12. Joseph A. Schumpeter: Maverick and Enigma

0:00Chapter XII. Joseph R. Schumpeter, Maverick and Enigma. Schumpeter's ancestors, Moravian cloth manufacturers from Driesch to Detrest, Czech Republic, were of German origin, Catholic and very popular on account of their charity toward others. Joseph Alois was born in 1883. After the early death of his father, his mother moved to Graz, where in 1893 she married Lieutenant Field Marshal Siegismund von Kehler, 32 years her senior, and moved to Vienna. Kehler's excellent connections enabled Yoshi to attend the Theresianum, a high school primarily reserved for the aristocracy. This played a significant part in shaping his character. A lifelong Schumpeter, a young friend and fellow student, would describe Schumpeter later in this way.

0:54He never seemed to take anything in life seriously. He had been educated in Theresianum, where the pupils were taught to stick to the issue. One should know the rules of all parties and ideologies, but not belong to any party or believe in any one opinion. After graduating with honours, Schumpeter began studying law. He shifted his focus to economics, however, After the influence of Menger's pupils, Friedrich von Mises, Eugen von Boehm-Bawerk and Eugen von Wille-Powitz, a colleague remembers that he, in seminars, attracted general attention through his cool scientific detachment and had a playful manner in which he took part in the discussion. He went to the London School of Economics and also to the universities of Oxford and Cambridge after graduating. He complemented his Austrian education with Schumpeter's employment with an Italian attorney took him to Egypt in 1907.

2:14He drafted his first monograph in the evenings after work, Das Wesen und der Hauptinhalt der theoretischen nationalökonomie, 1908, The Nature and Essence of Theoretical Economics. For this balanced account of the Methodenstreit and a forthright plea for methodological individualism, he received his habilitation in the same year. In 1909, he took on a non-tenured professorship by Ivan Chernovitz in present-day Ukraine. In 1911, at the age of 28, he was appointed as Professor to the Chair of Political Economy at the University of Graz, the youngest professor in all of the empire. He published his Theorie der wirtschaftlichen Entwicklung, 1912, The Theory of Economic Development, to at the end of the same year. Its publication date was erroneously given as 1912. This work quickly found international recognition and would Before the outbreak of the First World War and at Max Weber's 1844-1919 suggestion, he described in Epochen der Dogmen und Methodengeschichte, 1914, Economic Doctrine and Method and Historical Sketch, the economic phenomena with help of related social sciences. Schumpeter accepted

3:30a guest professorship at Columbia University in New York and delivered 17 lectures at other Schumpeter thought of himself as a scientist first and foremost. He emphasized over and over that he wished to refrain from making any political judgments and on economic policy measures wanted to offer his help if at all only where theoretical decision-making was concerned. He nevertheless assumed political posts and functions because he feared an economic takeover Schumpeter from Germany during the First World War, he tried, with several memoranda, to prevent a planned customs union with the German Reich. He joined the German Sozialisierungskommission – Socialisation Commission – immediately after the war, solicited by friends with Marxist leanings. To everyone's astonishment, Schumpeter advocated the complete and immediate nationalisation of the coal mining industry, whereupon the Viennese author, cultural critic and journalist Professor Karl Kaus, 1874-1936, derided him as an exchange professor as opposed to exchange student in terms of convictions and added with biting irony that Schumpeter had more different views than were necessary for his advancement.

4:49In 1919 Schumpeter was even appointed as finance minister under the socialist regime, but after seven months he had to resign, his budget had been completely rejected and he was accused of Having thwarted a nationalisation programme and thus of counteracting government policy. When it came to the economic independence of the young republic, Schumpeter spoke up with optimism at every opportunity. In contrast to this Otto Bauer, State Secretary for Foreign Affairs, pursued the goal of unification with Germany and argued its case on the basis of economic necessity. At the peace negotiations in Saint-Germain, Chancellor Karl Renner emphasised as well as the economic nonviability of the radically shrunken Austria.

5:34With Schumpeter allowing himself a noble riding horse, paid for out of his politician's salary while the Viennese were going hungry, and appearing in public accompanied by prostitutes, his political reputation was soon effectively destroyed. Many months later he was appointed president of the Viennese Biedermann Bank. The bank went bust within three years. He was dismissed in disgrace and with a mountain of debt. Schumpeter had reached the low point of his life, without capital, with a miserable reputation as a businessman, and without political renown. In 1925 Bonn made Schumpeter an offer he accepted immediately. His tenured professorship in political economy was a sensation from the start. For the first time in decades, theory was being taught at a German university. Bonn became the meeting place for economists from all over of the World.

6:25Moreover, his lectures in the areas of finance, monetary theory, history of economic theory and sociology were judged as flamboyant and unconventional, as one former student remembers. He was very relaxed as he began his lectures, always without notes. He had a clear and agreeable Viennese way of talking that was slightly playful, but nevertheless very measured and emphatic. He did not skimp on his gestures when he spoke, from all sides of the lectern, usually leaning Schumpeter also suffered staggering blows of fate in Bonn.

7:22In 1926 his mother Johanna passed away. His newborn son died a month later, as did Annie, his second wife, and the infant's mother, who had been stricken with puerperal fever. The daughter of the janitor of his parents' tenements, Annie, had fallen deeply in love with her Shumi at just 17. They moved into a grand villa in Bonn after their wedding in 1925 and threw many lavish parties. Schumpeter was devastated by the loss. Everyone who knew Schumpeter knew him, noticed a radical change in his personality. For years he left Annie's clothes untouched, made daily trips to the cemetery, and developed an out-and-out religious cult around her death. In 1932 Schumpeter quit teaching in Germany and went to Harvard University in Cambridge, Massachusetts. As he had in Bonn, he was able to gather around himself an illustrious circle of enthusiastic students and young researchers, For example, the future Nobel Prize winners Paul A. Samuelson, 1915-2009, Vasily Leontyev, 1905-1999, and James Tobin, 1918-2002, the Austrians Gottfried Habeler and Fritz Machlup,

8:31and also socialists like Oskar Lange, 1904-1965, Paul Sweezy, 1910-2004, and Richard M. Goodwin, 1913-1996. in 1996. He made a crucial contribution to the golden age of economics. His works on entrepreneur theory, as well as capitalism, made him the most recognised economist in the US. In 1947 he became the first foreigner to be elected president of the renowned American Economic Association. One year later he even took over the chair of the International Economic Association, which at the time had a membership of 5,300 worldwide. Among all of the ambitious The story goes that Schumpeter once said he had three goals in life, to be the world's America's Greatest Economist, Austria's Greatest Horseman and Vienna's Greatest Lover.

9:43It became increasingly clear to him in the 1930s that these goals were probably out of his reach, at least when it came to economics. With a treatise on money, 1930, Britain John Maynard Keynes plunged the ambitious and egotistical Schumpeter, his exact contemporary, into a deep creative crisis. Schumpeter had just written a manuscript on monetary theory and was getting it ready for printing. Schumpeter could hardly bear the excitement of his students as they looked forward to the latest works by Keynes. Although Schumpeter was always able to fascinate colleagues, students and audiences with his polyglot education, his skillful storytelling and his tremendous intellectual flexibility, he never managed to build up a following of students for very long. Self-critical, he blamed his lack of leadership and conviction and noted in his diary I have no garments that I could not remove. Relativism runs in my blood. This is one of the reasons I can't win, not in the long run.

10:45In terms of politics Schumpeter revealed his most disagreeable side during the Second World War. Time and again he ranted against Slavs and Jews and sympathized with Adolf Hitler. At the same time, however, he lent his help to many of the refugees arriving in the United States After 1945 he spoke of a Jewish victory and questioned the Nuremberg War Tribunal. Schumpeter, restless and driven, always seeking stability and often beset with despair, depression and premonitions of death, wrote several times in his diary that he considered his life to be a failure and that he wished nothing more for himself than a gentle death. When American President Franklin Roosevelt, 1882-1945, died suddenly of a brain hemorrhage, Schumpeter, who had been unhappy all of his life, remarked in an obituary, a lucky man to die in fullness of power. Schumpeter himself passed away in his sleep of a brain hemorrhage at Windy Hill, his summer house in Taconic, Connecticut in 1950.