The Big Three (Smith, Marx, and Keynes): Hands-Off, Hands-On

“During the past three centuries, three economists stand out as archetypes, symbols of three distinct approaches to economic philosophy. In the eighteen century, Adam Smith, a student of the Scottish Enlightenment, expounded a ‘system of natural liberty’ (what we might term a liberal democratic order consisting of an unfettered market and limited government), and elucidated how a nation flourishes and advances the standard of living of its citizens. In the nineteenth century, the German philosopher Karl Marx attracted and inspired workers and intellectuals who felt disenfranchised by industrial capitalism and sought radical solutions to inequality, alienation, and exploitation of the underprivileged. Finally, in the twentieth century, the British economist John Maynard Keynes sought to stabilize a crisis-prone market system through activist fiscal and monetary government policies.”

— Excerpted from Mark Skousen’s “The Big Three in Economics: Adam Smith, Karl Marx, and John Maynard Keynes” (2007)

Joseph Schumpeter: Creative Destruction

“Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary. And this evolutionary character of the capitalist process is not merely due to the fact that economic life goes on in a social and natural environment which changes[.] […] The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates. […]

The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U. S. Steel illustrate the same process of industrial mutation — if I may use that biological term — that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.”

— Excerpted from Joseph Schumpeter’s “Capitalism, Socialism and Democracy” (1942)

Peter Drucker: Entrepreneurial Society

“Innovation and entrepreneurship are thus needed in society as much as in the economy, in public-service institutions as much as in businesses. It is precisely because innovation and entrepreneurship are not ‘root and branch’ but ‘one step at a time,’ a product here, a policy there, a public service yonder; because they are not planned but focused on this opportunity and that need; because they are tentative and will disappear if they do not produce the expected and needed results; because, in other words, they are pragmatic rather than dogmatic and modest rather than grandiose — that they promise to keep any society, economy, industry, public service, or business flexible and self-renewing. […]

What we need is an entrepreneurial society in which innovation and entrepreneurship are normal, steady, and continual. Just as management has become the specific organ of all contemporary institutions, and the integrating organ of our society of organizations, so innovation and entrepreneurship have to become an integral life-sustaining activity in our organizations, our economy, our society.”

— Excerpted from Peter Drucker’s “Innovation and Entrepreneurship” (1985)