ABSTRACT
In The Theory of Economic Development, first published in 1911, Joseph Schumpeter, drawing inspiration from Karl Marx, argued that capitalism had to be conceptualized as an economic system in which technological change, or more broadly speaking innovation, constantly disrupted the general equilibrium of market exchange (see Lazonick 2011b). As Schumpeter (1950, 106) would put in his 1942 book, Capitalism, Socialism, and Democracy:
What we have got to accept is that [the large-scale enterprise] has come to be the most powerful engine of [economic] progress and in particular of the long-run expansion of total output not only in spite of, but to a considerable extent through, the strategy that looks so restrictive when viewed in the individual case and from the individual point in time. In this respect, perfect competition is not only impossible but inferior, and has no title to being set up as a model of ideal efficiency.
