The Enthusiast for Macroeconomics and Co-Founder of the Econometric Movement, Joseph Schumpeter, Had Previously Supported ‘Methodological Individualism’

In 1908, when Joseph Schumpeter at the age of twenty-five published his Wesen und Hauptinhalt der theoretischen Nationalökonomie, it attracted much attention by the brilliance of its exposition. Moreover, though he had been trained at the University of Vienna and had been a leading member of the famous seminar of Eugen von Böhm-Bawerk, he had also absorbed the teaching of Léon Walras, who had received little notice by the Austrians and had adopted the positivist approach to science expounded by the Austrian physicist Ernst Mach. In the course of time he moved further away from the characteristic tenets of the Austrian school so that it became increasingly doubtful later whether he could still be counted as a member of that group.

Schumpeter was very much a ‘master of his subject’, in contrast to the ‘puzzlers’ or ‘muddlers’ who follow their own distinct ideas; he also showed a strong receptivity to the dominant opinions in his environment and the prevailing fashion of his generation. Nowhere does this show more clearly than in the still entirely Mengerian chapter of his early book, now translated into English for the first time and regarded as the classic exposition of a view which he later abandoned. Many of his students will be surprised to learn that the enthusiast for macroeconomics and co-founder of the econometrics movement had once given one of the most explicit expositions of the Austrian school’s ‘methodological individualism’. He even appears to have named the principle and condemned the use of statistical aggregates as not belonging to economic theory. 

That this first book of his was never translated is, I believe, due to his understandable reluctance to see a work distributed which, in part, expounded views in which he no longer believed. His reluctance to keep his brilliant first book in print, much less having it translated, can probably be explained by his awareness that his own distinct opinions emerged only in his second book on the Theorie der wirtschaftlichen Entwicklung, which came out four years after the first. Though the author may later no longer have been prepared to defend the ideas of his first work, they are certainly essential enough to the understanding of the development of economic theory. Indeed Schumpeter made a contribution to the tradition of the Austrian school which is sufficiently original to be made available to a wider public.

—F. A. Hayek, “Joseph Schumpeter (1883-1950),” in The Collected Works of F. A. Hayek, vol. 4, The Fortunes of Liberalism: Essays on Austrian Economics and the Ideal of Freedom, ed. Peter G. Klein (Chicago: University of Chicago Press, 1992), Kobo e-book.