chapter  12
15 Pages

Financing economic activity

Schumpeter vs Keynes
ByEric Nasica

In this chapter we compare Schumpeter’s and Keynes’s views on the financing of economic activity. As will be seen, in section one, both economists share common ideas about the working and financing of market economies. In particular, both Keynes and Schumpeter reject the classical notions of the neutrality of money and the dichotomy of the real and the monetary sector, emphasising instead the role of monetary and financial variables in their respective explanations of economic fluctuations. However, the two approaches also display significant differences, most notably with regard to the importance attributed to specific financial variables and institutions for the financing of economic activity. Section two examines these differences and emphasises the originality of Schumpeter’s analysis of banking.