Creative Destruction: Entrepreneurship and Innovations in economic theories of Karl Marx, Werner Sombart and Josef Schumpeter

<p><span style="line-height: 150%;">The public interest to the&nbsp;</span><span style="line-height: 18px;">phenomenon of&nbsp;</span><span style="line-height: 150%;">innovations rising, the ideas of Josef Schumpeter are becoming more and more popular. And yet, understanding his concepts requires the knowledge of their intellectual roots. In this paper we are going to study the history of the concept of Creative Destruction, conducting a comparative analysis of papers of Karl Marx, Werner Sombart and Josef Schumpeter. We will argue that their works comprise a distinct intellectual tradition, largely opposing to that of the classical (Anglo-Saxon) political economy and (both Anglo-Saxon and Continental) economics and differing from the latter tradition both in the assumptions, approach and thus in conclusions. What is more important, Sombart&#39;s and ultimately Schumpeter&#39;s papers are devoted to studying the problems formulated by Marx.</span></p><p align="JUSTIFY" lang="en-US" style="margin-top: 0.42cm; margin-bottom: 0.42cm; line-height: 150%;"><font color="#222222">Drawing on the main works of these three authors, we reveal that their theories were either explicitly or implicitly based on the common understanding of three key philosophical concepts non-characteristic for the classical tradition. Firstly, that is the difference between static pre-capitalist or non-capitalist and dynamic capitalist economy whose most characteristic feature is that it is constantly introducing the innovations. The capitalist society is essentially revolutionary society. Secondly, Marx, Sombart and Schumpeter believed in the very unequal distribution of power among the economic actors, which is apparently reflected in the existence of profits. Thus when studying the logic of development of the capitalism, they focused their attention on those few economic actors who are drawing the profits and hold the economic power &ndash; entrepreneurs or capitalists (unlike the classical and neo-classical economists who saw no qualitative difference between various actors). Thirdly, our three authors made an implicit distinction between the institutions concerning to the productive sector of economy (okos) and those that were drawn upon non-productive relations (e.g. the state, feudal institutions, the financial sector). Any radical change in the economy first happens within the non-productive sector and only later in the productive one. For instance, the financial capital appears much earlier than the industrial one, because the possibility of power accumulation (and, consequently, the high profit margin) emerges here earlier than within the productive sector. Thus a change within the productive sector indicates that it reached the very core of the economy, e.g. according to Marx the capitalism is established when the capital subjugates the labor. </font></p><p align="JUSTIFY" lang="en-US" style="margin-top: 0.42cm; margin-bottom: 0.42cm; line-height: 150%;"><font color="#222222">Moreover, the similarity of theoretical frameworks reveals that these authors belong to one &ldquo;argumentative network&rdquo; in Randall Collins terms. Marx argued that the capitalism is characterized primarily by the monopolistic power of capitalists which roots in their monopoly on the means of production. Sombart seeked for alternative roots of this monopolistic power and concluded that it was based on the personal ability of an entrepreneur (Unternehmer) to apply a rational and innovative plan. Finally, Schumpeter formalized Sombart&#39;s theory, formulated details of such a plan and explained mathematically how exactly does it lead to the monopolistic power and profits.&nbsp;</font></p>