Schumpeter, but will also be of   
interest to novice-Schumpeterians interested in a concise and   
accessible critique on Schumpeter's work.  
  
  
Mark W. Frank is Associate Professor of Economics at Sam Houston   
State University, and author of "Schumpeter on Entrepreneurs and   
Innovation: A Reappraisal" _Journal of the History of Economic   
Thought_ (1998): 505-16.  
  
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