Development Course

Module BMS—D1a
Business Management Systems
Introduction to Development - Its Terms and Conditions

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INTRODUCTION TO

BASIC DEVELOPMENT

ITS TERMS AND CONDITIONS

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Albert Bernard Jansen, eMBA—ITAC Canada

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Business Management Systems : Business Development—Terms and Conditions

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Studyguide ⇒
I. ⇒ Contents
II. ⇒ Preface
III. ⇒ Introduction to some model aspects—Is Development Growth?

A. Development a Succinct Historical Review

A.1 ⇒ Balmer Rink’s Formula and the Harmonic Division
A.2 ⇒ Society’s Progress—Development is linked to Scientific Discoveries
A.3 ⇒ Schumpeter’s Definition of Development and Distinction from Growth
A.4 ⇒ Applications of Keynes’ Model : Keeping up Development by Blowing Debts
A.5 ⇒ Internet—Final Stages into the Infinitesimal and the Upcoming Jump.

B. The Theory and Model of Development

B.1 ⇒ Terms and Conditions for Development
B.2 ⇒ Mathematical Approach: The Three means at Start and End
B.3 ⇒ Development’s Start and End and Some Striking Consequences
B.4 ⇒ The Harmonic Division Bridging Development’s Opposites

C. Application of the Model in Business Practice

C.1 ⇒ Development, Corporate Governance, and Ethical Issues
C.2 ⇒ Sustainable Development and Success Stories

D. D Glossary

E. . Index

F. . Literature

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⇐ Studyguide
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Studytips

•Read the contents of each chapter carefully while gradually proceding. If according to your
timeschedule time to study runs short—do not start a new chapter.

•In order to get the gist, every single chapter should be read completely before detailed study
starts.

•After a second careful reading explanations which seem important to you should get full
attention: Get the idea by printing out textpassages if you think it’s important, or mark them
and try to analyse every detail and core thoughts.

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adaptation from other information resources. Don’t lose your joy studying otherwise study will
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•Written abstracts are to be succinct, relevant to the topic, formulated in your own words in a
concise easy-to-follow way. We grade your knowledge of the material offered.

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informed in time by email and you will receive a graded report sended to your postal address.

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care of the layout and leave at least half of the page blank.
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•Never hesitate to contact your lecturer or another responsible member of staff if something
needs to be cleared.

•Visuals like graphs and diagrams should be kept concise and clear.

•In this course by times clicks on navigations arrows or highlighted words will bring up pop-up
windows to give additional definitions or explanations. Allow your browser popups and cookies
as well. Apart from MS Excel or required plugins like Flash Player 5.0 we avoided embedding
files of technically advanced software—f.i. CAD software—in order to make the contents more
easy to adapt for all students. But please do not forget that we innovate and keep up with new
possibilities for blended learning. We expect you to appreciate this.

•This study will cover a part of your lifetime and this time will never return. So make the best
out of it. We wish you a great time !

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II. ⇐ Preface
| Πόλεμος πάντων μὲν πατήρ ἐστι |

“War is the father of all.”
Heraclitus of Ephesos - 6. Century B.E.

To put it succinctly: —Today development as a topic needs a renewed scientific approach. Only a
scientific concept as a background fundamental for development- and risk management in all
applicable fields can overcome critical problems occurring at various development stages. A renewed
approach would enable us to discern what to look for and where to look at should crises occur and
threaten to block off rational reasoning. In realworld practice we see that development do can have
dangerous impacts like commencing wars to maintain an upward trend of a country’s GDP1. Though
this would be thoroughly in line, because, conflicting potentials are innate to development at its start as
we shall see in upcoming units. As stated by Heraclitus in another famous aphorism; gods play with
the tools of creation [i.e. of development]. Of course development should not only be regarded just as
a playtoy for heavenly beings, but as a magnificent tool in the hands of responsible mankind—yet
necessary to fully comprehend for a proper application. Development indeed carries an inflammable
potential of innate energy, which—once enticed at start—could release the inextricable intertwined—
and initially strict opposed—forces into undesired directions.
So it’s time for the quest on development and its conditions, because entering the third millenium we
seem to embark for a totally new era of dynamics, in which development and the feat of its handling
will be a main issue for globalized society to uphold prosperity and to maintain peace. It seems clear
that once again at various fields the world is preparing to meet the challenges for a totally new
development stage—this time on a global scale. However we may say, that if there is no awareness of
the implications of development—still to be uncovered—we do can expect a future of increasing
conflicting interests, of increasing hostilities, of chasms emerge. If not handled properly it will likely
result in endless cruel wars. May war be the generator of all as Heraklitus stated and is to a certain
extend still valid today, it never may be developments aim as such. And as we shall see; if war is no
final target, then prosperity and harmony must be developments final result this by means of the
convergence of development forces initially opposed to each other as we shall cover further on.

1
GDP = Gross Domestic Product. An economic term to indicate the total market value of all final goods and services produced
in a one-year period of a country.

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This course will give you a small overview of what we actually ought to capture mentally—thinking and
reasoning in terms of development and growth. Anticipating on items to come: development is by no
means just growth and vice versa growth is by no means just development. From J. Schumpeter—the
known Austrian economist—we inherited crucial thoughts how to distinct between both expressions.
Society though seem not inclined to learn very fast. So for reasons of convention teachers and
economists are forced not to stress the difference and not to distinct properly; talking about growth
while pointing at events that would probably characterize development and talking about development
while pointing at events that would under circumstances characterize growth. We can’t blaim them, but
we should sense a responsibility not to continue with the usus. Still there is a job to do, to get the
proper underlinement of developments terms and conditions. This starts in the first place with a proper
definition i.e. of a proper distinction of meaning and comprehension of ideas like “development” and
“growth”. We have our famous forerunners in development research and are very grateful for it. One of
them is the Austrian economist Joseph Alois Schumpeter. To regard Schumpeters contributions to
development as a basic construction indispensable for all further research on development is a must
to acknowledge for us and for generations to come. Therefore it’s up to us to handle the topic
accordingly. Much has been undertaken already. A look at the evolutionary economists contributions
with respect to Schumpeter will convince us. With this introduction course we try to contribute to the
comprehension of the term development by stressing some very basic maths as well.

Of course there would be a lot to say about development to get all the different views conveyed. There
is literature galore dealing with this. What could make this special course useful to the reader is the
new approach of development with respect of what’s going on—and going wrong—in real-world
practice, emerging development dynamics with its complexity, weird globalization aspects, potential
dangers and unique possibilities. For individuals living in this crucial time—appreciating innovation with
respect to development— it’s possible to choose; either to adapt and step in the heart of realworld
development dynamics or to step aside in reluctance, while looking how the stressy world is passing
by. As PhD Tad James, leader in the neuro-dynamic field of Accelerated Human Change, once put it:
We can regard ourselves being “through time” i.e. endogen active in development’s process or rather
“in time” i.e. dependent on development’s exogen conditions.
The model of development introduced, together with the findings stated in this course is the result of
several years of indeep research and is by no means “new” in a sense that it has never been sensed
by mankind before. But it is forgotten. And since those times of the ancients things has been changed
enormously. A new world emerged. But these ancient insights mostly expressed in covert aphorisms
are valid still today and can have their say even more trenchant then our modern views.
Having said that, the model, presented here, is nevertheless backboned by maths and we were lucky
being enable to trace its principles from developments start right to developments entropic end. This
turns out to be of great help on how to sail between the “rocks of Scilla and Charybdis” as in the story

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of Odysseus, when we want to be successful achieving our targets through the subsequent stages
and inherent bottlenecks in the flux of developments progress. Odysseus blindfolded the crew to pass
the crises. Nowadays there can be no intention to blindfold our mates again like Odysseus did with his
team. On the contrary; we should strive to keep eyes open widely.
This brings us to a next issue: Imagine, if a med has the wrong anamnesis the cure won’t be much of
a success—will it? In the same way if an enterpriser or an economist has a biased anamnesis, what
will be his planning for the firms management or what will his advice to the policymakers bring about?
Speaking about development, we definitely need to look at the emergences of such phenomenons like
“crises”.Those complex and often enough desastrous situations should receive a proper foreseeing
treatment and—like Odysseus for his time—we also should have the right anamnesis resulting in the
right action or cure to deal with it, to feat the critical situations inherently anchored in all development.
But it has to be said, that people would like to avoid crises. We can easily imagine why. Mostly we all
are inclined, not to go through those development traps and bottlenecks, that nevertheless will actually
bring us through and up to higher stages of development quality. So we can expect, that avoiding
crises, treating them as if they were accidents, is like preparing for the wrong anamnesis. And often
enough a wrong advice or a fruitless strategic idea ends up in a derailed and tensefull development
environment—of course an organizational mess is the result. That in turn can lead to a destruction of
all previous achievements. This doesn’t make much sense and is an at all times painful experience. A
first remedy were to take Schumpeter serious. But just avoiding the challenges of crises is nor a cure
neither a way to envisage and treat such phenomenons. We got to look at it from a positive side. In
reality all crises are the sole potential possibility for the eliciting of sensefull but necessary steps and
for the passing to next stages of development, because the incremental rationals and gameplay logic
of methods appropriate for growth periods—admittedly most often a strategy f.i. of dull operational
research methods—can’t really do the job. We must state:—Crises do not put off their ‘iron helm’ and
reveal themselves if regarded as merely threats and dangers to creep away from. So for those, who
lauch developments and want them sound there is a great need for clearance and for the work up of a
lot of biased established views, attitudes and subsequent behaviors in order to master development
and its requirements in a more sound way. A lot of literature on crises seems only ripe for the bin.
Development is not something to be materialized off one’s own bat, but demands a lot of courage of
all involved. As William Easterly in his study: “The Elusive Quest for Growth” put it: “If you bake a
cake, according to a recipe, would you take just one or two out of 10 ingredients needed to start out
and make you cooking a success?” The answer of course is, no. Instead we take all ingredients and
not just two of them. If Easterly is right, then why is the cooking of a cake so simple and the inducing
of development so difficult and complex—even though we take all ingredients the same time?
Because the cooking of a cake does not require the experience of fatal crises nor the need of terms
and conditions—like morality—inseparately connected with development. Nobody dies when some
cooking failed, but inappropriate handling of development and crises on a large scale can have

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numerous victims. So in order to induce development we need not only all ingredients that make
development a success as Easterly proposes, but the right reading of the recipe i.e. the ideas of what
else is required to accomplish development with success. This implies, that—especially for third world
countries as was Easterly’s focus—all stake- and shareholders, donors and participants, need to
contribute in practical support as well as in a proper educational as well as ethical preparation2. In
order to induce development we don’t need consensus of all different views—on the contrary. But
there can hardly be any successful development without a spark of development knowledge. Because
development for one thing is the result of the satisfying of demand and coming from two different sides
it is the ephemer result of an agreement based on mutual interests. Mutual interests are lucky facts,
providing the basic for solutions as a satisfying, but ephemer outcome of originally opposed worlds.
Entireties with opposing interests become partners and agree to create the - economic - opportunity of
exchance of resources. But there can hardly be any development without a simple grade of trust, of
good will: i.e. honesty, constructiviness, clear thinking, extrapolation of mutual advantages and finally
the dynamics of good teamwork.
In general, people – you and me - are not altruistic and there is not always that innate skill or what’s
soever to immediately gist the advantage of all by focussing the advantage of others. There is a moral
aspect to this. To see the advantage of all involved in the process has to be trained on a daily base.
On the field of business it is our conviction, that an enthousiastic enterpriser with the most valuable
and usefull ideas and products in his output basket, with the best plannings to materialize it through
his firm, but embarking with poor development capacities, simply isn’t aware of the real power of his
contrahent—the stakeholder, like a groom unaware of the real value of the bride. In the course of
development stakeholders increasingly penetrate the firm and can even overrule its management
strategy with their own interests and power, especially the customers. To strive for the volatile and
ever ephemerical balance of harmony of opposed energies by way of development is a tremendous
challenge for the firms owner if he is just focussed on generating his own profit. As a strategy to aim
for this focus is not enough and will not hold very long.

Nowadays people—nations—unfortunately tend to fail to meet terms and conditions of development
even on a global scale. This study provides a small contribution at least to find the cause as to why
failures were made in the past and can reasonably be expected for the future—f.i. by instigating wars
—and what can be done to prevend them.

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2
For a view on main ingredients to induce development—not just growth—in the tropics, according to Easterly, look at the
Easterly’s recipe (PPS file): ⇒ (rightclick PPS to full screen using spacetab to navigate).

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III. ⇐ Introduction to some model aspects—Is Development Growth?

Overview
This course “Introduction to Development Its Terms and Conditions”—MBS-D1a—is organized in four
core parts (A to D) with some usual additionals:

A.Historical Review

Mainchapters B.The Theory and Model of Development
C.Application of the Model in Business Practice
D.Application of the Model in Macroeconomics
E.Epilogue
F.Glossary
G.Index
H.Literature

Chapters A gives some historical background. The focus is on the introduction of some main
contributors to the issue as a concept introduced here. Introducing them we would like to stress, that
these men—mainly economists—and there findings are still crucial for an understanding of ‘law and
order’ in dynamics and dynamic’s progress, though of course they all need revision and actualization.

Chapter B introduces some main mathematical principles and conditions underlying the model. As
mentioned in the preface, the material is certainly not new, but the context is. They are gathered piece
by piece and reorganized to be compatible with development theory.

Chapters C and D introduce some back of the envelop applications from realworld practice. Chapter C
with relevance to corporate governance and strategies of firms. Chapter D with relevance to certain
development phenomenons emerging on macroeconomic level.

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Target

In this introduction we would like to emphasize, that the core target of this course is to give you an
incentive to workout for yourself a new look on development. Partly we do this by let you pay attention
to the emergence of development nodes between two subsequent growth stages. In physics we know
that in oscillation and wave theory two amplitude waves build nodes as a result of two or more waves
in case there frequencies differi. ⇒ In development theory we would like to adapt this knowledge—just
with one small extension: We stress the additional fact, that—during time development is running
through a critical node—an unseen kind of backward looping of developments motion takes place. In
physics there are two opposed kinds of energy: potential and kinetic energy. We assume a change of
the weighing of these two kinds of energy: From kinetic or direct (“ignitional”) energy being
developments’ physical energy or main driver during direct progress into its opposite: The potential
energy as the main energy during the sensening—no physical reality—of a retrograd progress or
backward looping. So inbetween the change of two growth periodes in development the two different
kinds of energy actually alternateii. ⇒ This chapter is but an introduction to the material—you can
expect a more indeep discussion in situ. We also would like to introduce the fact that, during the short
time development goes through these nodes, we assume that this unseen motion of backward looping
is—in this world—experienced as a jump from a just completed to a next development stage. It is this
famous jump in development which once Schumpeter regarded as being the actual developments’
procedure. This with distinction to the subsequent growth stages. Basically these development jumps
can be regarded as jumps of quality rather than quantity (which would actually mean growth). Now, the
curve rising up from quality to quality can’t be visualized by showing a wave in a graph, but by a
straight line showing the rise in potency. In order to create a straight line for potencies we need a
logarithmic scale. Thus:

We can best show changes in quantity with a linear scale.
We can best show changes in quality with a logarithmic scale.

Here are two graphs with the same data showing the difference – mind the different grid pattern.

Clicks lead to *.pdf files
so make use of Adobe
Reader to view them.

Fig A. a logarithmic scale Fig. B a linear scale

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We can best use linear scales on y-axes (vertical axes) to make changes in quantities clear. We can
best use logarithmic scales on y-axes to show changes in quality with regard to potencies’ and their
progression. We use both linear and logarithmic scales—superimposing them in the same graph—to
show you data changes of both developments’ progress and it’s inherent growth stages. Technically
this isn’t quite doable and seemingly in mathematics even not correct, but this graph—a first scetch of
development—depicts pretty good what we mean: ⇒ But mind the underlying basic difference !

For an introduction these short explanations will do. However to explain the model of development we
have to introduce to you a lot more aspects.

Visualizations

We can’t touch, hear, smell or see development. Being unmaterialized its process is going on beyond
our physical senses. We only experience our joy, relieve, tenses, our expectations, and the results as
our failors and success and so on when we start to develop an idea. So in order to bring things a bit
“down to earth” and to make it more comprehensible we use certain visualizations like symbols. Thus
for the purpose of completition and comprehension and as an ideally visualization for the start of each
development we take the transparent cube as one of the platonic solids. Secondly to characterize the
end of development we take the transparent regular dodekaedron—a second platonic solidiii. ⇒ This
has a lot of reasons, which are to be explained later. Between both solids, the cube and the regular
dodekaedron, as a way to show developments’ progress we visualize a straight staff or rod with two
oscillating waves (or snakes) wrapped around the rod, which would symbolize the amplitude of any of
the harmonic swings. All three symbols together are a complete visualization of the model of
development. As you perhaps know these symbols are famous since antique cultures of the Middle-
East and there is a good reason for it. To stress it again:—nobody has ever physically seen this
composition of symbols, but as a whole it is a meaningful auxiliary and it can help us to clear the idea
of development. This model is basic to all natural development.

The nodes in the progress of development are allready mentioned. They are absolutely crucial and by
all means indispensable. Not in a sense, that we would promote the final desaster and the ‘going off’
of someone wrestling to come through. But nobody can and may escape critical situations inevitable
coming with the nodes. We should make it a rule for live never to try avoiding them. On the contrary
we are encouraged to master them and indeed pass through those bottlenecks in order to enter a next
period of growth on a higher level of quality. Lots of literature have been written about how to avoid or
to minimize the emergence of crises. Sorry, but it simply won’t work. Better mime the enterprisers
courage in your life and accept Schumpeters’ idea of “creative destruction” and you’re far better off.

From our exposition in theory we will procede to present a model with it’s inherent development laws.
A next step is the adaption of the model by some characteristical examples taken from realworld
practice to show you that the outline of this model structure holds.

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We complete the course with some examples in three appendages on fields that are not related with
economics or business. However we presume that they are welcome for an additional criterion. You
should know, that we are always glad with constructive critics and additional information from your
point of view.

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A. Balmer Rink’s Formula and the Harmonic Division

A.1 ⇐ Balmer Rinck’s Formula and The Harmonic Division

At the outset of our explanation of the model of development we first take a tour through the world of
physics. This is required to give the new approach a framework and background for reference.

From the range of research fields we take a look at atomic physics. There is a reason for starting our
tour with Balmer Rinck and his discovery. The formula discovered will be explained on the next page.
Why is Balmer so important? Because with Balmers discovery of the mathematical background for the
occurrence of a specific spectral lines signature we, for the first time, get a glimps of what nature uses
as a specific ‘tool’ creating the numerous varieties and increasing complexity of levels of physical
matter. Scientists later found out, that, with the use of logarithmics (potentials) nature seem to repeat
its basic mathematical principle every time again, but each time on a higher level i.e. on a subsequent
spectral line signature. The basic mathematical procedure however always stays the same. Having
discovered the quotient of this principle is Balmers important contribution to science. Since the time of
Balmer, search went on from Bohr to Einstein putting questions about the nature of the nucleus and its
shell, the excitation of photons and electrons, jumping from one to a next discret absorbtion level, if not
excited enough falling back while emitting X-ray. They discovered that by times the excitation is
enough high, that photons jump all over the shells potential barrier and into the socalled continuum or
plasma – ionizising and altering the nucleus and its compound.

If we realize on one hand how nature procedes to materialize and change physical matter creating
different levels of quality and if we realize on the other hand how this is done, we get a clue what
Schumpeter had in mind defining development as a creative destruction and a leap or a jump to a next
level of growth. This higher level would be more suitable and convenient for a next developing stage of
the original entity. Explaining principle and procedure of the spectral line signature we compare the
technics nature uses as a kind of template for research on developments procedure in general. We
regard it as an important key process, a method or a rule to follow enabling induction of development.

Let’s have a more indeep look at Balmer’s discovery.

According to one of the statements of Schumpeter in his Festschrift “Development”3, real and useful
discoveries always start with specific experiences on specific areas in praxis 4. J.J. Balmer Rinck was a
3
For this source go to www.schumpeter.info (assure internet connection) scroll down to find the link to open ’development'.
There is also an original text in german language available, for this look at: ’Entwicklung’.
4
Quotation from Schumpter: “Development” 1932 p1:
A preliminary remark is in order to protect the following unpretentious considerations from obvious misunderstanding:
Everything I will have to say is to be understood from the perspective of each particular science, and not in a

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Swiss mathematician and physician, who, in 1885 defined the second of a set of six different series5
describing the spectral line emissions of the hydrogen atom. Balmer discovered the visible part of the
electromagnetic spectrum and in that year 1885 used an empiricial equation for it:

Where λ (gr. Lambda) is the wavelength in Ǻngstström, n—referring to the ground
e.g. lowest energy level—is equal to 2, m refers to the principal quantum number
an integer above ground state of energy (m > n), C is a constant (potential
barrier) with the value of 3.6456×10-7 m or 364.56 nm. The Balmer series is characterized by the
electron transitioning from m ≥ 3 to n = 2. The next levels or transitions are named sequentially by a
greek letter: Starting m = 3 to n = 2 is called Hα (Hydrogen alpha), 4 to 2 is Hβ, 5 to 2 is Hγ, and 6 to 2
is Hδ. As the first spectrallines associated with this series are located in the visible part of the
spectrum, these lines are historically referred to as "H-alpha", "H-beta" and so on. The spectral lines of
hydrogen correspond to steps—though not yet jumps which in turn we would compare with an
expression of J. Schumpeter as a: “creative destruction”—promoting the electron within its shell to
various energy levels. In general theory, excited photons promote electrons to higher levels or fall
back while emitting X-ray as soon as energy returns to a lower state. The thing to remember here is
that the innate potential to ‘step’ of the excited photons can increase to a real jump and override the
potential barriers of the atoms shell with its specific energy levels. In consequence they can unbound,
freeing themselves into the socalled continuum and from there transforming the nucleus into a higher
organized atom with a changed shell and spectral lines signature. In science this potential barriers
penetrating jump is called the process of i o n i z i n g the atoms nucleus. Ionizing of an atom means
removing electrons from their genuine orbit system (shell). The imaginary space between two shells or
potential barriers—the continuum—is indicated in the energy level diagram of the Lyman and Balmer
ηερε. Thus, excited photons with energy exceeding 13.6 eV (look again at the foregoing graph) can
make electrons disappear into the continuum ionizing the nucleus. The ionized nucleus reaches a next
potential level with a different spectral lines signature. So the story goes.6 For us this all is to a certain
extend comprehensible. However the magic ‘unveiling of the secret’ for the context of development is
the following:—From the formula’s term in brackets (see Balmer’s formula above) we can derive the
socalled :

HARMONIC DIVISION.

philosophical sense – if not exclusively from the perspective of one particular empirical science, then, solely from the
general perspective of working in the particular sciences. If what is said here, in any case, turns out to be of some
interest, it is because it has emerged from an altogether concrete problem found in one particular science. It is further
because the awareness that a formally analogous situation is found in all the other particular fields of science and the
supposition that such a situation is rooted in the structure of our mental apparatus, were in neither case merely
postulated, but emerged afterwards, and step by step.
5
There are six different spectral line series: Lyman (n=2), Balmer(n=3), Pascher (n=4), Brackett (n=5), Pfund (n=6), Humphreys
(n=7).
6
An applet can show you the jumping of the electron on five of the sixt series. The last series—Humphreys series— is not yet
depicted. This animation requires Flash Player 5.0 to see it and the explanations are in german. ⇒

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To keep things simple, we take the first of all series, the Lyman series with m = 2 and n = 1. (See the
foregoing graph.) Being a mathematical component basic to development this harmonic division is
crucial for all progress by development. _

What’s the big thing about this harmonic division? Here is how wiki.org explains harmonic division: “A
harmonic division is about a specific dividing of a given linesegment. In geometry, harmonic division of
a line segment AB means identifying two points X and Y such that AB is divided internally and
externally in the same ratio. In an algebraic equation shown below, the ratio is two (2/1):

XA YA
=
XB YB

Harmonic division of a line segment is reciprocal as well; if points X and Y divide the line segment AB
harmonically, the points A and B also divide the line segment XY harmonically. In that case, the ratio
is one third given by:

BX AX
=
BY AY
which equals 1/3 in the second example above. Ratios (2/1 and 1/3) are not equal !” So far wiki.org.

AX YX
Here comes a third possibility to build a ratio (=2/3): =
AB YA

This third ratio makes perhaps more clear that there are two o p p o s e d points of view. The leftside
term of the equatation starts at point A (linesegment AX), the rightside term at point Y (linesegment
YA). The ratio is the same (the rightside terms doubled), but, what’s important to notice, we view the
scene from opposite sides. Here a few pictures of the harmonic division: 1. the divided square with
pythegorean triangles drawn: ⇒ 2. the same triangle derived from the harmonic division ⇒, and 3. the
three means derived from the triangle as well as the harmonic division ⇒ and compare this 4. with the
inherent opposition of forces: ⇒ then we don’t need much calcul at first to perhaps get an idea in what
compound “harmony” is actually embedded shown in terms of algebra and geometry. Let’s just take
cognizance of this and procede with decomposing the quotient in Balmers formula:

 m2 
λ = C 2 
 m − n2 
 

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We see that we can do this decomposing into basic quotients to derive the harmonic division. For the
deduction we use m = 2, and n = 1 equaling the value of the first of seven of spectrallines signatures
called after it’s discoverer Harvard physicist Theodore Lyman (1906):

Fig. D Balmer quotient
with Lyman values

So the squared term in the equation indicates the result of the harmonic linking of that inner and outer
division as is shown by the harmonic division. From the quotient of Balmer’s formula and the harmonic
division (again: m = 2 and n = 1) we can also derive the famous pythagorean triple: 3 : 4 : 5. We
already showed you the graph (⇒). To get this extension we simply draw two semicircles on
linesegment AY connecting all four points AXBY. As you can see it shows a clear relationship: All
development starts with a potential controverse situation, shown as semicircles being linked.
Remember this carefully: It is thís energetic, tenseness, and intertwined situation, which the ancient
greek called ‘harmonic’. Of course from this ancient point of view we nowadays differ in opinion about
how to define harmony. To us, harmony is a way of arranging pleasant sounds, objects and colours.
Harmony however according to the opinion of the ancient greeks is the linking—the ephemeral
agreement on a specific place7 of genuinously different, even opposed forcesiv. ⇒
So, to summarize some conclusions: A geometric harmonic division divides a given linesegment like
AB harmonically into two different line segments. If this is done in a manner to really show the innate
opposites you will get the same ratio. From segment AB segment AX = 2/3 and from YA segment YX
= 2/3. From starting point A (AB) there is a ratio directing to AX and from the ending point Y (YA) there
is a same ratio directing to YX. In both cases the ratio is the same (2/3), but each time we take the
opposite point to start. ⇒ Please put your mind on this, because it is important to realize that:

The law of harmonic division is the result of an—ephemeral—linking
of opposed starting points causing ‘harmony’.

What are implications? To really see the implications we have to complete our deduction. A sound
development like in the field of enterprising is defined as well restricted by principles causing harmony
7
We assume, that, If an ancient Greek would describe the function of his temple, he would probably state, that his temple is the
specific place in which the ephemeral agreements (daily votive offerings and rituals) between strictly different entities (god and
men) take place. These consecrate activities—according to the Greek—is the constant attempt to create harmony momentum.

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coming from opposed directions i.e striving from opposed forces, because as will be seen in a next
chapter in an ultimate sense the linking of the opposition—and, if critical enough vor the next change
of state, emerging in logarithmic periods—can be defined as being an encounter of rational as well as
irrational forces with there inherent different principles. Through the fact, that during development
these opposed realms regularly meet each other in the harmonic division, progressing from start till
end, we see the cause behind the appearances of nodes and thus from crises appearing.
Now, what we assume in the context of development as well, is our sensitive apperception of a kind of
retrograde motion occuring while our development passes the periodical nodes. This doesn’t occur
physically. It’s just our experience of an illusion. What’s a retrograde motion? Spoken in terms of
astronomy: Direct or prograde motion is the motion of a body in a direction similar to that of other
bodies within its system. Retrograde motion is motion in the contrary direction. Search the internet to
find applets depicting a retrograde motion to8. In the field of physics we can show the emergence of
nodes by a simple synchron movement of two waves with slightly differing wavelenghts. In astronomy
we can demonstrate the occurrence—and the illusionary impact—of a retrograde motion through the
orbiting of two entities on two distinct levels around one fixed centre, observed from one of the orbiting
entities. As in physics we as well state that retrograde motion is the optical illusion of the movement of
entities with different orbitals caused by the point of observation, though our sensening of that fact is
not.
We introduce to you a second phenomenon. Though it has nothing to do with the formula’s mentioned
above nor with retrograde motion. We just want to give you a next example of this peculiar passing of
a node necessary for the entering of a next level of quality.
If we heat water in a glass while looking at the constant rise of the quicksilver bar of a thermometre we
put in the glass, water will reach a temperature of 96°C and start boiling—correct? Not correct,
because for the boiling it actually needs 100°C. However for a moment the indicating quicksilver bar
just slowed down. After reaching 96°C we—again for a moment—don’t see any further rising looking
at the thermometre. The difference is 4°C. We now look what happens in the other direction: If we
decrease temperature, water can fall to 0°C before turning into ice—is this correct? Again no, for, to let
freeze water to ice temperature actually requires –4°C. So, in both cases we don’t know observe water
as a liquid with a temperature of +100°C or -4°C. Instead of real water we have either gas or solid ice.
Look carefully: At 96°C increasing and at 0° decreasing the temperature the quicksilver will slow down.
And it will take a short time till water starts to change it’s state to either get a solid or evaporates to
gas. Obviously, in order to change its states, water passes nodes of ‘development’ as well. It will reach
another level of quality or state—be this gas or ice. During the short time water passes it’s nodes to
change it’s state we, looking the thermometre, can’t observe an increase or a decrease of temperature
at first. We of course don’t know if it’s experiencing a retrograde motion while changing the state, but
what we do know is the fact, that it can only change it’s state trespassing a node.
8
An internet link to one of the numerous java applets which shows pretty clear what retrograde motion is. http://www.mhhe.com/
physsci/astronomy/applets/Retro/frame.html (You will need a java plugin.)

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This is the simple conclusion: The trespassing of nodes in a process of development is positive related
to the entering of new states or levels of quality. It has important implications for our conventional
view on development. We could of course start a discussion if water indeed can ‘develop’. Such
discussion however would nevertheless miss the point. Water can’t develop in a sense living entities
can, but it is highly sensitive acquiring kinetic energy not being in nodes—as is growth. Water is also
highly sensitive acquiring potential energy while trespassing a node unto other levels of state or
quality—as is development. A thermometer can show an increase and decrease of kinetic energy, but
it can’t show an increase or decrease of potential energy (let’s say skill). The quicksilver simply stops
increasing. So, observation of half of reality is enabled. It’s the physical side. Development is linked to
these phenomenons as well. Here comes the first of the implications. We can see nodes occur as a
result of two waves with slightly different wavelengths. They diminish the amplitude of the resultant
wave. In development we experience those same nodes the same way as stagnating highly critical
situations. Thus in order to explain development with it’s nodes we need the assumption not only of
one wave as used for instance to show the business cycle but of two waves. And if any nodes in the
flow of development’s progress do appear, then these two unsensed waves have:

1.SYNCHRON MOTION—e.g. processing within the same shell—in the flow of time
2.Slightly DIFFERENT WAVELENGTHS (frequencies or speed)9
3.a third fixed point (nucleus) to SENSE the ILLUSION of retrograde motion during a node.

In development we observe, that a crisis is the mostly tragic impact of the passing through these
nodes—the meeting of initialy opposed forces—, as discussed above, necessary to gradually reach a
target at the end of development. Here you see, that our view on harmony needs a revision. Harmony
is no big ‘relax, have a seat and listen’ idea. The emergence of harmony, or let’s say harmonic, in the
way it occurs in nature is a sudden robust change of all fixed variables—experienced as a most critical
situation. To make the critical impact of this ‘harmonic’ even more clear, we have to add some more
information on what typifies or characterizes both opposite worlds, which will be done after explaining
the three means: the arithmetic, harmonic, and geometric mean (hereafter with abbreviations: am, hm,
gm).
The idea of Balmer’s discovery was subject to further scientific research. From his definement we see
that in the field of atomic e.g. nuclear physics Rutherford and Bohr, Heisenberg, Hahn a.o. contributed
to develope, refine and apply atomic shell models. At start Einstein was very enthousiastic about the
findings. However seeing that in the hands of scientists like W. Heisenberg (who later on derailed final
research in german projects for moral reasons), this knowledge was used to build nuclear bombes he
got shocked. Let’s quote from an article written by Hugh Gusterson published by Global Research:

9
Spectral lines theory acquires the assumption of wavelengths discretion subject to integers of variable n: ny → n y −1

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"The attitudes of those working in the life sciences contrast sharply with the nuclear community.
Physicists since the beginning of the nuclear age, including Albert Einstein, understood the
dangers of atomic power, and the need to participate actively in managing these risks. The life
sciences sectors lag in this regard. Many neglect thinking about the potential risks of their work."10

The uranium bombe—developed and constructed by german and american physicians—turned out to
be the scientific result of a search for the power of ultimate power through destruction never intended
nor used by mother nature.
As in the situation of the excited electron transitioning from one energy level to a next, entities that
need to be developed as well—f.i. the launch of a firm—need excitation in form of a vision or a
creative and sound idea, that gets a haul of enthousiastic energy and sufficient financial resources to
materialize over the long run of say 30 years. This idea emerges in the head of an enthousiastic
individual and is never the result of a discussion about the utility of an idea of a range of board
members of some corporation, institute or a policy party. A fertile idea is a sound idea for enterprising
with rational expectations promising a high return on their investment (ROI) in the long run. The thrust
investors put in a fertile idea is inextricable linked to the thrust they put in the individual enterpriser
materializing his idea by launching and leading his firm. Again to put thrust in an individual makes
sense, but to put thrust in the strategy of a collective of a group mutual agreeing in the utility of a firm
to be launched is at odds and will hardly hold. So take cognizance to this:

All development can start only with entities capable of excitation - individuals
and the subsequent materializing of their sound ideas for the long run.

On the other hand a firm relies on it’s customers. Their behaviour, targets, and plannings for the future
is crucial for the strategy and tactic of the firm to survive. The bigger the firm gets the more customers
will be attached to it, the more interests are involved. The more ROI of the firm will need to change it’s
components, because—gradually—ROI will not only consist of pure financial interests any longer. This
need some explanation: In this context with the term ‘customers’ we mean everyone in some way and
to some extend linked to the firm, be it customers, stakeholders, investors, managers or government.
If we look in a broadened scene at the range of interests somehow linked to the firm we can look f.i. at
the plant’s location. Interests can be highly conflicting if only the enterpriser’s interests are being
materialized. So in order for firms to survive they become gradually more dependent on the community
of it’s location or within the virtual network they are operating in. If input can not be materialized
anymore to a satisfying output (with or without changed ROI) firms are going bankrupt. This will be in
all cases when throughput of resources or production factors (input) may still lead to high quality

10
http://www.globalresearch.ca/index.php?context=viewArticle&code=GUS20070420&articleId=5445

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products, but nevertheless do not lead to sufficient ROI anymore. Firms then suffer from resources’
entropy. The only solution for survival is enhanced concentration on the skills best acquired during
past development, a turnaround management project, the firm’s embedding in greater industrial
networks and/or the launching of a series of new small firms with the same identity. The key idea is to
concentrate the firm in some way with respect to the community to meet it’s interests again.

All individual development will end by an entropy of throughput capacity of the entity.
If development stayed sound, society will tend stronger and finally it’s interests will supercede.

This knowledge can lead to important inferences:

1.Real development at all time starts on an INDIVIDUAL base.
2.Development can not be extended (or restarted) without a RECURRENCE of conditions equal or
similar to the conditions at development’s start.
3.Development will always end if ENTROPY of throughput offsets the benefits of ROI.

Comprehensing the general idea of development conditions and of nature’s methods with respect to
development enabling to create all her varieties is important indeed. Therefore it is perhaps a good
thing to stay succinct. To conclude this chapter we return to the first topic and add some graphs that
show you the spectral lines signatures on a specific grid already introduced in this unit. It is the
logarithmic grid. A section of that grid we showed you before. ⇒ But remember this grid ? ⇒ It shows
a series of those sections as a rythmical recurrence of the first development stage on subsequent
levels! Unfortunately even recurrencies of this kind do not promise the firm’s ‘eternal life’ and can lead
to an end, which we shall explain later.11

⇐

As an assignment: 1. Go to hotpots and fill out the gaps in the sentences. ⇒ Sending your results to
my email address, please 2. Write a brief summary of the contents of this unit in your own words.
Blended learning involves three educational methods:

11
⇐ For a background please read this paper of a speech Schumpeter in 1931 held for the readers of Keizaigaku-Ronshu
of the imperial university in Tokyo. http://www.schumpeter.info/text2%7E1.htm. It’s english written 

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•distribution - the individual gathering of information f.i. lessons units.
•feedback - the interaction part; small tests, modules, forums, journal, chatting.
•collaboration - the real project part.
The first part can be done on your own.
The second part is teamwork. Feedback tools which you can do together.
The third part you should do with additional help from outside practice.

So, for the feedback build teams (all of you). Then:
•discuss the points of view you have acquired by reading this unit. (15 min.)
•specify, what implications in praxis de
velopment could have with resp
ect to the terms and conditions explained. (20 min.)
•write a short essay applying the knowledge to your own experiences in life. (2p. A4)

We skip the project part at this first unit.
⇐

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A 2. ⇐ Society’s Progress—Development is linked to Scientific Discoveries

Seen in a broadened sense we observe the fact, that Balmer’s discovery in the field of theoretic
physics was not a ‘standalone’ and out of the social context of the days. Researchers in all kinds of
disciplines became curious and strived to lift the many hidden mysteries of nature. As a research topic
they as well got sensitive for the ‘quest for the development principle’ as employed in nature. Since the
era of Enlightment society in general was evolving from an exploratory life heavily controlled by the
church or other under patronage of the feudal aristocracy into a situation were scientific explorations,
research, reasoning and development started to set the scene. Aspirations to enhance objectivity and
transparancy in science, to gain individual freedom in political and cultural, and to explore rationalism
in social fields were trendy. The psychological cause for this change in mentality can obviously be
seen in the coming into prominence of capitalism into society. Gradually the influence of capitalism
led to a change in apprehension of moral and social values, of ‘humanities’. One of the impacts of
capitalism was, that people lost traditional bonds which bounded them to their community. In the UK in
the early decades of the 20th c. questions raised, if capitalism could provide a comparable social
stability as experienced before. Schumpeter’s opinion being a known economic was appreciated. He
stated, that capitalism could provide in a technical stability, but called the economical and social
impact of capitalism to the people as a kind of “throw on their own resources”. Here we quote from a
speech hold by Schumpeter in 1927 in Leeds in front of the Board of the British Association for the
Advancement of Science:
“If we take a look back we see that in the Middle Ages people lived in an environment essentially
stable. There were the church, the castle, the village community, the communal processes, which
carried things on year after year in essentially the same way, and neither church nor castle were
discussed. There was no reason to discuss them. Discussion was always the precursor of
revolution. Thus the environment of the day made the minds of people stable. It was not a system
of castle and churches to which they were attached, but a certain visible church and castle and
community and a family life quite different from the modern family life. It was an essentially
traditional way of life and thinking. These did not exist anymore. Capitalism, with its private
property and the motives of private property, was tending to destroy them. It broke up the village
community and two things necessarily followed. People lost their sense of anything absolute
existing and of the existence of something which commanded allegiance irrespective of personal
judgment. Hence they were thrown on their own resources. They had to fight their way on slippery
ground, and doing so naturally focussed their attention on the rationality of their behaviour, on

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producing something that would fetch what it had cost at least. The feeling of dependence on their
own judgment influenced their culture, duty, mentality, religion, art, and so on. It tended also to cut
a man off from all his humanities to other persons and things which in the past were among the
most valuable of stimulants. Many of the things dear to our fathers were dear [to us] no more. Not
only the bonds which formerly bound an employer to his factory and workpeople, but also the
bonds of private life, the relations of man and wife, of parents and children, did not mean now
what they meant when they were a necessary form of survival.”12
If we look at this change—but in the context of development—we see that since the introduction of
capitalism society experienced a kind of split up or diversification of its social structure. Capitalism
had its few though strict principles (compare these principles with today real world practice):
•private property and private initiative
•production for the market and the division of labour
•enforcement of these principles by government rule
•financial resource creation by banks (legalized fractional banking system)
Together with capitalism a social shift prone to the above principles occurred, which created:
•a small upper class of a few rich industrials
•a big labour force of dependent people with an ‘organized’ income
•a shift of population from rural to urban society
•a stagnant pool of a few unemployed, left behind in a desolated state.
Due to the induction of capitalism in society of most of the nations, the role of church and landlord was
taken over by other institutions like governments, with its rulemakers and politicians. U.K.’ and later
U.S.’ led liberalism and capitalism enforced society the social ‘throw on the own resources’. The few
that could not bring up there own resources in a sufficient way which would enable them to survive
stayed dependent on government. Since then government provided them with institutionalized forms
of ‘human aid’. Together with the uprise of liberalism and capitalism, with its rationalization of social
and individual behaviour we see a next and most significant phenomenon occur: The economic booms
and depressions caused by the uprise of the business cycle.
This uprise of the business cycle was the necessary form economic evolution took under capitalistic
conditions. And the questions for economic and social stability coming in around 1927 got its robust
answer; the boom—destroying equilibrium—followed by the depression—creating equilibrium: two
characteristical trends of the business cycle. In 1929/30 an economic depression—never experienced
before— occurred in the USA. People were unknown about any tools to manage the amplitude of the
wave of the business cycle and for a moment they were baffled. The occurrence of this very unstable
situation in economics was swiftly followed by political and social instability. It was clear that society

12
„The instability of our economic system“ Speech of Schumpeter held in Leeds in 1927. Published in Manchester Guardian
1927, and The Times 1927. see http://www.schumpeter.info/Edition-stable.htm

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had entered a totally new era. With the introduction of capitalism and the business cycle society was
shifting—let’s speak in terms of development as introduced here—from a :
“linear grid into a linear + a logarithmic grid” !
With this unseen shift of terms and conditions, determining the change in background, all principles of
development were induced for the first time in mankind. Of course people had to struggle with the new
given ‘logarithmic’ rules of development. But they learned to take over responsibility. And so they took
care for their individual lives. Through rules and their institutionalized enforcement on governmental
level they started to take care for the poorest and for the entire society to survive.
This is just a scetch of the broad social context which however should be seen as inextricably linked to
individual scientific discoveries summarized to mathematical formula’s like those of Balmer, Bracket,
Lyman a.o. To mentally link the uprise of the business cycle with it’s booms and depressions with
seemingly irrespective occurencies like scientific discoveries, we can learn to discern and can indicate
what concerted facts led to a global change of society’s structure. To do so, we don’t stress a logical
string of single facts, but we put characteristical events in a context that enable us to perceive the
impulse, in what way society is on the march to build up a society’s structure that strongly differs from
the one known since the Middle Ages.
In order to induce development it is necessary to start a concentration of powers by way of individual
initiatives like is the case with capitalism. We can see as well, that such a massive concentration
inevitably leads to a freeing of boundings of former social structures, leaving a few at the opposite site
that—at the same time—are forced to experience a great loss and isolation on all levels. The fact that
society as a whole can not be left on its own, but has to be organized and managed as well gave
finally rise to the opposed principle of capitalism and open market economy, to the theory of planned
economy. From this it was a short step to the collectivistic policies of socialism and communism.
There is something inevitable in this contraction and spreading of powers. Sea starts to swell. In terms
of development it is a condition sine qua non that such a beating of forces takes place. That the theory
of planned economy by communistic principle didn’t work out as planned was due to the fact, that it
occurred in space and time NEXT to the synchron evolvement of capitalism (like in the SU, in China,
Korea, and Myanmar). Instead of creating and materializing a theory of planned economy, this impulse
should have been embedded into the development model of capitalism and liberalism itself—simply as
the economic scene of development’s final stage. This fortunately start to happen now. So, torsos or
trunks of stages of the model of development were materialized at the same time in several countries.
The torso of developments start is represented by capitalism, introduced in the US, the UK, Australia,
Canada, and Europe; The end of development is represented by the range of collectivistic theories,
introduced in countries like the SU and the PRC. In the course of time, both sides experience a
missing part in developments inherent structure. Such a power contraction could never have been
ocurred in the MA, in which daily live was ruled by values of tradition. However economic development
can not be induced by a day-to-day ‘caroussel’ of economic events. Instead it bears all charactistics of

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unfolding, evolving potentials, of being a project; it shows a plan, a start, a way to go, it experiences
crises, it matures with the expected output and finally it is brought to an end. Considering between
individualism and collectivism, leaders, politicians of course choosed the trunk of the development’s
model what they thought would best suit their country. Being opposed to all negative influences
entailed to capitalism, communistic leaders didn't focus on individual freedom (demand-consumption),
but on the contrary stressed the distribution aspect of people’s collective wealth (supply-production) in
order to satisfy individual needs. One might argue that in the end choosing the one or other policy
doesn’t make much of a difference. But it does. And so it holds true, that those leaders, choosing the
end trunk (communism and socialism), were at first far more worse off, because—in spite of the fact,
that they were absolutely convinced about the value of their social collectivistic concept—, in realworld
practice they cut off themselves from development before it even could start out. That was the
economical, political, and socio-cultural tragedy as a result of the rationalizing behaviour and of the
trial and error method worked out in the 20th century.
History came with the prove, that for the main part the choice of the collectivistic minded turned out to
be of target from the start and the choice of the capitalistic minded turned out to be stained by greatest
social deficiencies on practically all levels at the very end. So, question remained: — Who was in the
possession of the right key?

- As an assignment for this second unit write a short essay in your own words about the business
cycle, its characteristics and first occurrence in society.
- Since about the19th c. society of industrialized nations evolve into mainly two political and
economical systems seemingly opposed to each other.
Discuss this topic in your team striving the historical context, the reasons for their appearance and
final decay in the last decade of the 20th c. Put the findings together and get the point by choosing
one or two of you to make a short review in front of class with use of presentation tools (black-
whiteboard, beamer (slideshows, filmed interviews, dvd’s?), visuals with ohp etc.
- As a first project : Look for practical solutions to embed :
•the principles of socialism into policies of countries based on capitalism.
•the principles of capitalism into policies of countries based on socialism.
This is teamwork defined by the method of:
1.making your own individual written down point of view in advance
2.a meeting of the team members discussing the matter from all sides.
3.coming to theoretical e.g. practical solutions—only as a result of the meeting!
4.question: can you find Schumpeter remarks in this matter? (late Schumpeter)

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Admittedly you can contribute to, but not really find a solution on your own, because it would contradict terms and
conditions of development, that as a rule need harmony of opposites. You can forward the opinion of the team and do
not need to agree being still personally convinced of a different view.

While looking at some websites for solutions just keep it simple.

Here are a few pages:
http://www.mtholyoke.edu/courses/sgabriel/economics/china-essays/15.htm
http://www.mtholyoke.edu/courses/sgabriel/economics/china-essays/22.htm
http://www.capmag.com/category.asp?catID=30
http://www.guardian.co.uk/korea/article/0,2763,1098533,00.html
http://www.atimes.com/atimes/Korea/FL14Dg01.html
http://www.travelpod.com/travel-blog-entries/technotrekker/overland05/1130301960/tpod.html
http://www.sochealth.co.uk/socialism.htm
http://www.sochealth.co.uk/
http://www.socialisteducation.org.uk/
http://www.wsws.org/articles/2006/nov2006/vic-n01.shtml
http://www.cpa.org.au/cpa/cpa.html
http://www.greenleft.org.au/2002/511/27376
◄

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A 3. ⇐ Schumpeter’s Definition of Development and Distinction from Growth

Development is changing all variables previously known !
So, if we restrict ourselves and just look at development of
firms—in the end firms are basic to all society’s progress—,
then development can’t be characterized nor foreseen by a
trend regressionline. Development isn’t characterized by the
idea of the unfolding of something identical. In development
variables don’t stay within their conventional context, they
change simply because context changes.
A change of context is dramatical, occasionally experienced
as a great luck, accidently causing a tragedy. But at any
time it’s impact always results in the emergence of the
unexpected. Again development can be and was paralysed
by influence of a bad policy of governments, but it can’t be
induced by the policy of the good ones either. Business is
not a matter of governments but of enterprisers. Though we

Schumpeter (left) with a personal friend observe the fact, that governments have strong links to
named Redvers Opie in Bonn. certain enterprisers, which of course can give governments
a strong impact on economy. Apart from government’s main task to control by rule and to provide a
fair distribution of the country’s wealth it can—to some extend—outweigh unexpected trends through
monetary and fiscal tools, but neither rule nor governmental policy can really give the kick-start of an
individual excitation (enthousiasm) affordable to materialize a firm’s idea with goods and services. It
can work on a propitious environment giving incentives necessary for firms to invest. By doing so
government can contribute to stabilize productivity on a favourable level to keep economy ongoing.
However the efford to make a stable trend upwards just by outweighing instabilities towards a future
equilibirum will hardly be government’s policy reaching through. The business cycle tells us that—for
governments—the best recipe to achieve a prosperous economy is not only characterized by
“stabilizing” upcoming instabilities striving to equilibrium, but additionally by granting the industry the
flux of the business cycle - with it’s booms and depressions - and by providing sufficient incentives for
individual business activities.
These are some thoughts explicitly in the line of Schumpeter’s reasoning. It is not our aim to give a full
review of Schumpeter’s main thoughts on economy or biographic details. Together with Keynes
Schumpeter was a leading economist of the 20th c. and made crucial contributions to economics and
economic reasoning. He was not the kind of a shrewd thinker as Keynes perhaps has been, but he

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instead seem to be a wiseful man. For the first time in economic history he specified development as a
leap to other quality levels changing all fixed variables. By explicitly devining development as the jump
into a new level of quality he distincted it from growth and it’s only possible change by way of ever
diminishing to infinetisimal marginal utility rates.
So in order to introduce development in a way we presume be appropriate, we stress the importance
of J. Schumpeter. This can probably best be done by referring to one of his articles, a speech written
down by Schumpeter in 1932 already in the aftermath of the Great Depression. 13 Before quoting him,
let’s have a look at the logarithmic grid of the Lyman spectral lines series. We would like to point at the
gradually decreasing spaces (see: ‘Gosschen’s law’) between the various spectral lines within the
signature (indicating possibilites to ever decreasing steps to a next spectral line) as well as at the
continuum space after passing the Lyman’ potential barrier a space between other spectral lines
signatures. ⇒. The graph indicates clear what Schumpeter had in mind, explaining growth as being
the result of ever decreasing steps of marginal rates of utility caused by rational reasoning and
development. It’s a leap or a jump into a total other quality level as the result of creative destruction.
First of all Schumpeter defines the problematic of the traditional view on development. According to
Schumpter development does not involve things that stay identical:
“The ambiguity of the unfortunate term "development" requires a <…> remark <….>.
Expressions such as development or unfolding suggest the idea that some of what is
developing has to remain identical, an idea that can readily be the source of prejudice and
aberration.”
People are used to understand changes—characterizing steps in development—only, if they can give
rationalistic or logical reasons pointing to a cause for the change of variables even if this change
should appear as a change in norm. As an example he mentions the attempt to explain evolution
logically by way of adaptation to changed circumstances as with Charles Darwin’s theory. Schumpeter
stresses the fact, that we can reasonable understand things changed, when we put them into a
relation to each other.
“The fundamental economic truth, which is primarily accessible to observation, can be
formulated as follows: all observable variables seek to place themselves in a certain
relation to each other, or in other words, they at all times react adaptively to changes
in data.”
It is obvious that these changes in variables are but reactions of the previous cause. So, people
tend to capture all changes in datas/variables as results from a cause. This enables an explanation
from as historical point of view. Schumpeter continuous:
“Obviously, the point at which this procedure fails is where a leap-like change of the
norm occurs. Where such a leap-like change of the norm follows a leap-like change in
the data, we cannot say anything about what will happen in our subject area, except

13
Internetsource. http://www.schumpeter.info/Edition-Evolution.htm

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for some trivialities or vague conjectures. From the perspective of each particular
science, however, we can consider ourselves excused – we will shortly see that from
a more general standpoint the matter is not quite the same – which is why we now
want to part with phenomena of this class. In the case of a jerky change of the norm
that erupts spontaneously from the system itself, the same problem is much more
serious. An example can best show what we have to think of in the economic sphere:
Without further ado, → a continuous increase in population and wealth explains an
equally continuous improvement of roads and an increase of the mail coaches in
circulation in a step-wise adapting manner. But add as many mail coaches as you
please, you will never get a railroad by so doing. This kind of "novelty" constitutes
what we here understand as "development", which can now be exactly defined as:
transition from one norm of the economic system to another norm in such a way that
this transition cannot be decomposed into infinitesimal steps. In other words:
Steps between which there is no strictly continuous path.”

To distinct this defintion of development from the one of growth:

“Only recently have I also become aware of the fact that precisely the kind of change
defined above is often excluded from the notion of development and is indeed
considered the abrupt termination of what many want to understand as development,
i.e. change that in some sense or another is "lawlike" and predictable, essentially
continuous, and within which each state becomes intelligible when it is based on the
previous one. <…> What is called development in the sense just mentioned, I usually
call growth – which may, of course, also have a negative increment.”

We admit the lots of quoting to reflect the view of Schumpeter for an appropriate understanding of
the term development and it’s differing from growth. But let’s keep this in mind: As transitions of an
excited electron from one spectral line to a next one—proceding in ever decreasing steps within the
signature—differ from the absolute jump into the continuum, while ionizing the core of the atom, in
the same way will growth—steps defining growth—differ from development—jumps to other levels.
Therefore a change in norm or level—be it productivity, quality or a chemical change–is not caused
by excitement within the shell—called growth—but by a sufficient amount of excitement causing a
jump over the shell’s critical potential barrier—called development. If you get this idea, you will
know the difference between a closed system focussed on growth, stability ánd equilibrium and an
open system focussed on envision (german: ‘Gestalt’), on dynamics of destruction and creation.
Dynamic development always involve growth, but actually enables the typical jumps to a next level.

But, as Schumpeter stressed, the mess we make reasoning with the same expressions yet thinking
with total different contents is a greatest barrier for understanding and research. Let’s jump over

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this conventional barrier and understand what development is about.
⇐

1.Quiz with ‘hot potatoes’ software ! Click quiz sites 1 to 5 ⇒ to answer a few multiple choice
questions in my quiz. (As soon as you click, testtimer will start running – we test comprehension
and distinction, so take your time and send your results to my email address for grading. And
please, mind correct writing - bad writings is bad gradings!)

2.Build a team and try to find out—f.i. by internet—,

•what opinion did John M. Keynes have about J. Schumpeter’s ‘heretic’ contributions to the
business cycle in economic theory?

•Discuss this topic with each other: In a closed economic system—focussed on maintaning
stability, rational control and equilibrium of the economic system (Keynes)—enterpriser’s
profit is regarded as a surplus and actually a spill, just handed out to keep business going;
however, in an open dynamic economic system—focussed on dynamics of change and of
the increase of productivity (Schumpeter)—enterpriser’s profit must be regarded as a
necessary resource to finance the productivities of the future enabling the creation of future
jobs. The rationalist argues, that taking individual profits is something amoral and resources
should be returned to society (socialistic view).The irrationalist argues that profit—and thus
capitalism—is not an amoral thing at all, because it secures the maintaining and creation of
jobs for society. 1. Guess who is right ? 2. What has this discussion to do with growth and
development?

Tip  :

Discern between economic theorists focussing on maintaining
static equilibrium (growth) and those economic theorists
focussing on creative dynamic destruction (development).

And here is a next precious tip  :
http://www.peterdrucker.at/frmset_en_texts.html

3.Schumpeter once had a job in Cairo, Egypt. What was he actually doing in Cairo and what
noble person in particular was interested in his financial advice? (tip: internet search)

Lucky for you? No collaboration part as a project.

Module BMS—D1a

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