In a number of earlier essays on Marx and neoclassical economics, his book Capitalism: Competition, Conflict, Crises, and a recent note on heterodox economics, Anwar Shaikh (who sees his economic work grounded in classical political economy, which means being based predominantly on the theories and methodological approaches of Smith, Ricardo and, particularly, Marx) has focused his attention on the nature of competition within a capitalist market economy. In so doing, he aims to show that the only viable notion of competition is one based on what he calls 'real competition' in contrast to what's called 'perfect' and 'imperfect' competition in both the orthodox and heterodox varieties of modern economics.
For Shaikh there's no such thing in a real capitalist market economy as either 'perfect' or 'imperfect' competition; there's just 'real competition'. This is because in such an economic system, capitalist firms don't operate as if they're price-takers; nor is there an absence of barriers to the entry and exit of markets by capitalist firms; nor are markets just comprised of many small capitalist firms each competing with each other over the sale of homogeneous products like wheat at the same price; and nor are there any lack of technological advantages which gives some capitalist firms a competitive edge over others. Instead, there's just fierce competition amongst different capitalist firms which engage in cost-cutting measures in order to gain an economic edge over their competitors, with the aim of making the greatest amount of profits at the expense of others. Thus capitalist firms are profit-seekers, not profit-receivers.
So, for Shaikh, real competition in a capitalist market economy is 'not like a ballet', as it's conceived in the model of perfect competition in neoclassical economics, but actually 'a war' with casualties. This consequently means that real competition produces a concentration of wealth in the hands of fewer but larger capitalist firms (a key theoretical claim of Marx's Capital Vol. 1).
Now, according to neoclassical economics, the reason why a real capitalist market economy fails to emulate the model of perfect competition (which basically consists of many small capitalist firms competing with one another on a 'level playing field') is because of certain 'market imperfections' which impede it, like governmental regulations or labour union practices.
In contrast, however, non-neoclassical economists (like Stiglitz) hold that the perfect competition model can't be realised in a real capitalist market economy since such an economy is in fact comprised of such 'market imperfections'. It can't be otherwise. That is, there can't be such a thing as 'perfect competition', there can only be 'imperfect competition'. Thus, for non-neoclassical economists, a real capitalist market economy can't be perfect - at all!
(It should be noted that non-neoclassical economics seeks to be more realistic in its accounts of a real capitalist market economy, unlike neoclassical economics.)
Now, Shaikh rejects the respective models of competition and the respective approaches of both neoclassical and non-neoclassical economics. This is because both types of economics accept the model of perfect competition as a valid starting point to begin with. In the neoclassical economics case, it's the benchmark by which to measure the failings of a real capitalist market economy, while in the case of non-neoclassical economics it's the basis for saying that a real capitalist market economy isn't in any way at all like what's depicted in such a so-called model of perfect competition.
For Shaikh, this theoretical starting point is the wrong way of going about grasping the nature of a real capitalist market economy. It leads you up the wrong theoretical garden path, whereupon you draw the wrong theoretical conclusions - such as how the unemployment and poverty of the capitalist economic system is the result of certain types of 'market imperfections'. To avoid this theoretical outcome, you need to start from a different theoretical basis - one which is actually grounded in the real world to begin with.
Shaikh sums up his theoretical position at the end of his book, Capitalism, by saying that there can be no imperfection without perfection, but since there is no such thing as perfection, then there can't be any such thing as imperfection in the real world - hence there can only be the real, since that's all we have.
Now, it's my view here that Shaikh is right about all this: the starting point for a theoretical analysis of modern capitalism, in contrast to both neoclassical and heterodox economics, is a conception of real competition, not a conception of perfect competition.
In the next post I shall give a philosophical perspective on how and why we should accept Shaikh's theoretical point here.
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