In the Summer issue of Regulation (rubric “From the Past”), I review Joseph Schumpeter’s most famous book, Capitalism, Socialism and Democracy, first published 80 years ago::

In the book, Schumpeter argued that capitalism will naturally evolve into socialism, that socialism can work, and that it is not logically incompatible with democracy. I will argue against all three of these claims.

The celebrated book is well-known for its defense of “creative destruction,” but it also offers puzzling arguments in defense of socialism. I write:

Didn’t the reservations [Schumpeter] expressed overcome the putative advantages of socialism? Why didn’t he see that? One hypothesis echoed by Harvard business historian Thomas K. McCraw in his introduction to the 2008 edition of the book is that Schumpeter’s praise for socialism was irony. He had to camouflage his conservative opinions lest his socialist readers put it down. In this view, apparently shared by other scholars, we would have to read the satire between the lines.

One puzzling argument I report about (the quoted part is from Schumpeter):

If income inequality … were not deemed acceptable under socialism, the high-level bureaucrats could be “compensated not only by honors but also by official residences staffed at the public expense, allowances for ‘official’ hospitality, the use of admiralty and other yachts,” and such. OK, perhaps we can find some satire there!

McCraw wrote (and I have kept this part exclusively for my EconLog readers) that the famous Harvard professor of economics

was known for his good cheer, polished manner, and mischievous wit. He often said that he aspired to be the world’s greatest economist, lover, and horseman. Then came the punch line: things were not working out well with the horses.

As you will see if you read my essay (scroll down after following the link) I cannot but conclude about Capitalism, Socialism and Democracy:

Perhaps, after all, it is a long, devastating satire against socialism.