Schumpeter and Heidegger (Part One)

The commonsense of this tool of analysis may be formulated as follows: first, if we deal with, say, the
organism of a dog, the interpretation of what we observe divides readily into two branches. We may
be interested in the processes of life going on in the dog, such as the circulation of the blood, its
relation to the digestive mechanism, and so on. But however completely we master all their details,
and however satisfactorily we succeed in linking them up with each other, this will not help us to
describe or understand how such things as dogs
Joseph Schumpeter, Business Cycles. !"#"$ %"
have come to exist at all. Obviously, we have here a different process before us, involving different
facts and concepts such as selection or mutation or, generally, evolution. &n the case of biological
organisms nobody ta'es offense at the distinction. There is nothing artificial or unreal about it and it
comes naturally to us( the facts indeed impose it on us.
&t is incessant change in the data of the situations, rather than the inade)uacy of the data of any given
situation, which creates what loo's li'e indeterminateness of pricing. We conclude, on the one hand,
that we must ta'e account of this pattern when dealing with the process of change which it is our tas'
to analy*e in this boo' and which must be e+pected to create precisely such situations, and, on the
other hand, that it does not paralyze the tendency toward equilibrium
,Gleichgewichtstendenz-Business Cycles, p..#$
There comes a time when even the bourgeoisie must contemplate its own surcease. In this revealing
passage, Schumpeter canvasses with Heideggerian Entschlossenheit (or, as the Freiburg philosopher would
put it, with resoluteness in confronting beingtowarddeath! the eventual demise of capitalism. The
ver" realit" of social change and of economic evolution contains the certainty of capitalist extinction# The
facts indeed impose it on us. This is a realit" that e$uilibrium anal"sis b" its ver" formal character $uite
simpl" cannot countenance. There is no beingtowarddeath in e$uilibrium, no Da-sein % and no
e&tinction. 'ut the important reali(ation in Schumpeter)s reflection above is not so much this
e&istential dread, the fact that formal theor" can never encompass e&istence (cf. *ier+egaard)s vehement
criti$ue of Hegel)s dialectic!, it is rather the fact that e$uilibrium theor" completel" neglects the most
essential aspect of economics % the production of goods and services and therefore the metabolism of
the economic s"stem with the ph"sical environment of which human beings are part (this is indeed the ver"
first concern of Schumpeter)s intellectual mentor, -ugen 'ohm'awer+, at the beginning of The Positive
Theory of Capital!.
The certaint" that e$uilibrium theor" affords lies in the a&iomatic determination of prices. .et, once we
allow the mar+et participants of e$uilibrium, which as we have shown are merel" mechanical inert bodies,
to become political economic agents, then the prices of the economic s"stem become wholl"
indeterminate, precisel" because the s"stem undergoes incessant transformation or mutation. For
Schumpeter, the problem with both /lassical and 0eoclassical economic theories is that their formali(ation
of the relations between the component parts or functions of the econom" (suppl", demand, investment,
consumption, interest, monetar" mass!, is entirel" static or closed or selfreferential, and is therefore
entirel" incapable of accounting for the e$uall" observable fact of the d"namic movement of the
capitalist econom", for its mutation from one e$uilibrium to another, e$uilibria that are $uite different
not onl" in quantitative but also in qualitative terms1 /apitalist development is not 2ust horizontal
quantitative groth or development (!achstum!, it is above all vertical qualitative mutation or evolution
(Entic"lung!. Schumpeter)s initial ob2ection to the translation of Entic"lung with development rather
than evolution is all here# development refers to incremental change, evolution points star+l" at the
possibilit" of e&tinction. 3f course, the term evolution has its own problems in the sense, first, that
capitalism is not a dog (however much we 4ar&ists woud li+e to thin+ of it as such!, in other words it is
not an animal species with genes so that the analog" is ver" imperfect, and second that evolution, as
Schumpeter himself pointed out, has a tone of complacenc" about it. Indeed, it is even possible to
challenge the status of e$uilibrium economics as science given that, to reprise Schumpeter)s metaphor of
the circular flow or #reislauf, e$uilibrium anal"sis is 2ust that % mere ana-lysis1 It is, as it were, a
descriptive or anatomical schema that can onl" photograph or s+etch an economic s"stem and
classif" its individual organs. It relies e&clusivel" on pure e&change and on the ma&imi(ation of
welfare or utilit" from the redistribution of given endowments. 5bove all else, because e$uilibrium is
$uite simpl" a formal descriptive schema, it e&ists onl" logically, but it does not ec-sist in the sense that it
does not face the certaint" of death, in the case of its individuals, or the certaint" of e&tinction, in the
case of the capitalist economic s"stem. 3nce the certaint" of ontogenetic death and ph"logenetic e&tinction
are ta+en into account, then we understand that the individuals that ma+e up the economic s"stem must
deal with their ph"sical environment, with their physis# % this is the meta$olism that is entirel" and
conceptuall" absent from the e$uilibrium schema and that is instead essential to the notion of mar+et
process, that is, to the unfolding or e&trinsication of an economic s"stem in the ph"sical world.
6hat e$uilibrium anal"sis cannot do is understand and e&plain how the economic s"stem meta$olises, how
it interacts with its social, political, and ph"sical environment, how it grows, mutates, and dies % or,
ph"logeneticall", how it evolves and becomes e&tinct. Seen from the point of view of mar+et process %
which, as we e&plained earlier, is the $uasilogical or dialectical conceptual e&trinsication or unfolding of
the concept of e$uilibrium, its Heideggerian ec-sistence % seen from this perspective, e$uilibrium is a
purel" descriptive or classificator" e&ercise# it merel" describes the logical and functional relation of each
component of an economic s"stem to other components, and then determines the price matri& that will
ma&imi(e the individual utilit" schedules of its selfinterested individuals.
'ut two essential points must be made and understood# first, the prices or e&change rates of goods at
e$uilibrium are mathematical identities that do not tell us what is being e&changed e&cept for the purel"
metaph"sical notion of utilit". The equi-valence of the e&change in a static framewor+ merel" destro"s
or dissolves in the identity of the ob2ects e&changed, in their formal equi-valence, their difference (cf.
Heidegger, %dentity and Difference! in such a wa" that the e&change is not productive, it is not meta-
$olic % there is no change in this ex-change! Even then, this e&change of utilities is $uite simpl"
impossible when we consider the atomicit" of the selfinterested individuals of e$uilibrium theor". For
it is $uite absurd to imagine that such absolutel" selfinterested and individual entities % 5ristotelian
entelechies1 % could ever be able to exchange an"thing at all1 For an" e&change to be possible or
meaningful, there must be a su$-stance that ma+es the ob2ects of e&change equi-valent % of the same
value. 'ut it is precisel" this 3b2ective 7alue that is utterl" absent in e$uilibrium anal"sis because of the
bottomless individualit" and irreconcilable selfinterest of its mar+et entities, of its individuals1 The
onl" value present in e$uilibrium is Sub2ective 7alue which, as an inevitable result of its sub2ectivit",
is $uite simpl" incommensurable. But every self-interest must share some common element with other
self-interests to give meaning to the conflict of interests (the difference) that makes exchange possible.
-ver" com-petition must have an ob2ect over which competitors compete (see+ together!1 This
ob2ect, this su$-stance or quidditas, this su$&ect-matter that forms the communion of the exchange (the
contractual meeting of the minds over an ob2ect! is entirel" missing in the theor" of e$uilibrium1
Second, as a corollar" of the first point, e$uilibrium theor" allows onl" for the e&change of goods and
services# it tells us nothing about how the" are produced, that is, it tells us about the sub2ective
estimations b" mar+et participants of their goods for e&change with respect to one another, but tells us
nothing about the relation of mar+et participants to their natural environment. Third, mar+et participants are
mere inert $odies that obe" the a&iomatic conditions imposed b" e$uilibrium theor"# the" are certainl" not
economic agents ma+ing their own spontaneous decisions. 5nd finall" these economic agents are not
allowed to interact with one another or with their ph"sical environment % an e&clusion that automaticall"
removes the ob2ect, the sub2ectmatter of economics and eschews politics from the field of economic
in$uir" because (a! there is no ob2ect over which to haggle (there is no disputandum, no com- of com
petition and no con- of conflict!, and (b! atomic individuals cannot form friends with whom to fight
foes (cf. /arl Schmitt)s definition of the 8olitical in The Concept of the Political!.
In other words, seen from the perspective of the mar"et process, e$uilibrium (a! is internall" inconsistent
because it contains aporetic and antinomic concepts, (b! does not allow for the ontological and
ph"logenetic ec-sistence of its individuals in the sense that their e&istence is purel" logico
mathematical , (c! does not allow for pro-duction, that is, for the meta$olic interaction of human beings
(alone or together! with their ph"sical environment, and (d! is entirel" devoid of Politics because of its
individualistic e&istential or ontogenetic a&ioms which e&clude ph"logenetic realit". 5s we have seen,
without this metabolic or frictional interaction with themselves (the 8olitical! and with the world
(ph"logenesis! % without the physis , capitalist competition or enterprise is unthin+able because innovation
and profitma+ing are unimaginable, and so too therefore is economic change. The selfinterested
individuals that ma+e up the mar+et mechanism of e$uilibrium anal"sis are inert bodies that obe"
mechanicall" the a&iomatic pure laws of competition imposed e&ternall" and logicomathematicall" on
them.
There are two essential aspects to meta$olism here that are entirel" different from and ma+e it incompatible
with e$uilibrium anal"sis. The first is that the economic s"stem is transformed from ithin b" the
spontaneous actions of its economic agents. 5nd the other aspect is that these economic agents transform
the economic s"stem not merel" relatively to one another as atomistic individuals, that is, considered
ontogeneticall" % as the" must do a&iomaticall" in e$uilibrium theor" which involves onl" relative prices
or e&change rates and therefore onl" pure e&change % indeed an e&change so pure that it lac+s an
ob2ect , but the" also transform the economic s"stem b" interacting (a! with one another as aspects of
being human, that is to sa", ph"logeneticall", and (b! with their ph"sical environment, which includes not
2ust surrounding nature, but also their own ph"sical being, their physis.
6e have therefore two $uestions# the first is the transcendental $uestion of existence, and the second is the
immanent $uestion of meta$olism. The former involves for the stud" of economics the ontological $uestion
of wh" is there an economic s"stem at all and not nothing (cf. Heidegger)s $uestion wh" is there
something and not nothing at all9 in Einfuhrung in die 'etaphysi"!, and the latter involves the $uestion of
wh" the economic s"stem is what it actuall" is now % what is its material history. These are the crucial
$uestions that Schumpeter attempts to consider and fails because he limits himself to the transcendental
question but never even remotel" tac+les the most important $uestion % the historicomaterialist one of
meta$olism.
It is simpl" irrelevant and incorrect to accuse Schumpeter of failing to integrate theory and history.
:iven that Schumpeter never even considers the $uestion of immanent metabolism, given that he considers
onl" the $uestion of transcendental e&istence % that is to sa", the application of an abstract formal schema
to empirical facts , there was simpl" no wa" in which these antithetical concepts could ever be
integrated1 Such a criticism of Schumpeter is a lucus a non lucendo % a fire that will not light % because
of the antithetical terms in which the $uestion is posed b" Schumpeter. 5nd Schumpeter poses the $uestion
in these terms precisel" because he is attempting to ma+e whole % the literal meaning of to integrate1 %
the social realit" of capitalism that is bro+en and fragmented1 5s a result, Schumpeter)s theor" must
forever oscillate, li+e a pendulum, between logicomathematical formalism constituted b" the functional
anal"tical, descriptiveanatomical schema of e$uilibrium theor", on one side, and the sub2ectivevoluntarist,
ethicopolitical hypostasis of the %nnovationsprozess on the other.
To deplore the absence of realit" in e$uilibrium theor" (vedi ;awson, Economics and (eality! or
Schumpeter)s failure to integrate theor" and histor" (vedi 4oura)s homon"mous essa"! is to ma+e
the biggest error of all1 5nd that is that no economic theor", however sociologicall" or historicall"
informed, will be able to reflect the antagonistic realit" of capitalism scientifically1 0o theor"
as theory) will be able to integrate what is the $ro"en, fragmented antagonistic reality of
capitalist societ"1 ;awson and 4oura have completel" misconstrued the ineluctable ethico
political instrumental purpose of bourgeois economic theor" behind its scientific mas+ % and
indeed the instrumental purpose of an" economic theor", that is, of an" theor" that attempts to
present as scientific what is necessaril" a partisan (Schmitt!, nonneutral account of social
realit"1 (/f. 6eber)s *$&e"tivitat for what is decidedl" the greatest attempt from a bourgeois
social theoretician to comprehend these paramount issues.!

;awson and 4oura ma+e precisel" this mista+e of confusing political antagonism with e&istential human
choice, which is a purel" individual categor" that conceptuall" obscures the sphere of politics
because the Political cannot be reduced to the humanistic abstractions of individual e&istence and
free will (not to mention the theological one of the soul % cf. <aeger)s The Theology of the Early
+ree"s!. ;i+e Schumpeter, in their attempt to outline and prescribe a historicall"conscious or
reflective economics the" confine themselves to transcendence % and therefore fail to consider
what is the real problem with Schumpeter)s pure economic theor" of economic change
namel", the complete neglect of meta$olism, that is, of the sphere of production and of the social
and political antagonism that is the ver" essence of the capitalist mode of production.

To be sure, Schumpeter)s theor" does rest on the inelucta$ility of conflict, the universal Eris, not 2ust in
capitalism but in the entiret" of e&istence % that is the entire point of his Dynami" and, as we are
about to see, of his entire rationalisation of the scientific need for a ,tati"1 ;i+e 0iet(sche,
6eber and finall" Heidegger, Schumpeter presents and understands social and political and
economic conflict as an absolutel" ineliminable realit" not onl" of human, but indeed of all
e&istence. 5s we remar+ed above, there is no dialectical spiral in Schumpeter and in the entiret"
of the negatives Den"en from Schopenhauer to Ha"e+# there is onl" the eristic pendulum of
star+ opposition (+egensatz, +egen-stand! between human selfinterests that are transcendental
and ontogenetic (cf. Heidegger)s notion of Da-sein and 0iet(sche)s notion of e&ploitation! and
therefore admit of no immanentistic ph"logenetic and dialectical reconciliation (cf. Hegel)s
notion of -ersohnung!. That is the whole point to the methodological individualism o the
!ustrian School"