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    Conceptualizing Capitalism

    Institutions, Evolution, Future


          Winner of the 2014 Schumpeter Prize, awarded by the International Joseph A. Schumpeter Society


           Published by University of Chicago Press in August 2015

           Now available in paperback


"It is a must-read not only for economists, but also for social scientists in general." Denilson Beale, History of Economic Ideas

Conceptualizing Capitalism is an erudite and wide-ranging book by a perceptive historian of economic thought. I learned a tremendous amount of intellectual history from his chapters", Susan Rose-Ackerman, Journal of Economic Literature.

Click HERE for a summary of the book

Click HERE for a review of in the LSE Review of Books

“A rich traversal of capitalism in its myriad dimensions. . . . The book visits almost all dimensions of capitalism as we may think of it from employment, labour, firms, finance and property to the aspects that arguably constitute the core of this groundbreaking book: the role of the State and law.”

Click HERE for a review of in Panoeconomicus

“The richness of this book most certainly deserves compliments.”

My 2014 lecture HERE on "The Future of Work in the Twenty-First Century" draws from a part of this book.

See also HERE for a 2016 seminar in Belgrade discussing the book.


Review by John Plender in the Financial Times, 17 August 2015

Linguistic purge finds inequality Marx missed

The importance of the role of the state and law in facilitating the capitalist dynamic

As Geoffrey Hodgson points out in this erudite and thought-provoking book, defining capitalism as a combination of private ownership and markets would mean that the system has been in operation since the depths of antiquity. Markets, commodity exchange and property rights have, after all, existed for thousands of years. Hodgson’s view emphasises the importance of the role of the state and the law in facilitating the capitalist dynamic. Like the Austrian-born economist Joseph Schumpeter, but unlike Karl Marx, he highlights the role of banking in the development of capitalism. This has the advantage of allowing him to place the start of capitalism in the 18th century, shortly after the English financial revolution, when the nation state was already well developed. Capitalism can thus be identified with the period of explosive productivity growth that began with the industrial revolution. All of which makes excellent sense.

The legal perspective has much in common with the approach of “institutionalist” economists such as Thorstein Veblen and, more recently, Mancur Olson and Douglass North. ... This is because Hodgson is on a mission to cleanse economics of imprecise language. He believes that our understanding of the subject has been impaired by the “deep corruption” in the social sciences of terms such as property, exchange and capital. ...

On the word capital itself he has good points to make. For a start, the economist’s standard definition of capital is at odds with business usage, which makes for confusion. For those who deal with balance sheets, capital is the money advanced by shareholders to start a business. This view of capital was common until Smith decided to change its meaning. His was a very physical perception of the economy — he regarded services as inferior to manufacturing — and he preferred to think of capital as machinery, land and buildings, or assets capable of generating profits. That is the basis of the modern economist’s view of capital as a stock of factors of production that can be expected to yield productive services over time. And now, according to Hodgson, we have been deluged with such loose terms as social capital, human capital, religious capital and cultural capital to the point where the word is emptied of meaning.

He would like to confine capital exclusively to its everyday monetary sense and argues that a form of capital that cannot be used as collateral is simply not capital.  ...

Yet it does highlight an important feature of capitalism that is inherent in the different nature of the assets owned by the capitalist and by the worker. Workers cannot use their labour power as collateral, which is a class inequality intrinsic to capitalism that Marx failed to highlight.

One of the book’s more interesting pieces of analysis suggests that many growth projections for Russia, Brazil, China and India are over-optimistic as they underestimate the institutional changes required to reach high levels of per capita gross domestic product. On policy reform, its suggestions are relatively modest. But it is a stimulating, historically grounded exploration of the subject and a rewarding, if occasionally dense, read.

Comments by Leading Scholars

Ugo Pagano, University of Siena and Central European University

“In standard economics, capitalism has become an ill-defined concept, its analysis flawed from the very initial definition. Hodgson’s book reintroduces a sharp and precise definition, showing how a successful analysis of capitalism requires an understanding of the interactions of numerous complementary institutions, including sophisticated legal institutions. This is a remarkable and highly original piece of interdisciplinary scholarship that will greatly contribute to the understanding of contemporary capitalist economies."

Richard Nelson, Columbia University

“There are a number of books that purport to consider modern capitalism, but none of these treats the subject so broadly or considers in anything like the detail here the history of social science thought on the topic. Hodgson’s discussion of the many issues he treats is broad, thoughtful, and highly literate.”

Bruce Caldwell, Duke University

"Hodgson’s goal in Conceptualizing Capitalism is to clarify the basic concepts of capitalism. He shows the interconnections of such vital concepts as capital, money, exchange, property, and law, and how they work together to determine the essential character of capitalism. Hodgson draws on literature old and new in composing his definitions, and he reveals the many errors into which those who use language carelessly or vaguely inevitably fall. Economists, often preoccupied with mathematical precision, have paid insufficient attention to conceptual precision. This carefully-argued and ultimately convincing book provides a welcome remedy."

Wolfgang Streeck, emeritus director, Max Planck Institute for the Study of Societies

“This is a magnum opus if ever there was one. Hodgson gives you everything you always wanted to know about capitalism, from a heterodox evolutionary economics perspective. A book that is impressively erudite, deeply rooted in the tradition of the discipline and in economic history. It is also remarkably optimistic on the future of capitalism and the prospects of political reform to restore the historical alliance between capitalism and social progress.”

The Aim and Scope of the Book

The Great Financial Crash of 2008 and the subsequent global crisis have led many people to question the viability of capitalism, or at least to consider major reforms to its financial and corporate institutions. Nonetheless, spectacular economic growth in China and India since 1980 have clearly revealed the potential dynamism of markets and private enterprise, albeit with strategic guidance by governments. We need to understand the nature of capitalism, the sources of its dynamism, and its frailties.

A few centuries ago, capitalism set in motion an explosion of economic productivity. Markets and private property had existed for millennia, but what other key institutions fostered capitalism’s relatively recent emergence?  Until now, the conceptual toolkit available to answer this question has been inadequate, and economists and other social scientists have been diverted from identifying these key institutions.

Readers looking here for an ideological tract, either for or against capitalism, will be disappointed. Although I consider the future of capitalism near the end of this volume, my main purpose is to understand the nature of the beast, and to establish some conceptual tools needed to reveal its inner structure and dynamics. But along the way I shall argue that some mix of market competition and state power is unavoidable in any complex modern economy, thus disappointing advocates of both pure markets and wholesale planning.

There are many books on capitalism: so what is added here? First I take a position that is different from both Marxism and pro-market libertarianism. This is apparent in my overall analytical approach, including my assessment of the constitutive role of law and the state within capitalism, my treatment of the concept of capital, and in my appraisal of post-capitalist possibilities.

The primary aim of this work is to understand capitalism. It is hoped that this book will add to our understanding of the nature of capitalism and also make a methodological contribution that will help move enquiry forward.

    Contents listing of the book








Distilling the essence


Social structure and individual motivation


Law and the state


Property, possession and contract


Commodity exchange and markets


Money and finance


Meanings of capital


Firms and corporations


Labor and employment


A definition of capitalism




Conceptualizing production


Socialism, capitalism, and the state


How does capitalism evolve?


The future of global capitalism


Addressing inequality


After capitalism?