Joseph Schumpeter

DEFINITION of 'Joseph Schumpeter'

One of the 20th century's great economic and political thinkers. Joseph Schumpeter is well known for his theory explaining the activities that lead to economic growth in capitalist economies. His theory centers around entrepreneurial innovations and their role as the key driver of economic growth. Schumpeter argues that competition among market participants leads to a desire to seek out new ways to improve technology, new ways to do business and other types of advantages that would increase profit margins and directly impact the entrepreneur's standard of living.

BREAKING DOWN 'Joseph Schumpeter'

Schumpeter describes the act of new innovations replacing old innovations as "creative destruction." This process is driven by the inevitable copying of new innovations, which causes profit margins to become low and creates a new incentive to seek out new innovations. This is the essential idea behind capitalism as Schumpeter describes it.

RELATED TERMS
  1. Destructive Creation

    When innovation leads to destruction. Destructive creation was ...
  2. New Paradigm

    In the investing world, a new paradigm is a totally new way of ...
  3. New Economy

    A buzzword describing new, high-growth industries that are on ...
  4. Creative Destruction

    A term coined by Joseph Schumpeter in his work entitled "Capitalism, ...
  5. Entrepreneur

    An individual who, rather than working as an employee, runs a ...
  6. Venture Capitalist

    An investor who either provides capital to startup ventures or ...
Related Articles
  1. Fundamental Analysis

    How Influential Economists Changed Our History

    Find out how these five groundbreaking thinkers laid our financial foundations.
  2. Professionals

    7 Courses Finance Students Should Take

    These college classes will help you prepare for the working world. Learn how to stand out from your peers.
  3. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  4. Retirement

    Investing Books It Pays To Read

    We provide some classic and lesser-known titles to add to your collection.
  5. Bonds & Fixed Income

    Can Keynesian Economics Reduce Boom-Bust Cycles?

    Learn about a British economist's proposed solution to a common economic problem.
  6. Investing Basics

    How To Invest In Private Companies

    Owning a private firm means sharing more directly in the underlying firm’s profits.
  7. Entrepreneurship

    How to Run a One-Person Business

    Learn how to get a successful one-person business up and running with a business plan, financing, time-management tricks and delegation of tasks.
  8. Entrepreneurship

    Top Legal Tips for Starting a Business

    Before you launch a new business, make sure you're on top of the key issues that most startups face.
  9. Investing News

    The 10 Fastest Growing Green Startups in 2016

    These social entrepreneurs adopt triple bottom lines that champion urgent environmental problems while generating returns for shareholders.
  10. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
RELATED FAQS
  1. What safeguards exist to prevent the abuse of power in a market economy?

    According to free market theory, safeguards against abuse in a market economy come in several forms. Examples of non-government ... Read Full Answer >>
  2. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  3. What are the benefits of prorating expenses?

    When a person prorates expenses between personal and business expenses, he is able to capture the maximum amount of tax benefits ... Read Full Answer >>
  4. What is the relationship between research and development and innovation?

    Although it's possible to achieve innovation without research and development and it's possible to conduct research and development ... Read Full Answer >>
  5. According to the neoclassical growth theory, what factors influence the growth of ...

    The neoclassical growth theory builds five major variables into its time-sensitive production formula. The first is total ... Read Full Answer >>
  6. How does the notion of the American Dream influence the US economy?

    The notion of the American Dream influences the U.S. economy because it creates the driving force behind the free enterprise ... Read Full Answer >>
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center