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Understanding Capitalism

Competition, Command, and Change

Fourth Edition

Author Samuel Bowles, Frank Roosevelt, Richard Edwards, and Mehrene Larudee

Publication Date - 20 October 2017

ISBN: 9780190610937

592 pages
8 x 10 inches

In Stock

Offers an introduction to economics that pays extensive attention to inequality, the global economy, contemporary public issues, and more


Understanding Capitalism: Competition, Command, and Change, Fourth Edition, is an introduction to economics that explains how capitalism works, why it sometimes fails, and how it undergoes and brings about change. It discusses both the conventional economic model and the role of power in economic interactions. Understanding Capitalism analyzes how profit-seeking is a source of competition among firms, conflict, and change.

New to this Edition

  • Data and figures have been thoroughly updated throughout
  • Three new and four substantially rewritten chapters clarify the content and strengthen the book's international perspective
  • A new Chapter 6, "Government and the Economy," explains how the establishment of rules like limited liability and corporate personhood have increased investment growth and consolidation of enterprises in the U.S., laying the foundation for transnational corporations
  • A new Chapter 18, "Financial and Economic Crisis," describes the unfolding of the Great Recession, analyzes changes in the financial sector, and discusses the causes of economic crises in general
  • A new Chapter 19, "Government and the Economy in Transnational Capitalism," considers issues in private vs. public provision of services, especially in health care and prison management
  • Simpler algebra has been seamlessly integrated into Chapters 10, 11, and 12

About the Author(s)

Samuel Bowles is Research Professor at the Santa Fe Institute and Professor of Economics at the University of Siena, Italy.

Richard Edwards is Professor of Economics at the University of Nebraska-Lincoln.

Frank Roosevelt is Professor Emeritus of Economics at Sarah Lawrence College.

Mehrene Larudee is Visiting Associate Professor at Hampshire College.


"A good contested exchange alternative to a traditional textbook. Ideal for use in an economics class with an interdisciplinary focus." -- Andrew Farrant, Dickinson College

"This is a versatile, comprehensive textbook that introduces undergraduate students to the principles of political economy. In contrast to conventional textbooks, it develops analytical tools for understanding capitalism that are not celebratory of capitalism. Those tools are not presented in isolation, but are integrated with the traditional topics and principles of microeconomics and macroeconomics."--Dr. Jared Ragusett, Central Connecticut State University

"Understanding Capitalism is a great introduction to political economy and an excellent alternative to standard texts for introducing students to economics in general. The text's framework and analysis help students develop a critical perspective on the economic and social world around them, like no other textbook on the market does."--Jonathan Cogliano, Dickinson College

Table of Contents


    CHAPTER 1: Capitalism Shakes the World
    The Permanent Technological Revolution

    Which Came First: Technology or Capitalism?
    The Enrichment of Material Life
    Growing Inequality
    The Population Explosion and the Growth of Cities
    The Changing Nature of Work
    The Transformation of the Family
    Threats to the Ecosystem

    The Effects of Climate Change
    New Roles for Government

    CHAPTER 2: People, Preferences, and Society
    Constraints, Preferences, and Beliefs
    "Economic Man" Reconsidered
    Human Nature and Cultural Differences
    The Economy Produces People
    Conclusion: The Cooperative Species

    CHAPTER 3: A Three-Dimensional Approach to
    Economic Systems and Capitalism
    Three-Dimensional Economics

    Neoclassical Economics
    Values in Political Economy

    Balancing efficiency, fairness, and democracy

    CHAPTER 4: The Surplus Product: Conflict and Change
    Economic Interdependence, Production, and Reproduction

    Links Between Production and Reproduction
    A Labor Process Example: Making Pancakes
    The Surplus Product
    A Model of Production and Reproduction

    Who Gets the Surplus?
    Enlarging the Surplus
    Application of Model to Labor
    The Surplus Product and Change

    CHAPTER 5: Capitalism as an Economic System
    Class and Class Relationships

    Classes and Economic Systems

    Distinctions among Economic Systems
    Privately Owned Capital Goods
    Wage Labor
    Capitalism, the Surplus Product, and Profits

    CHAPTER 6: Government and the Economy
    Rules of the Game: Government and the Capitalist Economy

    The Emergence of Modern Legal Forms of Corporate Business
    From Competition to Monopoly
    From National to Transnational
    Democratic Government as Collective Provision for the General Welfare
    Government and the Distribution of Income, Wealth, and Welfare in the 19th Century

    Contention between Capital and Labor over Rules
    Voter turnout in the U.S. and around the world
    Democracy in the 20th Century

    CHAPTER 7: U.S. Capitalism: Accumulation and Change
    Accumulation as a Source of Change

    The Accumulation of Process
    Competition for Profits
    Social Structures of Accumulation
    Changing Strategies for Profit-Making
    Consolidation and Decay of an SSA
    The Stages of American Capitalism in the United States
    Competitive capitalism (1860s-1898)
    Competitive capitalism (1860s-1898)
    Corporate capitalism (1898-1939)
    Regulated capitalism (1939-1991)
    Transnational capitalism (1991- )
    U.S. Capitalism: Labor Organizing and Labor Markets
    The Rise and Fall of Labor Unions
    Segmented labor markets
    U.S. Capitalism Today is Transnational
    Shifts in what U.S. Labor Produces
    Fragmenting Global Production
    Rules for the Global Economy
    Tax Motives for TNCs to Go Global
    Corporate Stock Buybacks and Falling Productive Investment


    CHAPTER 8: Supply and Demand: How Markets Work
    The Nature of Markets
    Demand and Supply

    Demand and Supply Interacting
    Shifts in Demand or Supply

    CHAPTER 9: Competition and Coordination: The Invisible Hand
    Adam Smith and Laissez-Faire Economics

    Coordination by Rules and by Command
    The Limits of Coordination by Command
    The Invisible Hand
    The Invisible Hand in Action
    Problems with the Invisible Hand
    Market Failure
    Negative externalities as market failures
    Positive externalities as market failures
    Monopoly as a market failure
    Coordination Failure
    The Prisoner's Dilemma and the Benefits of Cooperation
    The Tragedy of the Common

    CHAPTER 10: Capitalist Production and Profits
    What Are Profits?

    Profits from a Production Process
    Calculating Profit and Other Property Incomes in the Whole Economy
    Profit in a Grain-Growing Capitalist Economy
    Calculating the Rate of Profit
    The Corporate Profit Rate in the U.S.
    Corporations and Other Businesses: Who Gets the Profit or Bears the Loss?
    Determinants of Total Profit and the Profit Rate
    Example: The Good Cod Fishing Company

    Profit per Unit of Output
    Conflict Over the Profit Rate
    Intermediate Inputs per Unit of Output as Profit Rate Determinants
    Unit Labor Cost as a Profit Rate Determinant
    Understanding the Profit Rate

    CHAPTER 11: Competition and Concentration
    Competition for Profits
    The Forms of Competition
    Price Competition

    Price as a markup over cost
    Economies of scale and price competition
    Other advantages of large size
    Capacity utilization
    Monopoly Power
    Investing to Compete
    The Dynamics of Competition

    Toward Equal Profit Rates?
    Toward Economic Concentration?
    Large Size and Monopoly Power
    Trends in Concentration
    Antitrust Enforcement

    CHAPTER 12: Wages and Work
    Work, Sloth, and Social Organization
    The Capitalist Firm as a Command Economy
    Conflict between Workers and Employers
    Labor Discipline: Carrots and Sticks
    The Labor Market, the Wage, and the Intensity of Labor

    Cost of Job Loss
    Avoiding the Cost of Job Loss
    Additional Implications of the Labor Extraction Curve

    CHAPTER 13: Technology, Control, and Conflict in the Workplace
    The Social Organization of the Workplace

    Simple Control
    Technical Control
    Bureaucratic Control
    Technology and the Labor Process
    Conflict in the Workplace

    Technical Change and Workplace Conflict
    Discrimination in the Workplace
    Profitability Versus Efficiency
    Markets and Hierarchies

    Democratic Firms


    CHAPTER 14: The Mosaic of
    Well-Being and Inequality

    Influences on Well-being and the Economy
    Measuring Living Standards and Inequality
    Growing Inequality
    Wealth Inequality
    Unequal Chances
    Race and Inequality
    Discrimination in Hiring
    Problem of Differential Pay
    Women's Work, Women's Wages
    Conclusion: Explaining the Mosaic of Inequality

    CHAPTER 15: Progress and Poverty on a World Scale
    Poverty and Progress
    Productivity and Income

    Vicious Circles of Low Productivity
    Intellectual Property Rights
    Other Government Interventions to Promote Development
    Requisites for Economic Development
    Eight Essential Conditions
    Other Factors in Development
    Foreign Investment and Development
    Investment Decisions by Transnational Corporations
    Transnational Investment and Tax Havens
    The High Cost of Low-Priced Clothing

    CHAPTER 16: Aggregate Demand, Employment, and Unemployment
    Counting the Unemployed

    What Determines Employment and Output?
    Aggregate Supply and Aggregate Demand
    Measuring Total Output
    Terms for Measuring the Macroeconomy
    Measuring Aggregate Supply and Aggregate Demand
    A Basic Macroeconomic Model
    Unemployment and Government Fiscal Policy

    Effects of Deficit Spending on Employment
    Multiplier Effect of Deficit Spending
    The Business Cycle and the Built-in Stabilizers
    Conscious Policy Changes
    Automatic Built-in Stabilizers
    Investment, Aggregate Demand, and Monetary Policy
    Wages, Aggregate Demand, and
    When is an Employment Situation Wage-Led?
    Implications for Economic Policy

    CHAPTER 17: The Dilemmas of Macroeconomic Policy
    The High-Employment Profit Squeeze

    The High Employment Wage Push
    The Materials Cost Push
    The Profit Squeeze
    Exports, Imports, and Aggregate Demand
    The Demand for Exports and Imports
    The Foreign Exchange Rate
    International Trade and Macroeconomic Policy
    Promoting Net Exports
    Competing in Global Markets
    Monetary and Fiscal Policy at Odds
    What Determines the Interest Rate?
    Borrowing and the Exchange Rate
    The Conflict between Monetary and Fiscal Policy
    Institutions for Achieving Full Employment
    Institutional Obstacles to Full Employment
    Institutions for Achieving Full Employment

    CHAPTER 18: Financial and Economic Crisis
    The Great Recession and the Subprime Crisis
    Understanding the Great Recession

    Why to Buy a Home
    Home Prices Start to Rise
    How to Buy a Home
    Securitization of Mortgages
    Liars' Loans
    Collateral Damage
    Derivatives of Other Kinds
    Bailouts and Buyouts
    Unemployment and Poverty
    Lessons from the History of Economic Crises
    Nonfinancial causes of crisis: over-investment, under-consumption
    Underconsumption as a cause of stagnation or crisis
    Asset markets differ from goods markets
    Why are asset markets prone to price bubbles?
    Feedback Loops
    Deregulation and financial fragility
    Large firms exacerbate the problem
    Weakening the social safety net
    Regulation in a capitalist economy
    Regulating the financial sector
    The Dodd-Frank Act
    Inequality, concentration and crisis

    CHAPTER 19: Government and the Economy in Transnational Capitalism
    More Spending, Less Health
    Government in the U.S.: Too Big?

    Government Spending: Comparing the U.S. with Other Countries
    Old age pensions
    Influencing the Rules
    Rules that Affect Business Costs and Profits
    Contracting Out Government Services
    Government Contracting: Profits and the Public Interest
    Decline in Competitive Bidding for Government Contracts
    Government Contracting for Private Prison Services
    Laws and Norms on Sentencing
    Rethinking Private Prisons and Mass Incarceration
    Selling to Government, Maximizing Profit
    Medical services in Private Prisons
    Changing the Rules
    Feedback Loops in Taxing Transnational Corporations
    Conflict Over Rules
    Proposals for Alternative Rules
    Democracy and Inequality
    Feedback Loops Between Inequality and Power
    Supranational rules and rule changes
    TNC Power over Foreign Government Decisions
    Conflict Over Rules
    Proposals for Alternative Rules
    Capitalism and Inequality
    Democracy and Inequality

    List of Variables
    Sources of Economic Information

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