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History of Economic Analysis

Schumpeter's scholarship is apparent in his posthumous History of Economic Analysis, although some of his judgments seem idiosyncratic and sometimes cavalier. For instance, Schumpeter thought that the greatest 18th century economist was Turgot, not Adam Smith, as many consider, and he considered Léon Walras to be the "greatest of all economists", beside whom other economists' theories were "like inadequate attempts to catch some particular aspects of Walrasian truth".

Business cycles

Schumpeter's relationships with the ideas of other economists were quite complex in his most important contributions to economic analysis - the theory of business cycles and development. Following neither Walras nor Keynes, Schumpeter starts in The Theory of Economic Development [6] with a treatise of circular flow which, excluding any innovations and innovative activities, leads to a stationary state. The stationary state is, according to Schumpeter, described by Walrasian equilibrium.

Schumpeter and capitalism's demise

Schumpeter's most popular book in English is probably Capitalism, Socialism and Democracy. This book opens with a treatment of Karl Marx. While he is sympathetic to Marx's theory that capitalism will collapse and will be replaced by socialism, Schumpeter concludes that this will not come about in the way Marx predicted.

Schumpeter and democratic theory

In the same book, Schumpeter expounded a theory of democracy which sought to challenge what he called the "classical doctrine". He disputed the idea that democracy was a process by which the electorate identified the common good, and politicians carried this out for them. He argued this was unrealistic, and that people's ignorance and superficiality meant that in fact they were largely manipulated by politicians, who set the agenda.

Schumpeter and entrepreneurship

The research of entrepreneurship owes a lot to his contributions. He was probably the first scholar to develop its theories. He gave two theories, sometimes called Mark I and Mark II. In the first one, the early one, Schumpeter argued that the innovation and technological change of a nation comes from the entrepreneurs, or wild spirits. He coined the word Unternehmergeist, German for entrepreneur-spirit. He believed that these individuals are the ones who make things work in the economy of the country.

Schumpeter and Innovation

Schumpeter identified innovation as the critical dimension of economic change.[10] He argued that economic change revolves around innovation, entrepreneurial activities and market power and sought to prove that innovation-originated market power could provide better results than the invisible hand & price competition. He argues that technological innovation often creates temporary monopolies, allowing abnormal profits that would soon be competed away by rivals and imitators.

GOAL!

DRUCKER'S CONTRIBUTION TO ENTREPRENEURSHIP

Peter Drucker is one of three theorists who made tremendous contribution to the field of entrepreneurship. Drucker was a self described social ecologist who successfully bridged the gap between management and entrepreneurship. He was steadfast in his belief that management and entrepreneurship go hand in hand. In his writings he explained that management has three very important aspects that need equal attention and importance: 1. art of management, 2. story of the individual and 3.connection to society.

Drucker was instrumental in ball-rolling the idea that management is essentially a social function. Today we see entrepreneurship rooted in his idea that management is a social function and a liberal art. This idea encouraged generations to accept entrepreneurial activity as a crucial part of business, management and human evolution. Drucker had four essential entrepreneurial strategies that he lived by and they are

“Being fustest with the mostest

Hitting them where they ain’t,

Finding and occupying a specialized ecological niche” thus changing the economic characteristics of a product, a market, or an industry.

If we were to do a survey and ask every businessperson or economist what a business is, their first response would be “an organization to make a profit” but Drucker believed that this was not the case and it is false. He contends that business is about behaviors and behaviors cannot be weighed in profits. He opined that businesses have various behaviors; productive, marketing, financial, creative, technical and technological. All these behaviors have a social face and impact and they are powered by the human spirit to achieve and perform in pursuit of this vision through innovation, social responsibility, resourcefulness and productivity. Mr. Drucker was one of the first pioneers who wedded business and enterprise to social relevance and impact. In many of his writings he gave leaders the ability to identify the poetry behind socially relevant work. During his work in spearheading the entrepreneurial drill, his ideas were instrumental in the creation of new business areas such as corporate social responsibility, social enterprise, and training of leaders beyond the capitalist theories and practices centered on economic, statistical, archaic division of labour and financial measures. Drucker’s work was able to address and challenge business ethics and authority thus ushering in a new management paradigm.

SCHUMPETER'S CONTRIBUTION TO ENTREPRENEURSHIP

THE

EVOLUTION

OF ENTREPRENEURSHIP

CANTILON'S CONTRIBUTION TO ENTREPRENEURSHIP

Essai sur la nature of trade in generally considered the first complete treaties on economics, with numerous contributions to science. These contributions include his cause and effect methodology, monetary’ theories and his conception of the entrepreneur as a risk-bearer, and the development of spatial economics. Cantillon’s Essai had significant influence on the early development of political economy. Essai remains Cantillon’s only surviving contribution to economics. It was written around 1730 and circulated widely in manuscript form, but was not published until 1755. Cantillon has been called the father of enterprise economics; one of Cantillon’s influences on his writing was English economist William Petty on his book treatise on taxes. Cantillon’s book was an origin of wealth and money, Cantillon divides society into two principle classes, that of: fixed income wage-earners and non-fixed income earners.

Entrepreneurs according to Cantillon are non-fixed income earners who pay known costs of production but earn uncertain income, due to speculative nature of pandering to an unknown demand for their product. Theories of entrepreneurship which saw the entrepreneur as a disruptive force differentiated from Cantillon’s anticipated belief that the entrepreneur brought equilibrium to a market by correctly predicting consumer preferences. Spatial economics deal with distance and area, and how these may affect a market through transportation costs and geographical limitations. Cantillon addressed spatial economics nearly a century earlier. Cantillon integrated his advancement in spatial economics theory into his microeconomics analysis of the market.

Conclusions on spatial economics were derived from three premises: cost of raw material of equal quality will always be higher near the capital, transportation cost vary on transportation, Cantillon posited that the locations of cities were the result in large part of the wealth of inhabiting property owners and their property cost. Also Cantillon provided a dedicated theory on population growth. Cantillon’s population theory was more modern than that of Malthus in the sense that Cantillon recognised a much boarded category of factors which affected population growth, including the tendency for population growth to fall to zero as a society becomes more industrialised.

PETER DRUCKER

Peter Drucker was born in Vienna Austria on November 19, 1909. His parents, Adolph and Caroline, regularly held evening salons with economists including Joseph Schumpeter, who would come to have a tremendous influence on his life. In the 1920s Drucker moved from Austria to Germany to study admiralty law at Hamburg University before transferring to Frankfurt University, where he studied law at night. In 1932 he was able to achieve a PhD in international law from Frankfurt University. Three years later he moved to England and attended a lecture by leading economist John Maynard Keynes, and there he had an epiphany “I suddenly realized that Keynes and all the brilliant economic students in the room were interested in the behavior of commodities while I was interested in the behavior of people.”

In 1934 Drucker married Doris Schmits and moved to the United States in 1937 where he began teaching economics part time at Sarah Lawrence College in New York. He had a very successful career that span many decades and in the process was able to publish several influential books, such as The Practice of Management which was published in the 1950s and widely considered the first book to organize the art and science of running an organization into an integrated body of knowledge and The Effective Executive in 1966. The work that he did was considered exemplary, so much so that in 1987 the Claremont Graduate School, of which he was a professor, was renamed in his honor as the Peter F. Drucker management center. Peter Drucker loved what he did and continued imparting his knowledge up until he was 93 years old and taught his last course in the spring of 2002. He was subsequently awarded the Presidential Medal of Freedom award, the nation’s highest civilian honor and was called by President Bush “the world’s foremost pioneer of management theory.”

Peter Drucker was hailed by Business week as “the man who invented management,” he also directly influenced a huge number of leaders from a wide range of organizations across all sectors of society. Among the many companies are General Electric, IBM, Intel, Proctor & Gamble, Girl Scouts of the USA, The Salvation Army, Red Cross, United Farm Workers and several presidential administrations. His 39 books, along with countless scholarly and popular articles, predicted many of the major developments of the late 20th century, including privatization and decentralization, the rise of Japan to economic world power, the decisive importance of marketing and innovation, and the emergence of the information society with its necessity of life long learning. In the late 1950s Drucker coined the term “knowledge worker” and he spent the rest of his life examining an age in which an unprecedented number of people use their brains more than their backs.

Throughout his work Drucker called for a healthy balance – between short-term needs and long term sustainability; between profitability and other obligations; between the specific mission of individual organizations and the common good; between freedom and responsibility. Driven by an insatiable curiosity about the world around him and a deep desire to make the world a better place, Drucker felt that entrepreneurship is more about innovation and could be practiced by a person or a business and he continued writing long after most others would have put away their pens. He eventually died in November 2005, just shy of his 96th birthday.

JOSEPH SCHUMPTER

Joseph Alois Schumpeter -born February 8th 1883 and died January 8th 1950, Moravian-born American economist and sociologist known for his theories of capitalist development and business cycles.

Schumpeter was educated in Vienna and taught at the universities of Czernowitz, Graz, and Bonn before joining the faculty of Harvard University in 1932–1950. In 1919 he served briefly as minister of finance in the Austrian government. His influence in the field of economic theory was powerful. In his widely read Capitalism, Socialism, and Democracy (1942), he argued that capitalism would eventually perish of its own success, giving way to some form of public control or socialism. His book History of Economic Analysis written in 1954 and reprinted in 1966 is an exhaustive study of the development of analytic methods in economics. His other books include Theorie der wirtschaftlichen Entwicklung 1911; The Theory of Economic Development) and Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process, 2 vol. (1939;

RICHARD CANTILON

Richard Cantillon, a very renowned individual was born during the 1680’s in Ireland. Although his date of birth is uncertain, it is no secret that he was one of the world’s first entrepreneurs. He was son to a landowner named Richard Cantillon. On the 16th of February 1722, Richard Cantillon married, the daughter of Count Daniel O’mahony- a wealthy merchant and a former Irish general. Cantillon spent much of the 1720’s travelling Europe with his wife, until they had two children: a son who died at an early age and Henrietta his daughter, who married William Howard Earl of Stafford.

In the 18th century he moved to France where he obtained French citizenship. Little information exists on Cantillon’s life. However, he became a successful banker and merchant at an early age. In spite of his success, he was not spared by debtors who filed lawsuits, criminal charges as well as murder plots until his death in 1734. Despite having much influence on the early development of the physiocrats and classical school of thought, (Essai sur la nature of trade in general) was largely forgotten until its rediscovery by William Jevon in the late 19th century. Indeed, Cantillon was an exceptional financier, his success mainly came from the political and business relationships he developed through his family and early employer James Brydes. Cantillon made a huge fortune in a short period of time by lending money to speculators, specialising in money transfers between Paris and London. Cantillon’s growing financial success caused friction in his relationship with John Law who threatened to imprison him if he did not leave France within twenty-four hours. Cantillon replied: “I shall not go away; but I will make your system succeed.” At the end of it all John Law, Cantillon and a wealthy speculator Joseph Gage formed a private company centred on financing.

In 1719, Richard Cantillon left Paris for Amsterdam but returned briefly to Paris in 1720. Cantillon had outstanding debt paid to him in London and Amsterdam and with the collapse of the “Mississippi bubble” Richard Cantillon was able to collect on debt accruing high rates of interest. Most of his debtors had suffered financial damage in the bubble collapse and blamed Cantillon. Richard Cantillon returned to his permanent residence in May 1734 in London, where his house was burnt to the ground. It is assumed that Cantillon was murdered. However, it is believed by one of Cantillon’s biographers- Antoine Murphy, that Cantillon staged his death to escape the harassment of his debtors. The cause of his nonetheless is still unknown

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