ABSTRACT
This chapter describes the resulting Schumpeterian theoretical system and the contribution of Capitalism, Socialism and Democracy, its significance for analysis and its role in shaping the current research agenda. Political individualism is explicitly rejected as an entirely separate assumption and no metaphysical claim is made: the adjective ‘methodological’ is used to signal that the adoption of the individualist position is purely instrumental. ‘Society forms individuals and directly influences their economic value’: social structures affect individuals. The circular-flow model developed by Schumpeter is a particular state of equilibrium, characterised by endless repetition of the same acts of exchange on the part of all individuals. This follows from an additional assumption of strictly static conditions, introduced in order to isolate and describe with precision the process of economic development. Having established the static roots of Schumpeterian theory, it is possible to move on to its actual dynamic content.
