One of these theories can be found in the ideas of Joseph Schumpeter. In
his work The Theory of Economic Development, Schumpeter first says that
entrepreneurship causes economic growth by allowing the means of production in
a society to be used in newer and more efficient combinations (Schumpeter, p.
74). Schumpeter thus claims that it is entrepreneurship (not merely knowledge)
which causes technological innovation. He then argues that entrepreneurship is a
process that is entirely distinct from the rational economic behavior of people, not
a natural result of it. His reasoning is that, for people to behave in an
economically rational manner, they must have some amount of knowledge on
which to base their decisions. He also states that since people typically draw their
knowledge from their past experience, all their rational economic behavior will be
based on past ideas and events. According to Schumpeter, then, economically
rational behavior is by definition not innovative. As a result of this, rational
economic behavior cannot result in the creation of entirely new and untried