The most important book on capitalism this year will be Anwar Shaikh’s Capitalism – competition, conflict, crises.
As one of the world’s leading economists who draws on Marx and the classical economists (‘political economy’, if you like), Anwar Shaikh has taught at The New School for Social Research for more than 30 years,authored three books and six-dozen articles. This is his most ambitious work. As Shaikh says, it is an attempt to derive economic theory from the real world and then apply it to real problems. Shaikh applies the categories and theory of classical economics to all the major economic issues, including those that are supposed to be the province of mainstream economics, like supply and demand, relative prices in goods and services, interest rates, financial asset prices and technological change.
Shaikh says that his “approach is very different from both orthodox economics and the dominant heterodox tradition.” He rejects the neoclassical approach that starts from “Perfect firms, perfect individuals, perfect knowledge, perfectly selfish behavior, rational expectations, etc.” and then “various imperfections are introduced into the story to justify individual observed patterns” although there “cannot be a general theory of imperfections”. Shaikh rejects that approach and instead starts with actual human behavior instead of the so-called “Economic Man”, and with the concept of ‘real competition’ rather than ‘perfect competition’. Chapters 3 and 7-8 emphasize that. It is the classical approach as opposed to the neoclassical one.
The book is a product of 15 years work, so it has taken longer to gestate than Marx took from 1855 to 1867 to deliver Capital Volume one. But it covers a lot. All theory is compared to actual data in every chapter, as well as to neoclassical and Keynesian/post-Keynesian arguments. A theory of ‘real competition’ is developed and applied to explain empirical relative prices, profit margins and profit rates, interest rates, bond and stock prices, exchange rates and trade balances. Demand and supply are both shown to depend on profitability and interact in a way that is neither Say’s Law nor Keynesian, but based on Marx’s theory of value. A classical theory of inflation is developed and applied to various countries. A theory of crises is developed and integrated into macrodynamics. That’s a heap of things.