Capitalism and Efficiency: A Review and Appraisal of the Recent Discussion

The paper reviews recent theoretical and empirical work by neo-Marxists suggesting that capitalist firms are inefficient, either technically or by Pareto criteria. The paper examines potential inefficiencies due to the division of labor, unemployment, labor segmentation/fragmentation, and bureaucracy/supervision. It is argued that technical inefficiency claims are incapable of being validated. While Pareto efficiency arguments may be warranted, presently existing socialist societies and experiments offer little persuasive evidence. Further empirical and theoretical work will be required to sustain efficiency arguments.