Commentary on Political Economy

Sunday 11 September 2011

Nasar's Bunk about Keynes and Schumpeter

In this link that Paul Krugman gives on his blog of Sylvia Nasar's book on Keynes and Schumpeter

she argues that at the end of the Great War (World War I), Schumpeter's great theoretical work was all done whereas Keynes's was just beginning. Friends who read through this site will see from the pieces on Keynes and Schumpeter (which will form part of the Krisis work we have promised) that this is only partly correct because it leaves out the "historico-sociological" theorisation of capitalism that Schumpeter began at Harvard in the late thirties and that reached its apex with his Capitalism, Socialism and Democracy and also the History of Economic Analysis, both of which surpass by a long margin anything the "socialite" Keynes ever wrote - which was basically a makeshift, slipshod, ramshackle attempted "theorisation" of Roosevelt's New Deal reforms to the institutional asset of capitalism.

The dif-ference (the different "im-port") between Keynes and Schumpeter is all here: that Keynes tried "to theorise" with abysmally hilarious notions (the marginal efficiency of capital, animal spirits, the liquidity trap, the self-sustaining interest rate, uncertainty) what could not be theorised because capitalism is nothing more than a politico-institutional reality (economics is a concentrate of politics), whereas Schumpeter came to understand this truth very well toward the end of his career - indeed, his "Austrian" intellectual background had always allowed him to take a very deep "fundamental" understanding of the historical-institutional bases of capitalism. So much so, that Schumpeter's late work remains almost unsurpassed to this day in the ability to com-prehend the "deep forces" that govern the "e-volution" (Ent-wicklung) of this "economic" system. This is something that wholly eluded Keynes who, by contrast, remained stuck in the "static" equilibrium theoretical premises of JB Say and then Alfred Marshall.

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