Nov 16, 2009
Definition of Development (Schumpeter, 1934) – from Chapter 2
Definition of Development (Schumpeter, 1934) – from Chapter 2
Definition of development (p63)
- Changes in the system that arise from within the system, not from external pressures.
- Adaptation to change in data is not development.
- Growth in the economy (due to population or wealth growth) is also not development – term these changes in data.
“It is spontaneous and discontinuous change in the channels of the flow, disturbance of equilibrium, which forever alters and displaces the equilibrium state previously existing.” (p64)
- These changes occur in industry or commerce, not in consumer wants. Where spontaneous and discontinuous changes in these wants do occur these can be viewed as spontaneous changes in data. But, in general such spontaneity is small.
Consumers are “taught to want new things, or things which differ in some respect or other from those which they have been in the habit of using” (p65).
Production is the combination of resources. Development necessitates new combinations.
5 Cases (p66):
- Introduction of a new good, or new quality of good.
- Introduction of new method of production.
- The opening of new markets.
- Conquest of new supply or raw materials or half-manufactured goods.
- Effecting the new organisation of an industry (e.g. creating or breaking-up of a monopoly position).
Note 1: The above do not have to be carried out by those that control present productive or commercial processes.
Note 2: Not only by the employment of unused resources do these changes take place (although this is often the case).
“as a rule, the new combinations must draw the necessary means of production from some old combinations”
Original Text:
Chapter 2 from Schumpeter, J.A. (1934). Fundamentals of economic development. Cambridge, Mass: Harvard University Press (translated by Redvers Opie).
