Friedrich Hayek on Joseph Schumpeter

“That an economist of Professor Schumpeter's standing should thus have fallen into a trap which the ambiguity of the term "datum" sets to the unwary can hardly be explained as a simple error. It suggests rather that there is something fundamentally wrong with an approach which habitually disregards an essential part of the phenomena with which we have to deal: the unavoidable imperfection of man's knowledge and the consequent need for a process by which knowledge is constantly communicated and acquired. Any approach, such as that of much of mathematical economics with its simultaneous equations, which in effect starts from the assumption that people's knowledge corresponds with the objective facts of the situation, systematically leaves out what is our main task to explain.”

“Speaking about great conversationalists among economists reminds me that you may wonder why I have not yet said more about Schumpeter—certainly the most brilliant talker among economists I have known with the sole exception of Keynes, with whom he had many other things in common, not least a puckish itch pour épater le bourgeois and a certain pretence to omniscience and a tendency to bluff which went far beyond their astounding knowledge. So far as Schumpeter is concerned, the fact is that during the few post-war years he lived at Vienna he had scarcely any contact with the economists and saw little even of those who had been his contemporaries in the Böhm-Bawerk seminar. Of course his two pre-war books and his essay on money were familiar to all of us. But we hardly saw him and some of his pronouncements on current affairs had earned him a reputation as an enfant terrible among economists.”

“Schumpeter’s attempt to prove his assertion to the layman characteristically begins by assuming that ‘means of production are present in given and, for the moment, unalterable quantities’. He does not explain to whom these quantities are ‘given’, that is, known, nor how much about their various attributes and potentialities anybody knows.”

“It was probably the influence of Schumpeter’s teaching more than the direct influence of Oskar Lange that has given rise to the growth of an extensive literature of mathematical studies of ‘resource allocation processes’. As far as I can see they deal as irresponsibly with sets of fictitious ‘data’ which are in no way connected with what the acting individuals can learn as any of Lange's.”