Heterogeneity of habits as a foundation for Schumpeterian economic policy

In this paper, we highlight the heterogeneity of agents in Schumpeter’s theory. Because of its centrality in Schumpeter’s theory, we argue that agent heterogeneity should also be a key element for economic policy informed by Schumpeter’s theory. Schumpeter considered agents’ habits as a particularly important source of heterogeneity. We show how Schumpeter’s notion of habits is closely related to modern work on habits, and draw on recent research to elaborate theory that can provide the foundation for Schumpeterian economic policy. We argue that heterogeneity of habits can be a crucial building block and foundation of Schumpeterian economic policy: it offers a target for policy interventions that is different from incentives or information. This target is potentially as powerful as incentives or information, which only influence intentions rather than influencing behavior directly.