Joseph Schumpeter and John Maynard Keynes were two of the most admired economists of their time. Both men were born in 1883; Schumpeter died four years after his rival, in 1950. Both changed the way a generation thought. Why, then, did Keynes give his name to an influential school of economics, while Schumpeter, though still admired, is little read?

Of these two figures, Schumpeter was more conservative. When Forbes celebrated the centenary of both in 1983, it asserted “Schumpeter, not Keynes, provided the best guide to the ... change engulfing the modern world”; Business Week acknowledged the 50th anniversary of Schumpeter’s death by proclaiming him “America’s hottest economist”.

Both men were the product of vibrant intellectual communities: Keynes in Cambridge and Bloomsbury, Schumpeter in Vienna. Both gravitated early to the centre of political events. In 1919, Keynes was negotiating the Treaty of Versailles; Schumpeter was Austrian minister of finance. Both enjoyed success and failure in high finance. Keynes would trade from bed; Schumpeter spent a decade paying off debts incurred in the collapse of central European financial institutions. Keynes’s academic life was in Cambridge, England; Schumpeter emigrated to Cambridge, Massachusetts, in 1932. Both enjoyed colourful personal lives: Keynes, actively homosexual, nevertheless married a Russian ballerina; Schumpeter married three times, and declared an intention to be the world’s greatest economist, lover and horseman – he acknowledged having to work at the horsemanship.

And both have outstanding biographers. Robert Skidelsky’s three-volume account of the life and work of Keynes now comes in an abridgment that can be lifted with one hand. Thomas McCraw, himself a distinguished business historian, has just published a 700-page history of Schumpeter which similarly combines the personal and intellectual.

Schumpeter’s reputation rests principally on three books. The Theory of Economic Development (first published in 1908) set out the basic thesis with which he is associated: the success of a market economy rests not primarily on the accumulation of capital but on innovation, which was the product of (mostly unsuccessful) entrepreneurship.

Capitalism, Socialism and Democracy, published in 1942, explores the comparative performance of economic systems and their relationship to political structures. Schumpeter was pessimistic about the long-run prospects of capitalism, for prescient if unconventional reasons. He recognised that the innovative success of capitalism produced large inequalities of income and wealth. He believed that the resulting resentment, fuelled by the persistent hostility of an extensive intellectual class whose existence capitalist prosperity made possible, would ultimately destroy the dynamism itself.

Schumpeter’s consideration of economic systems was wide-ranging. His History of Economic Analysis, which appeared posthumously in 1954, is a series of extended vignettes describing economic doctrines and thought from the time of the ancient Greeks.

Schumpeter rivalled Keynes in range of experience and subtlety of thought, and surpassed him in breadth of scholarship. But his impact on intellectual life and practical affairs was slight compared with that of his English rival. In Prophet of Innovation, McCraw claims his subject “has had an incalculable influence on business during the late twentieth century and the early twenty-first”. But this is difficult to sustain.

Schumpeter is, McCraw suggests, the founder of modern business strategy. He is right to say that “Schumpeter’s central preoccupations – innovation, entrepreneurship and credit creation – have played prominent roles in the formulation of these (business) strategies”. But Schumpeter’s ideas relate to the role these factors play in the evolution of economic systems, not the planning of individual businesses. Indeed, his emphasis on the foibles of the entrepreneur, the unpredictability of outcomes and the power of evolutionary processes directly contrasts with the high rationalism that modern business schools teach or consultants promote.

Schumpeter knew that his rival’s work had far greater influence. His critical essay on Keynes in History of Economic Analysis both displays his bitterness and identifies the reasons for Keynes’s greater success. Schumpeter expresses genuine admiration for the courageous publication of The Economic Consequences of the Peace. Keynes was, Schumpeter recognises, a natural leader who gave others confidence and inspiration.

Schumpeter would observe of himself: “I singularly lack the quality of leadership – with a fraction of my ideas a new economics could have been founded.” That new economics did not happen. There would be a Keynesian school, a Keynesian economics, but no Schumpeterian school, and really no Schumpeterian economists. While Keynes set the direction of Britain’s wartime finance, Schumpeter was under observation by inept agents of the FBI. They monitored his correspondence for clues, but appear not to have noticed that he published, in 1942, a book called Capitalism, Socialism and Democracy: bookshop visits were not, it would seem, part of their tradecraft. And Schumpeter’s most brilliant student, Paul Samuelson, would lead the postwar development of economics in quite different directions.

In the generation that followed Keynes and Schumpeter, John Kenneth Galbraith (born 1908) and Milton Friedman (born 1912), were the two most prominent public intellectuals among economists. If Schumpeter is more admired than read, Galbraith is more read than admired. The prevailing opinion is that Galbraith was a brilliant writer but mediocre economist. In his new book, Richard Parker challenges this view, with limited success. His argument relies too much on identifying almost every valid criticism of market fundamentalism or neoclassical economic theory to vindicate his subject.

Still, there is a case to be made for the partial rehabilitation of Galbraith’s scholarly reputation. America’s contrasting private affluence and public squalor was never more starkly revealed than in the aftermath of Hurricane Katrina in 2005, and never more cogently described than in Galbraith’s 1958 work The Affluent Society. His elegantly written The Great Crash describes Wall Street in the late 1920s; it proved almost a screenplay for the repetition of these events in the late 1990s.

Perhaps most importantly, Galbraith’s The New Industrial State (1967) saw the developed economy not as a set of interlocking competitive markets, but in terms of the power relationships in, around and between businesses. This perspective is a necessary contrast to a standard economic theory which barely recognises that the large corporation is the dominant institution in modern society. To understand the role of K Street and Wall Street in Bush’s America, we might more profitably turn to Galbraith than to Samuelson. But, as there is no Schumpeterian school, there is no Galbraithian school. Like Schumpeter, Galbraith never had time or inclination for the university and conference politics which that required.

Galbraith’s early career involved the administration of wartime price control, and that experience had a formative, sustained, and somewhat eccentric influence on his thought. Galbraith remained interested in a political role. But his most important public appointment – as US ambassador to India – was primarily decorative. Ultimately, he would always be at the fringe rather than the centre of political and intellectual life. The gift for dry, academic observation which was his stock in trade was best deployed in perpetual opposition. If Schumpeter lacked qualities of leadership, Galbraith chose not to exercise them.

Keynes’s popular achievement, Schumpeter had observed, was to project “his own personal view” through “an apparently general analysis”. As Keynesian influence waned in the 1970s, Milton Friedman (himself the subject of a recent biography by Alan Ebenstein) would have influence comparable to Keynes on both economic policies and research directions. Like Keynes, he provided intellectual leadership for a school of economists. In another new book, Johan Van Overtveldt provides the first full-length account of the emergence of the modern Chicago school under Friedman.

Van Overtveldt presents potted intellectual and personal biographies of the main protagonists, fitted into a history of the University of Chicago economics department and School of Business. He provides a compendium of information. But Van Overtveldt is no Skidelsky – he does not explain how the school’s success reflected a wider set of political, economic and social changes.

The method of dissemination of the Chicago school was similar to that of the Keynesians: a relatively simple ideological message for communication to the world outside; a new, difficult, yet extensive theoretical framework; and a dedicated band of supporters who would entrench the doctrine in other economics departments.

The Chicago school draws on a long conservative tradition befitting an institution founded by John D. Rockefeller. But from the 1960s, it displayed a self-confident imperialism, as its emphasis on rational choice and free markets was deployed in other areas of economics and social sciences. Indeed, Chicago professor Gary Becker’s 1992 Nobel Prize was awarded explicitly for extending the scope of economics – as though this were an achievement of value for itself – rather than for the insights it generated. The most important extensions in practice were the economics of law, finance theory, and macroeconomics founded on individual rational choice.

Van Overtfeldt quotes Friedman’s famous comments on Harry Markowitz’s 1955 doctoral thesis on portfolio theory: “This isn’t a dissertation in economics... It’s not math, it’s not economics, it’s not even business administration.” In fact, it was all these things. As such it was also the foundation of modern finance theory, embraced within the Chicago School.

Keynes and the Keynesians, Friedman and the Chicago School ... what now? The next generation of biographers of economists will tell the histories of Amartya Sen and Joseph Stiglitz. Sen is, in a natural sense, the Schumpeter of our times. He shows a breadth of erudition and subtlety of mind unparalleled among other economists. But, like Schumpeter, Sen is an isolated figure. There will be no Sen school. Nor, it would seem, will there be a school of Stiglitz: a generation of students looks for a counterweight to Chicago, but the school’s potential leader has not found the application to develop a coherent and comprehensive critique that such a leadership role would today require, or the aptitude or inclination for academic politics. And the dissonance between Paul Krugman as polemical columnist at The New York Times, and his professional work at Princeton, seems too great.

To change the way a generation thinks is a measure of prodigious talent. In reviewing the work of two remarkable figures – Galbraith and Schumpeter – who might have, but did not, bring that about, we see all the more clearly the scale of achievement of two men – Keynes and Friedman – who did.

John Kay is an FT columnist and author of ‘The Hare and the Tortoise: An Informal Guide to Business Strategy’ (Erasmus)

Prophet of Innovation: Joseph Schumpeter and Creative Destruction
By Thomas K. McCraw
Harvard University Press $35, 736 pages

John Kenneth Galbraith: A 20th Century Life
By Richard Parker
Old Street Publishing £25, 840 pages
FT bookshop price: £20

The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionized Economics and Business
By Johan Van Overtveldt
Agate $35, 432 pages

John Maynard Keynes 1883-1946: Economist, Philosopher, Statesman
By Robert Skidelsky
Pan £20, 1,056 pages
FT bookshop price: £16