J. A. SCHUMPETER'S 'CREDIT' THEORY OF MONEY

This dissertation deals with the roles that money and credit play in Schumpeter's vision and model of entrepreneurial innovation, economic development, and business cycles. The bulk of the evidence from Schumpeter's major German and English writings points to Schumpeter's believing: (1) that money per se is of relatively little importance in economic development and cycles; (2) that credit movements are the real vehicle for the financing of that innovation which leads to economic development and business cycles; and (3) that the quantity theory of money must be rejected.;The dissertation examines chronologically all of Schumpeter's writings that substantially deal with money and credit. A chapter on secondary sources in included. A careful examination of this work reveals that Schumpeter was an important innovator in monetary and credit aspects of Economic Theory. His innovations were: (1) his departure from the barter paradigm, adopting instead analysis of the economy in money flows; (2) his dealing concretely with the ways in which expenditures, those on innovation, are financed; (3) his analysis of an economy in which credit is the pivotal element, permitting innovation to take place; (4) his seeing economic development and increasing material welfare as dependent upon innovation rather than the mere accumulation of stock of capital; and (5) his treatment of capitalism as cyclical rather than stable.;The thesis demonstrated that Schumpeter's monetary theory is very different from standard contemporary monetary theory. In fact, it can be reasonably postulated that Schumpeter would choose a "credit theory of money" over the "monetary theory" which characterizes the contemporary literature. Schumpeter was a major figure in the long line of eminent economists, from Henry Thornton to J. M. Keynes and J. R. Hicks, whose monetary theories were really credit theories.;Special attention was given in earlier phases of the thesis project to Schumpeter's Das Wesen Des Geldes, a posthumous book published only in German. The only notable contribution of Das Wesen to Schumpeter's work on money proved to be its attention to how money evolved from a simple medium of exchange in a simple economy to the complex credit mechanism that permeates the complex modern economy. A detailed treatment of Das Wesen is included as an appendix.