Policy and Complex Systems
peter stood in sharp contrast with his critics whose economic models appealed to the static equilibrium notions although in practice they sought to depart from them .
Schumpeter ’ s “ economic sociology ” is laid out in his “ missing Chapter 7 ” of The Theory of Economic Development . The chapter , which was dropped in his 1926 edition of this book , laid out a summation of his theoretical outlook that emphasized the fact that economic development was an emergent property arising from endogenous systemic change and not a response to external stimuli . He stressed that “ it is not possible to explain economic change by previous economic conditions alone . For the economic state of a people does not emerge simply from the preceding economic conditions , but only from the preceding total situation .” 7
Also evident in this formulation is the fact that economic evolution is a nonlinear or discontinuous process with emergent properties . Schumpeter saw “ that kind of change arising from within the system which so displaces its equilibrium point that the new one cannot be reached from the old one by infinitesimal steps . Add successively as many mail coaches as you please , you will never get a railway thereby .” 8 This theme is explicit in his notion of the generation of variety through new combinations as well as their selection and retention .
By adopting an ecosystem approach , Schumpeter was able to identify the forces of economic succession that resulted from the invasive waves of railroads . 9 For Schumpeter , “ The essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process .” 10 He continues , “[ The ] process of industrial mutation … that incessantly revolutionizes the economic structure from within , incessantly destroying the old one , incessantly creating a new one . This process of Creative Destruction is the essential fact about capitalism .” 11
A systems approach would make it easier , both conceptually and practically , to address the ecological implications of development . So far the dominant approaches to environmental issues came from the traditional conservation movement that assumes that the environment is better protected by excluding human activities . Efforts to promote sustainable development can hardly be advanced without a greater use of innovation . 12
Schumpeter ’ s dynamic theory of economic development continues to be marginalized in mainstream economics . 13 Schumpeter held the view that it was possible for one “ to accept both his theory of
7
Schumpeter , The Theory of Economic Development , 58 ( emphasis in original ).
8
Ibid ., 64 n . 1 ( emphasis in original ).
9
See E . S . Andersen , “ Railroadization as Schumpeter ’ s Standard Case : An Evolutionary-Ecological Account ,” Industry and Innovation 9 ( 1 – 2 ) ( 2002 ),: 41 – 78 .
10
Schumpeter , Capitalism , Socialism and Democracy , 82 .
11
Ibid ., 83 .
12
For a review of the role of innovation in sustainability , see S . Jacobsson and A . Bergek , “ Innovation System Analyses and Sustainability Transitions : Contributions and Suggestions for Research ,” Environmental Innovation and Societal Transitions 1 ( 1 ) ( 2011 ): 41 – 57 ; A . Smith et al ., “ Innovation Studies and Sustainability Transitions : The Allure of the Multi-Level Perspective and its Challenges ,” Research Policy 39 ( 4 ) ( 2010 ): 435 – 448 ; and X . Fu and J . Zhang , “ Technology Transfer , Indigenous Innovation and Leapfrogging in Green Technology : The Solar-PV Industry in China and India ,” Journal of Chinese Economic and Business Studies 9 ( 4 ) ( 2011 ): 329 – 347 .
13
See R . Nelson , “ Why Schumpeter Has Had So Little Influence on Today ’ s Main Line Economics , and Why This May Be Changing ,” Journal of Evolutionary Economics 22 ( 5 ) ( November 2012 ): 902 .
6