Schumpeterian dynamics : Some methodological notes

The main purpose of this paper is to define ‘Schumpeterian dynamics’ and to indicate how it can serve as a basis and starting point for studies in development economics irrespective of how Schumpeter used his general approach and what kind of hypotheses he launched. Schumpeterian dynamics is characterized by its focus on economic transformation. This implies that the main interest is in causal chains outside the scope of macroeconomic growth analyses, namely in disequilibria and chain effects created inter alia by entrepreneurial activities, market processes and competition as a dynamic force. The micro underpinnings of such analyses therefore differ from those of growth models which deal with aggregates, such as investments and saving, productivity, income distribution, wage shares in value added, and capital/output ratios. Seen through Schumpeterian glasses, the micro units have no well-defined generalizable ‘propensities’, and they are not fully informed calculators reacting in a mechanical way to prices that they cannot influence. Instead, firms continuously seek new information and often search for projects which, if carried out, exert transformation pressure on the markets. Consumers can also actively influence firms and markets and do not only passively react to supply prices. Transformation analyses should not replace macroeconomic growth models, but a change of roles is called for. Such analyses have too long and too often been regarded as empirical complements to growth analyses and therefore as belonging mainly to the domain of economic historians. The stress on ‘complement’ instead of ‘alternative’ implies that some sort of a synthesis should be sought in theoretical as well as in empirical research.