Capitalism and Society
A Journal of the Center on Capitalism and Society
Ed. by Phelps, Edmund / Bhidé, Amar
This paper argues that a number of ``unorthodox" analyses of capitalism can be understood from the point of view of orthodox economic theory. Our argument is based on the assumptions of monopolistic competition and that utility derived from consuming an individual good is bounded. The model's predictions are consistent with some popular heterodox views, such as ``In modern capitalist society, productivity is so high that many people are nearly saturated with goods;" ``Productivity growth reduces the real consumption wage of workers;" and ``The benefits from growth are appropriated by symbol manipulators." Furthermore, depending on relative levels of product diversity and physical productivity, globalization may harm poorer workers in LDCs, rather than unskilled workers in developed countries, as is usually predicted.