The historian of economics encounters special difficulties in dealing with a heterodox economist. When one considers someone who is orthodox, basic notions can be taken for granted, and this enables the historian to zero in on meaningful issues without first having to provide an extensive introduction dealing with fundamental notions which have to be understood if the significance of what is being said is to be grasped. On the other hand, if one omits this step when dealing with the heterodox the analysis is not likely to be very meaningful. This special difficulty is much compounded where the heterodoxy is methodological, as it is with Wesley Clair Mitchell. What Mitchell tried to do was to reconstruct economics, to convince economists to adopt a different approach to the very way they conduct their inquiries. John Stuart Mill had laid down the law that extensive observation of specific experience was of no help in the attempt to derive economic theory, and mainstream economists generally went along with him on this. Mitchell disagreed and attempted to show that by building on different foundations a more “scientific” and useful economics could be derived. The interesting question for the historian of economics is: What can we learn from Mitchell's experience? It is here that we run into the problem that I noted at the outset.

Facts, the historian E.H. Carr argued, are like fish in a vast ocean: what one catches to a large extent depends on where one chooses to fish and on the kind of tackle one uses. Professor Paul Samuelson has offered (HES Bulletin, Fall 1987) a prescription for stimulating demand for history of economics. He proposes “that history of economics more purposefully reorient itself toward studying the past from the standpoint of the present state of economic science. To use a pejorative term unpejoratively, I am suggesting Whig Economic History of Economic Analysis.” (Samuelson 1987: 52) Samuelson promises that fishing with the tackle of present-day theory will catch commercially attractive historical fish and illustrates this approach with his own work in history of economics.

By the time Joseph A. Schumpeter was well into the writing of his History of Economic Analysis. that is, in the late 1940's, shortly before his death, Paul A. Samuelson was already well known in the higher circles of the profession for his precocity and brilliance.2 But, if later his impact on the discipline was to be ceremonialized, and quite accurately as such appelations go, as the Age of Samuelson, was this dimly if at all anticipated by Schumpeter when he wrote the History? How did Schumpeter treat Samuelson therein and was it different from his treatment of other contemporary economists, such as Milton Friedman, John R. Hicks, Oscar Lange, Abba Lerner, Franco Modigliani, and George Stigler, all of whom, for example, figure in the History?

Keynes' Treatise on Money was used to describe his ideas on the credit market. This was the market where equilibrium determines the rate of interest. The supply of credit, or loanable funds, was set equal to the demand for credit; variations in the interest rate were explained by shifts in these functions. Most of Keynes' early interest theories were short run; they were developed in relation to his theory of the credit cycle; he was attempting to explain why the interest rate would vary during a “slump” or an “expansion” of the economy. Some of Keynes' interest theory was also developed in relation to his attempt to rationalize Gibson's Paradox (GP), that prices and interest rates move in the same direction over time. This was Keynes' long run theory of interest.

This investigation reveals certain modifications and extensions pertaining primarily to the disintegration of the social fabric of capitalist society developed by Schumpeter, with special emphasis on his writings between the years 1942 and 1949, just prior to his death in 1950. Three publications during the period which hold particular significance are Prime and Henderson (1975), “Schumpeter on Preserving Private Enterprise” (an address by Schumpeter to a group of Quebec businessmen in November 1945); J.A. Schumpeter, “The March into Socialism,” AER, May 1950 (a paper presented on December 30, 1949); and J.A. Schumpeter, notes on “American Institutions and Economic Progress,” (late 1949). These more recent views are exposed and compared with Galbraith's rationalizations on the contemporary corporate economy. It is well known that Schumpeter, the theorist, was willing to express tendencies but was hesitant to relate the specific outcome of the future of capitalism. However, Galbraith was quite precise in his interpretation of the transition to modern capitalism.

So true is it that, in science as elsewhere, we fight for and against not men and things as they are, but for and against the caricatures we make of them.

(Schumpeter, 1954, p. 90)