Complexity , Innovation , and Development
theories of economic equilibrium that dominated classical economic text of the time .
Schumpeter ’ s work was appropriately called “ the theory of economic development ” because it described a world that is analogous to large parts of today ’ s emerging countries . However , these countries have not benefitted much from Schumpeter ’ s intellectual legacy .
At first glance it would appear that the lack of application of Schumpeter ’ s ideas to emerging countries was a historical oversight given that most of them were colonies at the time of his writing . However , these countries were desperately searching for alternative development models that would free them from dependence on their former colonial masters .
Schumpeter was writing during the ascendency of neoclassical economics that placed considerable emphasis on mathematical equilibrium models that Schumpeter was rejecting . Schumpeter framed economic development as an evolutionary process . 3 He laid the foundations of looking at economies as complex systems . 4 It is therefore not surprising that Schumpeter ’ s work has been consistently excluded from compilations of studies on economic development , as surveyed by Thanawala . 5 In fact , the dismissal runs deep . Nobel laureate Arthur Lewis wrote in his 1955 book , Theory of Economic Growth , that Schumpeter ’ s Theory of Economic Development “ is very much narrower in scope than its title implies .” 6
This paper argues that although the work was not ignored , it was debated throughout much of the 1950s and the general consensus was that Schumpeter ’ s ideas were not relevant to emerging countries . The paper traces the early debates in development studies on Schumpeter ’ s ideas .
The paper is divided into four parts . The first part outlines the fundamental elements of Schumpeter ’ s theory of development . This is followed by a review of debates on the relevance of Schumpeter ’ s ideas in emerging countries . The third part assesses the evolution of development studies through the life of Hans Singer , a former student of Schumpeter and a leading architect of development theory and practice . The paper concludes with an assessment of policy implications of Schumpeter ’ s relevance for contemporary economic policy in emerging countries .
The Economy as a Complex System
First , Schumpeter was concerned with
overall system transformation in the same way that his critics wanted to see rapid economic change in emerging countries . He pioneered the application of complex systems thinking to economic development . Second , Schumpeter was interested in change over time , which is why he adopted an evolutionary approach that recognized the importance of history . By appealing to complexity and time , Schum-
3
N . Clark , and C . Juma , Long-Run Economics : An Evolutionary Theory of Economic Growth ( London : Pinter , 1992 ).
4
M . C . Becker , T . Knudsen , and R . Swedberg , “ Schumpeter ’ s Theory of Economic Development : 100 Years of Development ,” Journal of Evolutionary Economics , 22 , 5 ( 2012 ): 931 .
5
K . Thanawala , “ Schumpeter ’ s Theory of Economic Development and Development Economics ,” Review of Social Economy , 52 , 4 ( 1994 ): 353 – 63 .
6
Quoted in D . Rimmer , “ Schumpeter and the Underdeveloped Countries ,” Quarterly Journal of Economics , 75 , 3 ( August 1961 ): 422 . When Ghana gained independence in 1957 Arthur Lewis became the country ’ s first expatriate advisor and drew up its first five-year ( 1959 – 1963 ) development plan .
5