Business booksJoseph Schumpeter was eminent as a womaniser and as an economist, writes Pat McArdle

Whatever you may think about him - and there are many views - Schumpeter, the father of modern capitalism according to this book by Thomas K McCraw, was a remarkable fellow who gave the lie to the notion that economists are invariably a dull lot.

As a young man growing up in Vienna, he is said to have had ambitions to be the best economist in the world, the best horseman in Austria and the best lover in Vienna. In later years he admitted to failure in only one of them, but would never say which. Readers of this book are left with little doubt about his eminence as an economist and his prowess as a womaniser. You will search in vain for references to his horsemanship skills.

When, at the age of four, his father was killed in a hunting accident, his mother uprooted and moved first to Graz and then Vienna, so that her prodigy could receive the education he deserved. The class system of the time meant that proximity and genius were not sufficient to gain acceptance to a great university like Vienna, so she married a retired army general more than twice her age, only to divorce him in the year in which Schumpeter graduated. Not surprisingly, Schumpeter adored his mother - "his most important goal was her approval, even after her death". He never really recovered from the shock of his mother, wife and child all dying within a short space of time, and wrote notes to them in his diary for many years afterwards.

Schumpeter lived through two great wars at a time of massive disruption and change and the emergence of new thinking promulgated by Marx, Keynes, etc. By his mid-50s he had lived in nine cities and five countries. He was Austria's youngest finance minister, he lectured in Germany as the Nazi forces were gathering, he made and lost fortunes on the stock exchange and he was one of the first great European émigrés to the United States. He was a notorious womaniser, "married" three times but with countless affairs. He frequently regaled his colleagues with stories of orgies and "advanced sexual techniques", hardly the stuff of the common rooms in UCD or Trinity, unless I am greatly mistaken.

In many ways, these are the more interesting parts of the book, but McCraw, a business historian at Harvard (where Schumpeter spent the latter part of his life) and a Pulitzer Prize winner, frustratingly stops short of giving any real insights into Schumpeter's sexual predilections.

The book, reckoned by one reviewer to be one of the two or three best biographies of an economist ever written - there have not been many - is a 500-page tome with an additional 200 pages of notes. It is not for the faint-hearted. Unswervingly sympathetic to his subject, McCraw is not content to restrict himself to the great man's life and contribution; he attempts an intellectual history and comparative evaluation of the different economic systems as well. These can be quite tedious: indeed, in so doing, McCraw leaves himself open to the same criticism as that of his subject - an excessive focus on history and detail.

Why is it that Schumpeter, who died in 1950, just a few weeks short of his 67th birthday, is less well known than Marx or Keynes who were his contemporaries? His output in the early years was prodigal - by the time he was 30 he had produced three major books but there followed a slowdown. He attempted to do everything on his own, spending endless hours on historical exploration and attempts to merge history and theory. This, combined with a long period of depression after the death of his loved ones, slowed him down and, unlike Keynes who frequently used his students as sounding boards and assistants, resulted in long and tedious publications.

He spent many years working on the subject of money but it was Keynes who published the definitive work on it - Schumpeter was generous in his praise of the opus but confided to a student that Keynes had stolen some of his ideas. After seven years of research, he published a major work on business cycles in 1939, but it has not stood the test of time.

Schumpeter's greatest insights were that innovation is the driving force of capitalism and that entrepreneurs are the agents of innovation. Without change we die and turbulence is a small price to pay.

"The capitalist achievement does not typically consist in providing more silk stockings for queens (Queen Elizabeth wore silk stockings in the 16th century) but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort," he wrote.

Like Marx, he predicted that capitalism would fail, but Schumpeter saw it more as a continual rebirth. This was his enduring legacy. He deserves more recognition and McCraw's book is to be welcomed on that account.

Pat McArdle is chief economist with Ulster Bank

Prophet of Innovation - Joseph Schumpeter and creative destruction by Thomas K McCraw. Harvard University Press: €32.30