The Republic of Entrepreneurs: A Critique of Schumpeter on Entrepreneurs, Innovation, and Cycles

Heng-Fu Zou ()

No 799, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: Schumpeter's heroic entrepreneur and "creative destruction" remain the dominant metaphors for innovation and cycles. Read against history and theory-from Cantillon's functional entrepreneur, Mises's monetary calculation and residual claimancy, Hayek's dispersed knowledge and discovery, Kirzner's alertness, Mokyr's Industrial Enlightenment, McCloskey's bourgeois dignity, and Phelps's grassroots dynamism-those metaphors misallocate causal weight. Innovation is chiefly a civic process carried out by a republic of entrepreneurs: many actors proposing small, testable changes under general, impersonal rules; markets and peer criticism supply fast feedback; lawful imitation multiplies gains. Monopoly "havens" are neither necessary nor suficient for discovery and often dull price and reputation signals. Business cycles need not originate in technology clusters; monetary-financial coordination failures (credit booms, interest-rate mispricing, policy shocks) can amplify or swamp a steady flow of decentralized discovery. Historical cases-Britain, the United States, France, Germany, and modern biomedicine - show the braid of the republics of letters, science, and entrepreneurs turning useful knowledge into useful industry through open entry, standards, and disclosure norms. We propose a republican policy constitution: protect the commons of discovery (contestable markets, interoperable standards, IP that teaches and expires, and publication/priority rules) rather than pick champions or sanctify durable market power. The framework yields testable predictions about proposal density, feedback speed, and difusion breadth and offers a practical agenda for growth and development.

Pages: 25 pages
Date: 2025-10-31
New Economics Papers: this item is included in nep-ent and nep-sbm
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