The present chapter focusses on the socio-economic and scientific problems that Schumpeter wanted to confront in Entwicklung I. The theoretical problems can roughly be specified as concerning the economic functioning of capitalism (see Figure 5.1 on the next page). Although the specification of these theoretical problems of capitalism is crucial for the understanding of his evolutionary research programme, they have not normally been treated explicitly by economists. For instance, Schumpeter (History, 552n) later remarked that “while the term Capitalist gained citizenship in the economist's lingo, the term Capitalism was, throughout the nineteenth century, hardly used except by Marxists and writers directly influenced by Marxism.” The developments within the economics of the twentieth century have not really changed this situation. The major exception is Schumpeter's own contribution that depicted the major characteristic of capitalism as being its promotion of economic evolution.

The missing treatment of the problems of interest to Schumpeter was remarked by William Baumol's (2002, p. x) in his book on capitalism as an “innovation machine”. Baumol emphasised that, when developing the book, he was “unable to find anything that deals directly with my subject … with the exception of very brief discussions by Marx, Engels, and Schumpeter”. This comment demonstrates that even Baumol follows the all-dominant practice of focussing on a few of Schumpeter's statements in Development and Capitalism. In contrast, the present book tries to demonstrate that major parts of these books, and of most of his other works, are closely related to Baumol's topic.