Schumpeter, Lederer and Hilferding on Economic Development, Credit and Business Cycles

The paper compares Joseph Schumpeter, Emil Lederer and Rudolf Hilferding with respect to their visions concerning economic development, technology, credit and business cycles. Their theoretical investigations, in a great number of thematic areas and concepts, seem to converge significantly. For instance, all three used similar arguments to emphasize the link between economic development and technological change. In their analyses, Schumpeter and Lederer referred to psychological factors motivating the entrepreneur, in order to explain the forces that set in motion the process of innovation and thus economic development. Hilferding stressed the importance of technology but mostly with respect to market structure and, more specifically, the emergence of monopolies and cartels. The function of credit is another central theme in the works of all three theoreticians. Besides, they all comprehended in a similar manner the way that credit expansion infuses dynamism into the economic system, creating, thus, on the one hand new growth prospects, and on the other financial and economic instability. Also, regarding the issue of economic crises and fluctuations, all three economists considered them as an endogenous characteristic of the capitalist system and not simply as the result of external factors or shocks. Schumpeter and Lederer argued that business cycles arise from the disruptions created by innovations, which are introduced discontinuously into the economic system, whereas Hilferding focused on the role of disproportionality between sectors producing capital goods and those producing consumer goods. Conclusively, all three writers, in spite of their theoretical differences, have delivered theses which are similar in scope and conclusions.