Modern Prophets: Schumpeter or Keynes? - Page 2

Schumpeter and Keynes are often contrasted politically, with Schumpeter being portrayed as the "conservative" and Keynes the "radical." The opposite is more nearly right. Politically Keynes's views were quite similar to what we now call "neoconservatice." His theory had its origins in his passionate attachment to the free market and in his desire to keep politicians and governments out of it. Schumpeter, by contrast, had serious doubts about the free market. He thought that an "intelligent monopoly" - the American Bell Telephone system, for instance - had a great deal to recommend itself. It could afford to take the long view instead of being driven from transaction to transaction by short-term expediency. His closest friend for many years was the most radical and most doctrinaire of Europe's left-wing socialists, the Austrian Otto Bauer, who, though staunchly anticommunist, was even more anticapitalist. And Schumpeter, although never even close to being a socialist himself, served during 1919 as minister of finance in Austria's only socialist government between the wars.

Schumpeter always maintained that Marx had been dead wrong in every one of his answers. But he still considered himself a son of Marx and held him in greater esteem than any other economist. At least, so he argued, Marx asked the right questions, and to Schumpeter questions were always more important than answers.
The differences between Schumpeter and Keynes go much deeper than economic theorems or political views. The two saw a different economic reality, were concerned with different problems, and defined economics quite differently. These differences are highly important to an understanding of today's economic world. Keyned, for all that he broke with classical economics, operated entirely within its framework. He was an heretic rather than an infidel. Economics, for Keynes, was the equilibrium economics of Ricardo's 1810 theories, which dominated the nineteenth century. This economics deals with a closed system and a static one. Keynes's key question was the same question the nineteenth-century economists had asked: "How can one maintain an economy in balance and stasis?"