The Natural Instability of Markets : Expectations, Increasing Returns, and the Collapse of Capitalism

by Michael Perelman

As Socialist states struggle to transform themselves into market economies and the United States privatizes everything from schooling to policing, the current crises in Russia and East Asia suggest that something might be amiss. In the rush to open societies to the benefits of competition, economists have overlooked the fundamental instability of competitive markets. What had seemed to be an invincible capitalist juggernaut may be reaching its apotheosis. A close look at market economies is more timely and crucial than ever. Michael Perelman argues that capitalism's victory is temporary, based as it is on an unrealistic understanding of the system's inherent risks. He analyzes the nature and causes of crisis within a market society, and along the way, he re-examines one of capitalism's most primary and unquestioned tenets, that the more competition there is, the better off society will be. This accessible book, garnished with plenty of examples and anecdotes, is an open-minded injection of common sense into the understanding of a capitalist society.

203 pages, Hardcover

First published June 12, 1999

About the author

Michael Perelman (born October 1, 1939) is an American economist and economic historian, currently professor of economics at California State University, Chico. Perelman has written 19 books, including Railroading Economics, Manufacturing Discontent, The Perverse Economy, and The Invention of Capitalism. A student of economics at the University of Michigan and San Francisco State College, Perelman earned a Ph.D in agricultural economics from the University of California, Berkeley in 1971, under supervision of George Kuznets. Perelman writes that he was drawn away from the "framework of conventional economics," noticing that the agricultural system was "consuming ten times more energy than it was producing in the form of edible food." Perelman's research into how "profit-oriented agricultural system created hunger, pollution, serious public health consequences, and environmental disruption, while throwing millions of people off the land" led to his first book, Farming for Profit in a Hungry World (1977). Perelman continued to write extensively in criticism of conventional or mainstream economics, including in all his books (and especially his books published from 2000 to date), papers and interviews.

Although perceiving flaws in Marx's work as it is typically interpreted in the context of its modern reading, Perelman writes that "Marx’s crisis theory was far more sophisticated than many modern readers had realized," focusing on an interpretation that is largely bypassed by many readers of Marxian economic thought. Perelman views Marxist theory as vindicated through its account of crises that a capitalist economy must inherently generate.

Perelman has appeared on a number of programs, including Media Matters, Pacifica Radio, KPFA 94.1 Berkeley, and WBBR (Bloomberg Radio).

Reviews

[Alex · Rating 3 out of 5]

Not an essential book at all, mostly discusses economic theory to highlight the fact that competition in markets can have negative and chaotic effects. Somewhat interesting, but don't be fooled by the subtitle, there's nothing here about "Expectations", "Increasing Returns", and CERTAINLY not "the Collapse of Capitalism"! Poor, poor naming.