Understanding Capitalism: Competition, Command, and Change, Third Edition, is an introduction to economics that explains how capitalism works, why it sometimes does not work as well as we would like it to, and how over time it not only changes but also revolutionizes the world around us. The "three-dimensional approach" of the text focuses on competition in markets; command in firms, governments, and international relations; and change as a permanent feature of a capitalist economy driven by technical innovation and conflict over the distribution of income.

The book covers the standard topics of supply and demand, market competition, imperfect competition, aggregate demand, inflation, and unemployment. It emphasizes the extraordinary dynamism and material productivity of the capitalist economy; the psychological foundations of human behavior; the logic and limitations of Adam Smith's invisible hand; technical change and the new information-based economy; global economic integration and its impact on national economies; the impact of economic activity on the environment; and inequality both within and among nations. In addition, it provides a critical evaluation of the tenets of neoclassical economics, a clear introduction to contract theory, and material drawn from new research in behavioral, institutional, and information economics.

Understanding Capitalism, Third Edition, is ideal for undergraduate courses in economics and political economy. An Instructor's Manual is available to adopters.

FEATURES OF THE THIRD EDITION

Offers a new chapter on the behavioral foundations of economics, showing that the selfishness of the "economic man" leaves out the important role of other social motives and how individual tastes and values evolve in response to experiences

Includes a new chapter that examines how economic success (and poverty) are passed on from parents to children and also looks at the increasing inequality of income and wealth along lines of race and gender

Presents a completely revised and expanded treatment of the revolutionary changes that have been associated with capitalism over the past three centuries

Provides boxed treatments of issues that can serve as the basis of classroom discussions

Defines important terms in the margins throughout the text

Contains a section entitled "Sources of Economic Information" that helps readers locate relevant outside data, both in print and online

Samuel Bowles is Research Professor at the Santa Fe Institute, U.S.A., 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 of Economics at Sarah Lawrence College.

Preface

List of Figures

Sources of Economic Information

PART ONE: POLITICAL ECONOMY

1. Capitalism Shakes the World

The Permanent Technological Revolution

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

New Roles for Government

Globalization

Conclusion

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

3. A Three-Dimensional Approach to Economics

Economic Systems and Capitalism

Three-Dimensional Economics

Neoclassical Economics

Values in Political Economy

4. Political Economy, Past and Present

Adam Smith

Karl Marx

Joseph Schumpeter

John Maynard Keynes

Ronald Coase

Amartya Sen

5. The Surplus Product: Conflict and Change

Economic Interdependence, Production, and Reproduction

The Surplus Product

A Grain Model of Production and Reproduction

International Exchange and the Surplus Product

The Surplus Product and Conflict

The Surplus Product and Change

6. Capitalism as an Economic System

Class and Class Relationships

Classes and Economic Systems

Capitalism

Capitalism, the Surplus Product, and Profits

Conclusion

7. American Capitalism: Accumulation and Change

Accumulation as a Source of Change

Capitalism Becomes the Dominant Economic System in the United States

Social Structures of Accumulation

The Stages of American Capitalism

American Capitalism Today: Economic Dualism

American Capitalism Today: Globalism

PART TWO: MICROECONOMICS

8. Supply and Demand: How Markets Work

The Nature of Markets

Supply and Demand

Supply and Demand Interacting

Shifts in Demand or Supply

Conclusion

9. Competition and Coordination: The Invisible Hand

Coordination

Coordination by Rules and by Command

The Invisible Hand

The Invisible Hand in Action

Problems with the Invisible Hand

10. Capitalist Production and Profits

What Are Profits?

Calculating the Rate of Profit

The Determinants of the Profit Rate

The Rate of Profit per Worker Hour

The Labor Determinants of the Profit Rate

Materials and Capital Goods as Profit Rate Determinants

The Role of Capital Goods (Again)

Conclusion: Understanding the Profit Rate

11. Competition and Concentration

Competition for Profits

The Forms of Competition

Investing to Compete

The Dynamics of Competition

Toward Equal Profit Rates?

Toward Economic Concentration?

12. Wages and Work

Work, Sloth, and Social Organization

The Capitalist Firm As a Command Economy

The Conflict Between Workers and Employers

Labor Discipline: Carrots and Sticks

The Labor Market, the Wage, and the Intensity of Labor

13. Technology, Control, and Conflict in the Workplace

The Social Organization of the Workplace

Technology and the Labor Process

Conflict in the Workplace

Profitability Versus Efficiency

Markets and Hierarchies

Democratic Firms

PART THREE: MACROECONOMICS

14. The Mosaic of Inequality

Measuring Well-Being and Inequality

Growing Inequality

Wealth Inequality

Unequal Chances

Race and Inequality

Women's Work, Women's Wages

Conclusion: Explaining the Mosaic of Inequality

15. Progress and Poverty on a World Scale

Poverty and Progress

Productivity and Income

Productivity, Incentives, and the Surplus Product

Capitalism and Uneven Development

Government and the Development Process

Investment and Production on a World Scale

Conclusion

16. Aggregate Demand, Employment, and Unemployment

Aggregate Supply and Aggregate Demand

Unemployment and Government Fiscal Policy

The Business Cycle and the Built-in Stabilizers

Investment, Aggregate Demand, and Monetary Policy

Wages, Aggregate Demand, and Unemployment

Conclusion

17. The Dilemmas of Macroeconomic Policy

The High-Employment Profit Squeeze

Exports, Imports and Aggregate Demand

International Trade and Macroeconomic Policy

Monetary and Fiscal Policy at Odds

Institutions for Achieving Full Employment

Conclusion

18. Inflation

Two Types of Inflation

Why Worry About Inflation?

Conclusion

19. Government and the Economy

The Rules of Government Organization

The Economic Activities of the Government

The Expansion of Government Economic Activity

Government and the Profit Rate

The Limits of Democratic Control of the Capitalist Economy

PART FOUR: CONCLUSION

20. The Future of Capitalism

The Limits to Growth

The Weightless Economy: From Grain and Steel to Information and Ideas

The New Economy

Can the Invisible Hand Tame Fugitive Resources?

Conclusion

List of Variables

Glossary

Index