The following points highlight the twelve propositions of Schumpeter’s model of economic growth. Proposition 1: Production Function: The production function is same as in the classical economy i.e. O = ƒ (L, K, Q, T) L = Labour force K = Capital stock T = Technology Proposition 2: Saving depends on wages, Profits and Interest Rates: Savings depend upon wages, [...]
The following points highlight the nine major criticisms of Schumpeter’s theory of economic development. Criticism # 1. Role of innovator emphasized: Schumpeter theory highlights the role of innovator as the prime mover of economic development. The analysis of the entrepreneurial innovation is highly useful in the development of capitalism. Innovations are only one of many factors causing cyclical fluctuations in [...]
The following points highlight the eleven reasons why Schumpeter’s theory is not applicable to Under- Developed Countries (UDCs). Reason # 1. Not applicable to Socialist Countries: This theory is not applicable to majority of UDCs which have socialist system. For example, the introduction of social security measures and highly progressive income taxes are harmful to the development of an entrepreneurial [...]