Joseph Schumpeter and Simon Kuznets: comparing their evolutionary economic approaches to business cycles and economic growth

Abstract

The connections between the work of Simon Kuznets and Joseph Schumpeter are discussed from a history of economic thought perspective. First, their broad perspectives on economic evolution are compared and contrasted. It is argued that Kuznets assigned a greater role for institutional change in economic evolution and he had a greater interest in the distribution of income and how it changes with economic development. Second, Kuznets’ controversial review of Schumpeter’s two volume book, Business Cycles, is reassessed. This leads directly to discussion of their differing methodological approaches. Third, their respective views on the determination of economic growth are compared and it is argued that Kuznets’ laid a stronger foundation for future neo-Schumpeterian research on economic growth. The paper concludes with some discussion of how evolutionary economists using modern perspectives, such as ’micro-meso-macro’, can draw upon the works of these great economists to provide an empirical methodology that can be used to explain economic growth and its fluctuation.