The Theory of Economic Development

This is the first book I read about the role of entrepreneurs in the economy. I have mixed feelings about it.

It’s filled with insights but it is also deeply flawed. Entrepreneurs drive economic development and engage in “creative destruction.” The market is about change rather than equilibrium. These are both great insights.

But history has refuted Schumpeter’s Nietzschean view that entrepreneurship is confined to “captains of industry” with unusual personality traits, and his attempts to explain business cycles is unpersuasive.  

This book is the starting point of the widespread study of innovation in Economics providing not only basic definitions still in use in the field today, but also fundamental insights into the relationships between innovation, profits, competition, business cycles, and other economic phenomena.

I first read this as a doctoral student and its weaving of innovation as a major driver of economic development and growth was an eye-opener and contrasted with much of the current literature at that time.