James Crotty

The Intellectual Odyssey of James R. Crotty: From the War on Vietnam to the Critique of Financialized Global Capitalism

Speaker: Prof. Gary Dymski [University of Leeds, UK]

The 69th JSPE Annual Conference, JSPE-Routledge International Book Prize Session, Oct 16 2021

The President/Chairman of the JSPE
Dr. Tetsuji Kawamura

The Japan Society of Political Economy (JSPE) is pleased to announce the winner of the 2020 JSPE- Routledge Book Prize. The JSPE is an interdisciplinary association devoted to the study and development of political economy and its application to social problems. It has been the largest organization in theoretical areas of political economy and heterodox economists in Japan since its foundation in 1959, providing important occasions for developing and debating ideas about capitalism and its dynamics. The book prize is financially supported by Routledge, which is the world's leading academic publisher in the Humanities and Social Sciences. The prize promotes the study of political economy and heterodox economics throughout the world, with the aim of challenging orthodox neo- liberal economics among economists and policy-makers. The prize is awarded annually to a living political economist based on his or her “lifetime achievement,” as embodied in a distinguished book (or books) reflecting the analytical perspectives represented by the Japan Society of Political Economy.

The 2020 JSPE-Routledge Book Prize winner

The 2020 prize winner is Professor James Crotty (an emeritus professor of University of Massachusetts, Amherst, U.S.A.) based on his following book:

  • James Crotty, Capitalism, Macroeconomics and Reality: Understanding Globalization, Financialization, Competition and Crisis (Cheltenham and Northampton: Edward Elgar, 2017)

  • --with special reference to James Crotty, Keynes Against Capitalism: His Economic Case for Liberal Socialism (London and New York: Routledge, 2019)]

Reasons for Awarding the Prize to Professor Crotty

James Crotty earned a Ph.D. degree from Carnegie Mellon University in 1973. The following year he joined the faculty of the University of Massachusetts Amherst, which was a center of radical political economy in the United States amidst the Western Marx Renaissance of the late 1960s and 1970s. Since then, he has continued his research and educational activities at the university. At present, he is an emeritus professor at the University of Massachusetts and a senior research associate at the Political Economy Research Institute (PERI). The 2020 JSPE-Routledge Book Prize is awarded to Professor Crotty in recognition of his 2017 book, Capitalism, Macroeconomics and Reality: Understanding Globalization, Financialization, Competition and Crisis. During the selection process, the judges also referred to his 2019 book, Keynes Against Capitalism: His Economic Case for Liberal Socialism.

Professor Crotty’s research themes are extremely diverse, including macroeconomic theory and policy, Marxian theory, Keynesian and post-Keynesian theory, investment theory, economic methodology, global economy, financial markets, financial instability and financial crisis, and the analysis of the Korean economy. He is considered to be one of the representatives of Post-Keynesian economists in the United States, but he has consistently sought to integrate the complementary analytical powers of Marxian and Keynesian traditions. In this sense, he is one of the most unique post-Keynesian economists.

Capitalism, Macroeconomics and Reality consists of five parts and 15 chapters, organized according to the consistent attitude of discussing macroeconomic theory and policy in the “spirit” of Marx, Schumpeter, and Keynes. Most of the papers on which the chapters are based were published in the 1990s and 2000s, and this book summarizes the achievements and considerations of the author over many years of research.

Two points in particular can be mentioned as the author’s original contribution in this book. The first is the assertion that “methodology is important.” The book discusses M. Friedman’s methodology of positive economics. Since Friedman’s positivism rejects the validity of any theory apart from prediction, the verification of whether the market is efficient is essentially indistinguishable from the verification of whether the assumed theoretical model is correct or incorrect. The underdetermination of theory known as the “joint hypothesis problem” and the “Duhem-Quine proposition” cannot be a problem in the first place. Therefore, positivism is not a scientific claim but merely an ideology. In this regard, Professor Crotty emphasizes the return to Keynes, who believes that the reality of the assumptions is important. The key is Keynes’s fundamental uncertainty, the assumption that “we simply don’t know.” He argues that replacing the “risk” assumption, which allows us to know the probability distribution, with Keynes’s “uncertainty” assumption will fundamentally change our understanding of the nature of financial markets. He emphasizes that the very reality of assumptions is a prerequisite for the implementation of realistic theories and effective policies. This claim serves as the basso continuo of this book and is repeatedly emphasized in the analysis of the 2008 global financial crisis and the explanation of the crisis trends brought about by neoliberal capitalism.

The second main contribution of the book is the author’s unique analysis of US capitalism since the 1980s. The novel claim is made that the main cause of the 2008 financial crisis triggered by the Lehman shock is the bonus-driven compensation system at large investment banks. A single financial firm with key decision makers motivated by bonuses made top executives rich, destroyed shareholder value, and created a systemic risk that threatened the financial system itself. Within these financial companies, the so-called entrenchment effect was in operation, which had the negative effect of forcing top management to adopt excessive risk-taking measures and engage in excessive leverage. On the other hand, large non-financial companies face low profits and are forced into investment due to intensifying competition under the progress of neoliberal globalization, leading to overcapacity of industry and further increasing debt. In addition, deregulation of financial markets has forced these companies to shorten their business planning perspectives, and such factors have made it impossible for non-financial companies in the United States to operate effectively. Professor Crotty’s diagnosis is that a new model of socially embedded economic institutions and government-guided economic growth is essential to address these challenges. He also argues that the regressive austerity policies launched around the world in the wake of the 2008 financial crisis were unilateral class struggles aimed at destroying destroy social democracy.

Of course, the insights presented in this award-winning book are not limited to those two points. This book contains a number of other insights useful to modern political economists. Professor Crotty’s insightful ideas are derived by constantly returning to the Keynesian and Marxian intellectual traditions. The introduction at the beginning of this book presents the 13 theoretical propositions that they book conveys. All of these are theoretical issues that modern political economy should address. In particular, he states that the purpose of political economy is “not only to understand the world, but to change it into a better world through political, economic and social intervention.” His award- winning book reflects the numerous research achievements he has made through pursuing that objective, which have exerted a great impact on a wide range of younger researchers. For the reasons outlined above, the results of Professor Crotty’s research presented in his book make it fully worthy of the 2020 JSPE-Routledge Book Prize.