ABSTRACT
This chapter critically examines Schumpeter's treatment of the three concepts of "normal" along with the relationships among them. They are: the common-sense or businessman's concept of normal business conditions; the values associated with a theoretical norm; and the values associated with a statistical norm. Schumpeter argues the actual values of economic variables converge on values given by their respective common-sense, theoretical and statistical norms at the interval in the transition between business cycles. The chapter considers the apparent contradiction between evolution and equilibrium and the resolution attempted by Marshall with the distinction between short– and long–period time horizons, which leads to distinguishing between disrupted and orderly industries. It discusses Schumpeter's treatment of imperfect competition. Schumpeter clearly recognises the usefulness of the Walrasian equilibrium concept for analysing business cycles depends on the economic system having an equilibrating mechanism. The discussion focuses on analytical differences between a developing economy at the nadir of innovative activity and an economy in a stationary state.
