Schumpeter and Weber on the Institutions of Capitalism

Abstract

In a `new introduction' to their work, Richard Swedberg (2002) argues that Weber and Schumpeter's `economic sociology of capitalism' contains a `puzzle'. Weber and Schumpeter are said to believe that a vigorous capitalism requires `something else' in addition to the institutions outlined in their respective ideal types and theories. Dynamic capitalism requires individuals who possess a distinctive `mentality' or `inner motivation' - that is, a `capitalist or entrepreneurial spirit'. This new introduction is entirely consistent with the tenor of existing sociological interpretations of Weber and Schumpeter. But, more importantly, both Swedberg and the sociological tradition of which he is critical completely ignore the institutional source of dynamism that is central to Schumpeter's Theory of Economic Development and figures in Weber's General Economic History. Both saw that a differentia specifica of capitalism is the production of an elastic supply of credit-money by banks and states, without which entrepreneurial activity could not take place.