Agents of change
The last point is of particular importance in the light of Schumpeter’s entrepreneurial theory of change. Pareto and others considered rationality as the core of the foundational distinction between economics and sociology.
But this is at odds with the main thrust of Schumpeter’s own entrepreneurial theory of economic change which is not modelled on the basis of neoclassical rational choice. For Schumpeter, drawing the line according to the distinction between preference-guided optimizing (homo oeconomicus) versus routine-/ norm-induced behaviour (homo sociologicus) would impede the formation of a theory of change. In his economic theory, both routine-induced behaviour as well as energetic action plays a role. Constrained optimization is not taken to capture all economically important aspects of human action. As already becomes clear in Entwicklung (1912), JAS’s classes of agents exhibit a significant degree of heterogeneity, with the behavioural patterns corresponding to functional roles: the static agents sustaining the circular flow follow routines and adapt their behaviour to given circumstances; others (the entrepreneurs) mobilize superior energies to change those circumstances by disrupting the circular flow, engaging in creative destruction in terms of new products, production methods, markets, price systems, organizational patterns, and norms. An intermediate type of agent (the early follower) has capabilities allowing him or her to swiftly recognize successful innovations and imitate them. Somewhat similar capabilities of judgement (albeit in a different decision context) are ascribed to “the banker”, who is responsible for channelling scarce resources (which are assumed to be fully employed in the circular flow) to some of the would-be innovators. While the powerful innovative agency of entrepreneurs certainly cannot be reduced to the kind of perfect hedonic rationality under conditions of full information, it would be a big mistake to equate it with irrationality. On the contrary, rationality may play a larger role in the context of the behaviour of innovators than of those who are mainly following routines or at best adapt to changing circumstances. Innovative entrepreneurs are not necessarily rational in a neoclassical sense, but rationalizing agents in a systemic sense. Their agency (“creative destruction”) is pivotal for forward-looking disruption of routinized behaviours and structures. For innovation to become a pervasive and systemic phenomenon, agents such as “the early follower” or “the banker” play an important subsidiary role. In that process of experimentation and creative destruction, boundedly rational agents of change employ their creative energies. In historical perspective, semi-rational entrepreneurial capitalism unleashes most powerful forces of rationalization which eventually transform the economic process: in the whole process, enterprises and societies learn to organize and routinize change.