Re: Origins of Capitalism/was Re: The Prize by...

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

On Wed, 05 Dec 2001 12:52:00 +1100, "John M. Legge"
<jlegge@xxxxxxxxxxxxxx> wrote:

>1. Entrepreneurial profit and the circular flow
>Schumpeter makes it clear that there is no entrepreneurial profit
>WITHIN the circular flow, since there is no entrepreneurship.  There
>may, of course, be rents, the residuum of past entrepreneurship.
>The entrepreneur "swims against the flow" and "forces it into a new
>course".

Better to say that Schumpeter constructs a circular flow within
which there is no entrepreneurial profit.  It is a Walrasian
circular flow that he relies on to realise his pre-theoretical
vision of economic orderm -- with the entrepreneur as the agent
that disrupts this order.  I have an argument (JEI 2000:
Schumpeter's Entrepreneur and Common's Sovereign Authority) that
a different model of economic order can result in a model of
entrepreurial "creative destruction" that still bears a family
resemblence to Schumpeter's Pure Model, although it differs from
it in many respects.

>Keynes had an extremely limited view of entrepreneurship,
>almost entirely neglecting the role of entrepreneur as innovator,
>and seemed principally concerned with factors that made the
>circular flow rotate faster or slower, not those that diverted it
>into new and broader channels.

Keynes General Theory is a theory of the short period ... that
is, given equipment, given technology, given institutions, etc.
Within the scope of this theory, high quasi-rents are the
windfall that entrepreneurs receive for owning productive assets
when the state of effective demand is high, and low quasi-rents
are the risks that entrepreneurs face if the state of effective
demand falls.  The general theory is, importantly, NOT a general
theory of growth, development, technical progress, or economic
evolution.  It is rather a theory *that* for any monetary
production economy, certain regular relationships hold in the
short period involving employment, interest, and money.  It is
that "far any given" that makes is a general theory ... but
nowhere in it will you find it claiming to be a theory "of
everything economic in general"!

A theory including both Schumpeter's and Keynes insights in
Theory of Economic Development and the General Theory, respect.,
would have to move away from a Walrasian model of economic order
to one consistent with the General Theory of those short period
relations in the scope of the General Theory, and would have
to avoid the temptation to directly "project" General Theory
reasoning beyond its short-period scope.

--
Dr. Bruce R. McFarling, PhD
Bus. Office 1.72 -- (02) 4348-4078
School of Business
Faculty of the Central Coast
Newcastle University, Ourimbah