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Capitalism is doomed to be replaced by socialism. At least that was the view of the well-known Harvard economist Joseph Schumpeter who is most famous for his popularization of the term “creative destruction”—the process by which new entrepreneurial innovations arise and subsequently cause the old way of doing things to disappear. 1 Somewhat ironically, despite Schumpeter being a staunch defender of free-market capitalism and its long-run merits, this view put him in agreement with the noted socialist writer, Karl Marx.

Schumpeter explicitly discussed his agreement Marx’s prediction, though he also stressed that his view of both the causes and desirability of the transition were clearly different. While Marx believed that the end of capitalism would come in the form of a working-class revolt due to capitalism’s failures, Schumpeter in-