Joseph Schumpeter

Joseph Alois Schumpeter was born on 8 February 1883 in Triesch in Habsburg Moravia (now Třešť, Czech Republic) and died on 8 January 1950 in Connecticut. He studied law and economics in Vienna in the circle of Eugen von Böhm-Bawerk and published The Theory of Economic Development in 1911, which made the entrepreneur and innovation central to economic change. He served briefly as Austria's finance minister in 1919, and from 1921 was president of the private Biedermann Bank, which failed in the mid-1920s and left him with heavy debts.

After a professorship in Bonn he moved to Harvard in 1932, where he taught until his death and became a US citizen in 1939. Capitalism, Socialism and Democracy (1942), written during the Second World War, was his most widely read book; History of Economic Analysis was published posthumously.

• Creative destruction. Capitalism is an evolutionary process in which innovation — new products, methods, markets and forms of organisation — continually destroys old structures. Popularising a term from Werner Sombart, Schumpeter argued that this, rather than price competition, is the essential fact about capitalism.
• Capitalism's self-undermining. He predicted that capitalism would be undone by its success: large bureaucratic firms would routinise innovation, and an intellectual class hostile to capitalism would erode its legitimacy, opening the way to socialism, which he thought workable.
• Against the classical doctrine. The 'classical doctrine' held that democracy realises the common good by letting people decide issues through representatives who carry out their will. Schumpeter argued that there is no uniquely determined common good, that the 'will of the people' is largely manufactured by political competition, and that ordinary voters reason about politics with little knowledge or responsibility.
• Democracy as method. He proposed instead that 'the democratic method is that institutional arrangement for arriving at political decisions in which individuals acquire the power to decide by means of a competitive struggle for the people's vote'. The role of the people is to produce a government and to remove it; between elections they should leave politics to politicians.
• Conditions of success. Democracy works best with high-quality politicians, a limited range of decisions subject to politics, a strong, independent bureaucracy and a culture of 'democratic self-control' that tolerates opposition.

Schumpeter's definition became the dominant 'minimalist' or 'procedural' conception of democracy in political science. It underlies Anthony Downs's economic theory of democracy, Samuel Huntington's two-turnover test of democratic consolidation, Adam Przeworski's definition of democracy as a system in which parties lose elections, and many indices that classify regimes by whether governments are chosen in contested elections. Its focus on competition, alternation and the right to remove rulers gives a clear, measurable threshold.

The theory also defined the target of later democratic innovations. Participatory democrats such as Carole Pateman, deliberative democrats and advocates of citizens' assemblies and sortition present their proposals as answers to Schumpeter's claim that citizens are incompetent outside the voting booth: when given time, information and a manageable task, they argue, ordinary people can reason well about policy. Debates about epistocracy, technocracy and AI-assisted decision-making revisit his question of how much should be decided by electoral competition and how much delegated to professionals.

• Democratic minimalism. Critics argue that reducing democracy to elite competition abandons political equality and self-government, and treats low citizen competence as fixed when it may be the product of exclusion from decision-making.
• Empirical claims about voters. Studies of deliberation and of citizens' assemblies suggest that ordinary people can acquire knowledge and change their views on complex issues, contrary to his picture of irresponsible voters.
• Elections without accountability. Competitive elections can coexist with clientelism, media capture and gerrymandering; the minimal definition can classify as democracies regimes that offer little real choice.
• Predictions. His forecast of capitalism's gradual replacement by socialism was not borne out in the second half of the twentieth century.

• The Theory of Economic Development (1911; English 1934)
• Business Cycles (1939)
• Capitalism, Socialism and Democracy (1942), especially Part IV, chapters 21–23 on democracy
• History of Economic Analysis (1954, posthumous)
• Overview: 'Joseph Schumpeter', Wikipedia