Farewell to Anwar M. Shaikh by P. Tsaliki and L. Tsoulfidis

It is with great sadness that we learned of the passing of Anwar Shaikh (October 22, 1945 – October 6, 2026), our teacher, colleague and friend for many of us, as well as a leading figure in contemporary political economy. He taught at the New School for Social Research in New York from 1972 until his retirement in 2022, when he became Professor Emeritus.

From the outset, Shaikh’s work was rooted in classical political economy (CPE), drawing on Smith and Ricardo while developing Marx’s project of uncovering the laws of motion of capitalism. His major contribution was transforming this tradition into a unified theoretical and empirical framework, integrating Marx’s analysis of accumulation and crisis with Leontief’s input-output analysis, Sraffa’s linear models of production and Keynes’s theory of effective demand. These elements were brought together in an analysis of capitalist turbulent dynamics centered on real competition, profitability and capital accumulation, enabling Shaikh to address fundamental economic problems that neoclassical theory cannot adequately resolve within its own theoretical premises. His approach to CPE is consistent with Kuhn’s view of scientific progress, according to which the advancement of a competing theory is not restricted to merely exposing the limitations of an established paradigm, but extends to explaining phenomena the prevailing theory cannot account for and raising new questions it cannot answer. Shaikh pursued this objective by developing a framework that explains turbulent capitalist dynamics through the interaction of competition, profitability, accumulation and effective demand. Although neoclassical economics has not been superseded, his contribution demonstrates the viability of a theoretically coherent and empirically grounded alternative.

Starting with his 1973 PhD dissertation at Columbia University and his influential 1974 paper, Laws of Production and Laws of Algebra: The Humbug Production Function, Shaikh challenged neoclassical capital theory. A theory of capitalism lacking a consistent concept of capital is doomed to fail, he argued. The reason is that capital comprises heterogeneous physical goods, aggregating them into a single measure requires pricing them. In neoclassical theory, however, the pricing of capital goods depends on the rate of profit, which is itself derived from the marginal productivity of aggregate capital. This creates a “dog-chasing-its-tail” circularity; that is, aggregate capital cannot be measured without first knowing the distribution variables it is meant to determine. Shaikh demonstrated that an apparently well-behaved aggregate production function could arise from the mathematical properties of the data without establishing the underlying technological relationship it purported to represent. This challenged the claim that factor prices reflect marginal productivity and that relative scarcity provides an independent explanation of income distribution. The central implication was that aggregate production functions could not independently justify the claim that factor prices reflect marginal productivity or explain income distribution through relative factor scarcity. This critique established Shaikh as a leading figure in heterodox economic theory.

It is important to clarify that Shaikh did not argue that capital cannot be measured, in general. His objection was directed at the internal inconsistency of measuring aggregate capital within the neoclassical theory and subsequently using that measure to explain the rate of profit and income distribution. The heterogeneous capital goods can be aggregated either in monetary terms using market prices (as businesses routinely do) or in terms of embodied labor values. These are distinct methods of measurement, each serving a different analytical purpose. The core problem therefore is not measurement per se, but rather treating the value of aggregate capital as an independent technological magnitude when its monetary valuation inherently depends on prices and distribution. Consequently, marginal productivity theory of neoclassical economics cannot be invoked as an independent causal explanation for the remuneration of capital and labor. By contrast, CPE does not suffer from these valuation problems. Labor values resolve the initial measurement problem; by advancing the analysis to a more concrete level of abstraction; that is, moving from labor values to their monetary expression (direct prices) or to a lower level of abstraction (prices of production), the measurement of capital can be solved consistently, when one distributional variable (such as the real wage) is taken as given.

A second major contribution that brought Shaikh to international prominence was his critique of the construction and interpretation of the national income and product accounts. He argued that conventional accounting categories, shaped by the prevailing conception of production, classify many activities as productive without distinguishing between their roles in the production and the appropriation of surplus value. Consequently, measures such as GDP, labor productivity and the rate of profit may obscure crucial features of capitalist production and dynamics. For Shaikh, heterodox economists should not accept official aggregates uncritically but examine the theoretical assumptions underlying their construction. His work on national accounting, culminating in his book (with Ahmet Tonak) Measuring the Wealth of Nations: The Political Economy of National Accounts (1994), exemplified this approach. By reconstructing the national accounts from a CPE and in particular Marxian perspective, Shaikh developed alternative measures that offered a distinct understanding of the structure and performance of the U.S. economy. His methodology inspired similar empirical reconstructions in many other countries. This reconstruction also provided the empirical foundation for his critique of the “net social wage”, a concept he examined in this book and developed further in subsequent articles and lecture notes. He further argued that social benefits and taxes on labor largely offset one another, leaving fiscal transfers with little net effect on the real wage. This finding was consistent with the CPE view that, in the long run, the net wage is structurally determined and therefore relatively resistant to redistribution through state fiscal policy.

Shaikh’s research also addressed fundamental questions concerning the labor theory of value (LTV). He treated the LTV not merely as an explanation of exploitation and the generation of surplus value, but as a theory of the determination of labor values, their monetary expression (which he termed “direct prices”), and their transformation into prices of production, which act as more concrete centers of gravitation for market prices. His empirical investigations revealed a close correspondence among estimated direct prices, prices of production and observed market prices. Utilizing input-output data, he demonstrated near-linear relationships both between prices of production and the rate of profit and between the wage rate and the rate of profit. These findings shed new light on the capital theory controversies and the foundational premises of neoclassical theory of value and income distribution. For Shaikh, the deeper problem was not merely the logical possibility of reswitching or the inconsistencies it exposes, but the absence of an independent causal relationship for explaining factor incomes through marginal productivity, results which are absolutely consistent with his 1974 critique of the aggregate production function and capital theory. This line of research was subsequently extended by scholars internationally, who provided further empirical support for Shaikh’s findings while advancing theoretical explanations for these empirical regularities.

Shaikh’s most distinctive theoretical contribution was his reconstruction of competition as a real, dynamic process governing the operation of capitalist economies. Against the neoclassical conception of competition as either an equilibrium among price-taking firms or a set of market structures defined by deviations from perfect competition, he analyzed it as an ongoing struggle among firms to reduce costs, introduce innovations and gain market share at the expense of their rivals. Through this process, firms seek to secure competitive advantages, while the interactions among them generate regulating prices, profit-rate differentials and patterns of accumulation. Competition, in Shaikh’s approach, is thus not an external condition imposed on economic actors but the very mechanism through which these outcomes emerge.

Although the idea of competition as economic warfare appears in business analysis and evolutionary economics, Shaikh developed it into a systematic theory of capitalist regulation. He distinguished competition within industries from competition between them and introduced the concept of regulating capital to explain how the production conditions of leading capitals shape industry-specific and therefore the even more concrete centers of gravitation which are the regulating prices of production. He also emphasized the incremental rate of return on investment (IROR), defined as the ratio of the change in profits over investment of the preceding period. Rather than assuming that average profit rates are continuously equalized, his analysis identifies the IROR as the immediate regulator of investment decisions across industries. This distinction connects short-run competitive adjustments to longer-run movements in profitability and capital accumulation.

Shaikh extended his theory of real competition to international trade, challenging the claim that Ricardo’s principle of comparative advantage (the longest-standing and least disputed principle in economics) adequately explains trade patterns and the mutual gains supposedly guaranteed by free trade. He emphasized absolute cost advantages through which stronger economies can consolidate their positions at the expense of weaker ones. His contribution was not simply to substitute one trade principle for another, but to explain international trade through the same cost-reducing and profit-seeking dynamics that govern competition within national economies. From this perspective, exchange-rate adjustments and policies designed to influence the exchange rate cannot, by themselves, overcome underlying differences in productivity and production costs. Competitive pressures ultimately constrain the effectiveness of such interventions. This argument explains Shaikh’s opposition to the view that Greece’s economic crisis during the 2010s could be resolved simply by abandoning the euro and restoring a national currency, followed by a substantial devaluation. Currency devaluation alone, he argued in interviews, would not overcome the structural problems of Greece’s competitive disadvantage.

At the aggregate level of capitalist development, Shaikh linked competition, profitability and accumulation to the cyclical alternation of expansion and crisis forming a Kondratiev cycle. Central to this analysis was the law of the tendency of the rate of profit to fall. A declining rate of profit does not automatically entail a falling mass of profit, as ongoing accumulation can continue to expand both the capital advanced and the total profits generated. Over the long run, however, persistent downward pressure on profitability progressively dampens the growth of real net profits, eventually leading to stagnation. This stagnation signals a weakening internal momentum of accumulation which, when compounded by deteriorating expectations of profitability and demand, discourages productive investment. The resulting deceleration in capital accumulation suppresses output and employment growth, driving up unemployment. Although mediated by demand conditions, capacity utilization and financial mechanisms, the core dynamic remains rooted in the interaction between profitability and accumulation under competitive pressure. Shaikh brought these theoretical and empirical insights together in Capitalism: Competition, Conflict, Crises (2016), a landmark contribution to CPE and the culmination of decades of research. The book offers an integrated analysis of income inequality, economic growth, inflation and unemployment. It also introduces the new economically significant concept of “unemployment intensity” designed to capture the severity of unemployment by combining the official unemployment rate with the relative duration of unemployment. Addressing both microeconomic and macroeconomic questions, the book develops a unified CPE framework. The book’s continuing development was also reflected in a condensed and updated version, incorporating more recent data and empirical evidence, which was reportedly nearing completion at the time of Shaikh’s death.

For several generations of economists, Anwar Shaikh influenced the way we approach Political Economy and understand the relationship between theory and economic reality. Conversations with him were always opportunities to learn something new and to engage with new questions. He had a rare ability to address complex theoretical issues with clarity and rigor while remaining open to reconsidering his views in the face of new evidence. Approachable and open to dialogue, he took a particular interest in the work of younger economists and contributed significantly to the development of the next generation of Political Economists.

His intellectual connection with the Greek academic community was also reflected in 2016, when he was awarded an Honorary Doctorate by the Department of Economics of the Aristotle University of Thessaloniki. The distinction recognized his scholarly work and contribution to Political Economy and was a particularly meaningful occasion for the Department and the wider Greek academic community.

His passing is a profound loss, both scholarly and personal. His legacy, however, remains alive not only through his books and writings, but also through his students, colleagues and all those who were influenced by his ideas and example.

We will remember him with respect, gratitude, affection and a commitment to continuing and deepening his ideas.

Persefoni Tsaliki, Professor, Aristotle University of Thessaloniki

and

Lefteris Tsoulfidis, Professor, University of Macedonia