Marxian Economics
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Marxian economics, or the Marxian school of economics, is a
heterodox In religion, heterodoxy (from Ancient Greek: , + , ) means "any opinions or doctrines at variance with an official or orthodox position". ''Heterodoxy'' is also an ecclesiastical jargon term, defined in various ways by different religions and ...
school of political economic thought. Its foundations can be traced back to Karl Marx's
critique of political economy Critique of political economy or simply the first critique of economy is a form of social critique that rejects the conventional ways of distributing resources. The critique also rejects what its advocates believe are unrealistic axioms, flawe ...
. However, unlike
critics of political economy A critic is a person who communicates an assessment and an opinion of various forms of creative works such as art, literature, music, cinema, theater, fashion, architecture, and food. Critics may also take as their subject social or governme ...
, Marxian economists tend to accept the concept of
the economy An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the ...
prima facie ''Prima facie'' (; ) is a Latin expression meaning "at first sight", or "based on first impression". The literal translation would be "at first face" or "at first appearance", from the feminine forms of ' ("first") and ' ("face"), both in the a ...
. Marxian economics comprises several different theories and includes multiple schools of thought, which are sometimes opposed to each other; in many cases Marxian analysis is used to complement, or to supplement, other economic approaches. An example can be found in the works of Soviet economists like
Lev Gatovsky Lev Markovich Gatovsky (Russian: Лев Маркович Гатовский; 26 July 1903 – 18 April 1997) was a Soviet Union, Soviet economist, being one of the first who tried to create a theoretical framework in which to understand the natu ...
, who sought to apply Marxist economic theory to the objectives, needs, and political conditions of the socialist construction in the Soviet Union, contributing to the development of Soviet
political economy Political or comparative economy is a branch of political science and economics studying economic systems (e.g. Marketplace, markets and national economies) and their governance by political systems (e.g. law, institutions, and government). Wi ...
. Marxian economics concerns itself variously with the analysis of
crisis A crisis (: crises; : critical) is any event or period that will lead to an unstable and dangerous situation affecting an individual, group, or all of society. Crises are negative changes in the human or environmental affairs, especially when ...
in
capitalism Capitalism is an economic system based on the private ownership of the means of production and their use for the purpose of obtaining profit. This socioeconomic system has developed historically through several stages and is defined by ...
, the role and distribution of the
surplus product Surplus product () is a concept theorised by Karl Marx in his critique of political economy. Roughly speaking, it is the extra goods produced above the amount needed for a community of workers to survive at its current standard of living. Marx f ...
and
surplus value In Marxian economics, surplus value is the difference between the amount raised through a sale of a product and the amount it cost to manufacture it: i.e. the amount raised through sale of the product minus the cost of the materials, plant and ...
in various types of
economic system An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within an economy. It includes the combination of the various institutions, agencies, entities, decision-making proces ...
s, the nature and origin of
economic value In economics, economic value is a measure of the benefit provided by a goods, good or service (economics), service to an Agent (economics), economic agent, and value for money represents an assessment of whether financial or other resources are ...
, the impact of class and class struggle on economic and political processes, and the process of economic evolution. Marxian economics—particularly in academia—is distinguished from
Marxism Marxism is a political philosophy and method of socioeconomic analysis. It uses a dialectical and materialist interpretation of historical development, better known as historical materialism, to analyse class relations, social conflict, ...
as a political ideology, as well as from the
normative Normativity is the phenomenon in human societies of designating some actions or outcomes as good, desirable, or permissible, and others as bad, undesirable, or impermissible. A Norm (philosophy), norm in this sense means a standard for evaluatin ...
aspects of Marxist thought: this reflects the view that Marx's original approach to understanding economics and economic development is intellectually independent from his own advocacy of
revolutionary socialism Revolutionary socialism is a political philosophy, doctrine, and tradition within socialism that stresses the idea that a social revolution is necessary to bring about structural changes in society. More specifically, it is the view that revo ...
. Marxian economists do not lean entirely upon the works of Marx and other widely known Marxists, but draw from a range of Marxist and non-Marxist sources. Considered a
heterodox In religion, heterodoxy (from Ancient Greek: , + , ) means "any opinions or doctrines at variance with an official or orthodox position". ''Heterodoxy'' is also an ecclesiastical jargon term, defined in various ways by different religions and ...
school, the Marxian school has been criticized by claims relating to inconsistency, failed predictions, and scrutiny of nominally
communist Communism () is a sociopolitical, philosophical, and economic ideology within the socialist movement, whose goal is the creation of a communist society, a socioeconomic order centered on common ownership of the means of production, di ...
countries'
economic planning Economic planning is a resource allocation mechanism based on a computational procedure for solving a constrained maximization problem with an iterative process for obtaining its solution. Planning is a mechanism for the allocation of resources ...
in the 20th century. According to economists such as
George Stigler George Joseph Stigler (; January 17, 1911 – December 1, 1991) was an American economist. He was the 1982 laureate in Nobel Memorial Prize in Economic Sciences and is considered a key leader of the Chicago school of economics. Early life and e ...
and
Robert Solow Robert Merton Solow, GCIH (; August 23, 1924 – December 21, 2023) was an American economist who received the 1987 Nobel Memorial Prize in Economic Sciences, and whose work on the theory of economic growth culminated in the exogenous growth ...
, Marxist economics are not relevant to modern economics, having "virtually no impact" and only "represent nga small minority of modern economists". However, some ideas of the Marxian school have contributed to mainstream understanding of the global economy. Certain concepts developed in Marxian economics, especially those related to
capital accumulation Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form ...
and the
business cycle Business cycles are intervals of general expansion followed by recession in economic performance. The changes in economic activity that characterize business cycles have important implications for the welfare of the general population, governmen ...
, have been fitted for use in capitalist systems; one such example is
Joseph Schumpeter Joseph Alois Schumpeter (; February 8, 1883 – January 8, 1950) was an Austrian political economist. He served briefly as Finance Minister of Austria in 1919. In 1932, he emigrated to the United States to become a professor at Harvard Unive ...
's notion of
creative destruction Creative destruction (German: ''schöpferische Zerstörung'') is a concept in economics that describes a process in which new innovations replace and make obsolete older innovations. The concept is usually identified with the economist Josep ...
. Marx's magnum opus on
critique of political economy Critique of political economy or simply the first critique of economy is a form of social critique that rejects the conventional ways of distributing resources. The critique also rejects what its advocates believe are unrealistic axioms, flawe ...
was ''
Das Kapital ''Capital: A Critique of Political Economy'' (), also known as ''Capital'' or (), is the most significant work by Karl Marx and the cornerstone of Marxian economics, published in three volumes in 1867, 1885, and 1894. The culmination of his ...
'' (''Capital: A Critique of Political Economy'') in three volumes, of which only the first volume was published in his lifetime (1867); the others were published by Friedrich Engels from Marx's notes. One of Marx's early works, ''Critique of Political Economy'', was mostly incorporated into ''Das Kapital'', especially the beginning of volume 1. Marx's notes made in preparation for writing ''Das Kapital'' were published in 1939 under the title ''
Grundrisse The ''Grundrisse der Kritik der Politischen Ökonomie'' (, ), often simply the ''Grundrisse'' (, ), is an unfinished manuscript by the German philosopher Karl Marx. The series of seven notebooks was rough-drafted by Marx, chiefly for purposes ...
.''


Marx's critique of classical economics

Marx's
critique of political economy Critique of political economy or simply the first critique of economy is a form of social critique that rejects the conventional ways of distributing resources. The critique also rejects what its advocates believe are unrealistic axioms, flawe ...
took as its starting point the work of the best-known economists of his day, the British moral philosopher turned economist
Adam Smith Adam Smith (baptised 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the field of political economy and key figure during the Scottish Enlightenment. Seen by some as the "father of economics"——— or ...
as well as
David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist, politician, and member of Parliament. He is recognized as one of the most influential classical economists, alongside figures such as Thomas Malthus, Ada ...
. In ''
The Wealth of Nations ''An Inquiry into the Nature and Causes of the Wealth of Nations'', usually referred to by its shortened title ''The Wealth of Nations'', is a book by the Scottish people, Scottish economist and moral philosophy, moral philosopher Adam Smith; ...
'' (1776), Smith argued that the most important characteristic of a market economy was that it permitted a rapid growth in productive abilities. Smith claimed that a growing market stimulated a greater "
division of labor The division of labour is the separation of the tasks in any economic system or organisation so that participants may specialise (Departmentalization, specialisation). Individuals, organisations, and nations are endowed with or acquire specialis ...
" (i.e. specialization of businesses and/or workers) and in turn this led to greater productivity. Although Smith generally said little about laborers, he did note that an increased division of labor could at some point cause harm to those whose jobs became narrower and narrower as the division of labor expanded. Smith maintained that a ''
laissez-faire ''Laissez-faire'' ( , from , ) is a type of economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies or regulations). As a system of thought, ''laissez-faire'' ...
'' economy would naturally correct itself over time. Marx followed Smith by claiming that the most important beneficial economic consequence of capitalism was a rapid growth in productivity abilities. Marx also expanded greatly on the notion that laborers could come to harm as capitalism became more productive. Additionally, Marx noted in ''Theories of Surplus Value'': "We see the great advance made by Adam Smith beyond the
Physiocrats Physiocracy (; from the Greek for "government of nature") is an economic theory developed by a group of 18th-century Age of Enlightenment French economists. They believed that the wealth of nations derived solely from the value of "land agricult ...
in the analysis of surplus-value and hence of capital. In their view, it is only one definite kind of concrete labour—agricultural labour—that creates surplus-value... But to Adam Smith, it is general social labour — no matter in what use-values it manifests itself — the mere quantity of necessary labour, which creates value. Surplus-value, whether it takes the form of profit, rent, or the secondary form of interest, is nothing but a part of this labour, appropriated by the owners of the material conditions of labour in the exchange with living labour". Malthus' claim in ''
An Essay on the Principle of Population The book ''An Essay on the Principle of Population'' was first published anonymously in 1798, but the author was soon identified as Thomas Robert Malthus. The book warned of future difficulties, on an interpretation of the population increasing ...
'' (1798) that population growth was the primary cause of subsistence level wages for laborers provoked Marx to develop an alternative theory of wage determination. Whereas Malthus presented a historical theory of population growth, Marx offered a theory of how a relative surplus population in capitalism tended to push wages to subsistence levels. Marx saw this relative surplus population as coming from economic causes and not from biological causes (as in Malthus). This economic-based theory of surplus population is often labeled as Marx's theory of the
reserve army of labour Reserve army of labour is a concept in Karl Marx's critique of political economy. It refers to the unemployed and underemployed in capitalist society. It is synonymous with "industrial reserve army" or "relative surplus population", except tha ...
. Ricardo developed a theory of distribution within capitalism—that is, a theory of how the output of society is distributed to classes within society. The most mature version of this theory, presented in ''
On the Principles of Political Economy and Taxation '' the Principles of Political Economy and Taxation'' (19 April 1817) is a book by David Ricardo on economics. The book concludes that land rent grows as population increases. It also presents the theory of comparative advantage, the theory that ...
'' (1817), was based on a
labour theory of value The labor theory of value (LTV) is a theory of value that argues that the exchange value of a good or service is determined by the total amount of " socially necessary labor" required to produce it. The contrasting system is typically known as ...
in which the value of any produced object is equal to the labor embodied in the object and Smith too presented a labor theory of value, but it was only incompletely realized. Also notable in Ricardo's economic theory was that profit was a deduction from society's output and that wages and profit were inversely related: an increase in profit came at the expense of a reduction in wages. Marx built much of the formal economic analysis found in ''Capital'' on Ricardo's theory of the economy. Marx also criticized two features of "bourgeois economy" he perceived as main factors preventing full realization of society's production power: ownership of the means of production, and allegedly irrational operation of the economy, which leads to "disturbances" and surplus:


Marx's critique of political economy according to Marxist economists

According to some, Marx employed a
labour theory of value The labor theory of value (LTV) is a theory of value that argues that the exchange value of a good or service is determined by the total amount of " socially necessary labor" required to produce it. The contrasting system is typically known as ...
, which holds that the value of a commodity is the
socially necessary labour time Socially necessary labour time in Marx's critique of political economy is what regulates the exchange value of commodities in trade. In short, socially necessary labour time refers to the average quantity of labour time that must be performed unde ...
invested in it. In this model,
capitalists Capitalism is an economic system based on the private ownership of the means of production and their use for the purpose of obtaining profit. This socioeconomic system has developed historically through several stages and is defined by a n ...
do not pay workers the full value of the commodities they produce; rather, they compensate the worker for the necessary labor only (the worker's wage, which cover only the necessary means of subsistence in order to maintain him working in the present and his family in the future as a group). This necessary labor is necessarily only a fraction of a full working day – the rest, surplus-labor, would be pocketed by the capitalist as profit. Marx theorized that the gap between the value a worker produces and his wage is a form of unpaid labour, known as
surplus value In Marxian economics, surplus value is the difference between the amount raised through a sale of a product and the amount it cost to manufacture it: i.e. the amount raised through sale of the product minus the cost of the materials, plant and ...
. Moreover, Marx argues that markets tend to obscure the social relationships and processes of production; he called this
commodity fetishism In Marxist philosophy, commodity fetishism is the perception of the economic relationships of production and exchange as relationships among things (money and merchandise) rather than among people. As a form of Reification (Marxism), reificati ...
. People are highly aware of commodities, and usually don't think about the relationships and labor they represent. Marx's analysis leads to the consideration of economic crisis. "A propensity to crisis—what we would call ''business cycles''—was not recognised as an inherent feature of capitalism by any other economist of Marx's time," observed
Robert Heilbroner Robert L. Heilbroner (March 24, 1919 – January 4, 2005) was an American economist and historian of economic thought. The author of some two dozen books, Heilbroner was best known for ''The Worldly Philosophers: The Lives, Times and Ideas of th ...
in ''
The Worldly Philosophers Robert L. Heilbroner (March 24, 1919 – January 4, 2005) was an American economist and historian of economic thought. The author of some two dozen books, Heilbroner was best known for ''The Worldly Philosophers: The Lives, Times and Ideas of th ...
'', "although future events have certainly indicated his prediction of successive boom and crash.". Marx's theory of economic cycles was formalised by Richard Goodwin in "A Growth Cycle" (1967),. a paper published during the centenary year of ''
Capital, Volume I ''Capital. A Critique of Political Economy. Volume I: The Process of Production of Capital'' () is the first of three treatises that make up , a critique of political economy by the German philosopher and economist Karl Marx. First published on ...
''. To resolve the bourgeois contradiction between the ownership of the means of production and the "social act" of production itself, Marx proposed socialization of the means of production. To remove the "disturbances" of capitalist economy, Marx postulated "rational management" of the economy, which would replace the "chaotic" market forces driven by a "sum of individual preferences":


Methodology

Marx used
dialectics Dialectic (; ), also known as the dialectical method, refers originally to dialogue between people holding different points of view about a subject but wishing to arrive at the truth through reasoned argument. Dialectic resembles debate, but the ...
, a method that he adapted from the works of
Georg Wilhelm Friedrich Hegel Georg Wilhelm Friedrich Hegel (27 August 1770 – 14 November 1831) was a 19th-century German idealist. His influence extends across a wide range of topics from metaphysical issues in epistemology and ontology, to political philosophy and t ...
. Dialectics focuses on relation and change, and tries to avoid seeing the universe as composed of separate objects, each with essentially stable unchanging characteristics. One component of dialectics is
abstraction Abstraction is a process where general rules and concepts are derived from the use and classifying of specific examples, literal (reality, real or Abstract and concrete, concrete) signifiers, first principles, or other methods. "An abstraction" ...
; out of an undifferentiated mass of data or system conceived of as an organic whole, one abstracts portions to think about or to refer to. One may abstract objects, but also—and more typically—relations, and processes of change. An abstraction may be extensive or narrow, may focus on generalities or specifics, and may be made from various points of view. For example, a sale may be abstracted from a buyer's or a seller's point of view, and one may abstract a particular sale or sales in general. Another component is the dialectical deduction of categories. Marx uses Hegel's notion of ''categories'', which are ''forms'', for economics: The commodity ''form'', the money ''form'', the capital ''form'' etc. have to be systematically deduced instead of being grasped in an outward way as done by the bourgeois economists. This corresponds to Hegel's critique of Kant's transcendental philosophy. Marx regarded
history History is the systematic study of the past, focusing primarily on the Human history, human past. As an academic discipline, it analyses and interprets evidence to construct narratives about what happened and explain why it happened. Some t ...
as having passed through several stages. The details of his periodisation vary somewhat through his works, but it essentially is:
Primitive Communism Primitive communism is a way of describing the gift economies of hunter-gatherers throughout history, where resources and property hunted or gathered are shared with all members of a group in accordance with individual needs. In political sociolo ...
Slave Slavery is the ownership of a person as property, especially in regards to their labour. Slavery typically involves compulsory work, with the slave's location of work and residence dictated by the party that holds them in bondage. Enslavemen ...
societies –
Feudalism Feudalism, also known as the feudal system, was a combination of legal, economic, military, cultural, and political customs that flourished in Middle Ages, medieval Europe from the 9th to 15th centuries. Broadly defined, it was a way of struc ...
Capitalism Capitalism is an economic system based on the private ownership of the means of production and their use for the purpose of obtaining profit. This socioeconomic system has developed historically through several stages and is defined by ...
Socialism Socialism is an economic ideology, economic and political philosophy encompassing diverse Economic system, economic and social systems characterised by social ownership of the means of production, as opposed to private ownership. It describes ...
Communism Communism () is a political sociology, sociopolitical, political philosophy, philosophical, and economic ideology, economic ideology within the history of socialism, socialist movement, whose goal is the creation of a communist society, a ...
(capitalism being the present stage and communism the future). Marx occupied himself primarily with describing capitalism. Historians place the beginning of capitalism some time between about 1450 (Sombart) and some time in the 17th century (Hobsbawm). Marx defines a
commodity In economics, a commodity is an economic goods, good, usually a resource, that specifically has full or substantial fungibility: that is, the Market (economics), market treats instances of the good as equivalent or nearly so with no regard to w ...
as a product of human labour that is produced for sale in a market, and many products of human labour are commodities. Marx began his major work on economics, ''Capital'', with a discussion of commodities; Chapter One is called "Commodities".


Commodities

"The wealth of those societies in which the capitalist
mode of production In the Marxist theory of historical materialism, a mode of production (German: ''Produktionsweise'', "the way of producing") is a specific combination of the: * Productive forces: these include human labour power and means of production (tools, ...
prevails, presents itself as 'an immense accumulation of commodities,' its unit being a single commodity." (First sentence of ''Capital'', Volume I.)
"The common substance that manifests itself in the exchange value of commodities whenever they are exchanged, is their value." (''Capital'', I, Chap I, section 1.)
The worth of a commodity can be conceived of in two different ways, which Marx calls use-value and value. A commodity's use-value is its usefulness for fulfilling some practical purpose; for example, the use-value of a piece of food is that it provides nourishment and pleasurable taste; the use value of a hammer, that it can drive nails. Value is, on the other hand, a measure of a commodity's worth in comparison to other commodities. It is closely related to
exchange-value In political economy and especially Marxian economics, exchange value () refers to one of the four major attributes of a commodity, i.e., an item or service produced for, and sold on the market, the other three attributes being use value, econo ...
, the ratio at which commodities should be traded for one another, but not identical: value is at a more general level of abstraction; exchange-value is a realisation or form of it. Marx argued that if value is a property common to all commodities, then whatever it is derived from, whatever determines it, must be common to all commodities. The only relevant thing that is, in Marx's view, common to all commodities is human labour: they are all produced by human labour. Marx concluded that the value of a commodity is simply the amount of human labour required to produce it. Thus Marx adopted a labour theory of value, as had his predecessors Ricardo and MacCulloch; Marx himself traced the existence of the theory at least as far back as an anonymous work, ''Some Thoughts on the Interest of Money in General, and Particularly the Publick Funds, &c.'', published in London around 1739 or 1740. Marx placed some restrictions on the validity of his value theory: he said that in order for it to hold, the commodity must not be a useless item; and it is not the actual amount of labour that went into producing a particular individual commodity that determines its value, but the amount of labour that a worker of average energy and ability, working with average intensity, using the prevailing techniques of the day, would need to produce it. A formal statement of the law is: the value of a commodity is equal to the average socially necessary labour time required for its production. (Capital, I, Chap I – p. 39 in Progress Publishers, Moscow, ed'n.) Marx's contention was that commodities tend, at a fairly general level of abstraction, to exchange at value; that is, if Commodity A, whose value is "V", is traded for Commodity B, it will tend to fetch an amount of Commodity B whose value is the same, "V". Particular circumstances will cause divergence from this rule, however.


Money

Marx held that metallic money, such as gold, is a commodity, and its value is the labour time necessary to produce it (mine it, smelt it, etc.). Marx argued that gold and silver are conventionally used as money because they embody a large amount of labour in a small, durable, form, which is convenient. Paper money is, in this model, a representation of gold or silver, almost without value of its own but held in circulation by state decree.
"Paper money is a token representing gold or money." (''Capital'', I, Chap III, section 2, part c.)


Production

Marx lists the elementary factors of production as: # Labour, "the personal activity of man." (Capital, I, VII, 1.) # The subject of labour: the thing worked on. # The instruments of labour: tools, labouring domestic animals like horses, chemicals used in modifying the subject, etc. Some subjects of labour are available directly from
Nature Nature is an inherent character or constitution, particularly of the Ecosphere (planetary), ecosphere or the universe as a whole. In this general sense nature refers to the Scientific law, laws, elements and phenomenon, phenomena of the physic ...
: uncaught fish, unmined coal, etc. Others are results of a previous stage of production; these are known as
raw material A raw material, also known as a feedstock, unprocessed material, or primary commodity, is a basic material that is used to produce goods, finished goods, energy, or intermediate materials/Intermediate goods that are feedstock for future finished ...
s, such as flour or yarn. Workshops, canals, and roads are considered instruments of labour. (''Capital'', I, VII, 1.) Coal for boilers, oil for wheels, and hay for draft horses are considered raw materials, not instruments of labour.
"If, on the other hand, the subject of labour has, so to say, been filtered through previous labour, we call it raw material. . . ." (''Capital'', I, Chap VII, section 1.)
The subjects of labour and instruments of labour together are called the
means of production In political philosophy, the means of production refers to the generally necessary assets and resources that enable a society to engage in production. While the exact resources encompassed in the term may vary, it is widely agreed to include the ...
.
Relations of production Relations of production () is a concept frequently used by Karl Marx and Friedrich Engels in their theory of historical materialism and in ''Das Kapital''. It is first explicitly used in Marx's published book '' The Poverty of Philosophy'', al ...
are the relations human beings adopt toward each other as part of the production process. In capitalism,
wage labour Wage labour (also wage labor in American English), usually referred to as paid work, paid employment, or paid labour, refers to the socioeconomic relationship between a worker and an employer in which the worker sells their labour power under ...
and
private property Private property is a legal designation for the ownership of property by non-governmental Capacity (law), legal entities. Private property is distinguishable from public property, which is owned by a state entity, and from Collective ownership ...
are part of the system of relations of production. :Calculation of value of a product (price not to be confused with value): :If labour is performed directly on Nature and with instruments of negligible value, the value of the product is simply the labour time. If labour is performed on something that is itself the product of previous labour (that is, on a raw material), using instruments that have some value, the value of the product is the value of the raw material, plus depreciation on the instruments, plus the labour time. Depreciation may be figured simply by dividing the value of the instruments by their working life; ''e.g.'' if a lathe worth £1,000 lasts in use 10 years it imparts value to the product at a rate of £100 per year.


Labor theory of value

The
labour theory of value The labor theory of value (LTV) is a theory of value that argues that the exchange value of a good or service is determined by the total amount of " socially necessary labor" required to produce it. The contrasting system is typically known as ...
was initially introduced by the classical economists
Adam Smith Adam Smith (baptised 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the field of political economy and key figure during the Scottish Enlightenment. Seen by some as the "father of economics"——— or ...
and
David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist, politician, and member of Parliament. He is recognized as one of the most influential classical economists, alongside figures such as Thomas Malthus, Ada ...
, but was further developed in Marx's work ''
Capital Capital and its variations may refer to: Common uses * Capital city, a municipality of primary status ** Capital region, a metropolitan region containing the capital ** List of national capitals * Capital letter, an upper-case letter Econom ...
.'' According to the
labour theory of value The labor theory of value (LTV) is a theory of value that argues that the exchange value of a good or service is determined by the total amount of " socially necessary labor" required to produce it. The contrasting system is typically known as ...
, the value of a commodity equals the socially necessary labour time required to produce it. The value of commodities is divided into two categories:
use-value Use value () or value in use is a concept in classical political economy and Marxist economics. It refers to the tangible features of a Commodity (Marxism), commodity (a tradeable object) which can satisfy some human requirement, want or need, o ...
and
exchange-value In political economy and especially Marxian economics, exchange value () refers to one of the four major attributes of a commodity, i.e., an item or service produced for, and sold on the market, the other three attributes being use value, econo ...
.
Use-value Use value () or value in use is a concept in classical political economy and Marxist economics. It refers to the tangible features of a Commodity (Marxism), commodity (a tradeable object) which can satisfy some human requirement, want or need, o ...
is the usefulness of a commodity. Exchange-value is the proportion by which use-values of one kind are exchanged for use-values of other kinds. However, since the exchange-values are not arbitrary, there must be a common unit by which the goods can be equated. When the unique use-values of the goods are removed, the only value left is the labour time necessary to produce the commodity.


Abstract labor

Marx's theory of value differs from the classical view in his definition of labor. Marx separates it into two different types: concrete and abstract labor. Concrete labor can be thought of as the unique characteristics of labor such as the work of a farmer versus a tailor. Abstract labor, on the other hand, is the general conceptualization of human labor. It represents the expenditure of simple human labor power. Concrete labor produces qualitatively different commodities; however, in order to equalize and compare the values of qualitatively different commodities quantitatively, their value must be measured in terms of abstract labor. Abstract labor is the basic unit of value and is basis for Marx's labor theory of value.


Surplus value

According to Marx, in capitalism, workers own their labor-power, but do not own the means of production through which they can actualize their labor power and generate use-values. As a result, the workers must sell their labor and are alienated from it. The capitalist takes the use-values created by the workers. However, the capitalist does not want these goods for their use-values, rather, he or she wants them for their exchange-values. According to Marx, capitalists desire profit or
surplus-value In Marxian economics, surplus value is the difference between the amount raised through a sale of a product and the amount it cost to manufacture it: i.e. the amount raised through sale of the product minus the cost of the materials, plant and ...
. However, no surplus value can be created naturally. The labor process simply transforms value from one form into another. Thus, according to Marx, the only way for the capitalist to gain surplus-value is by paying the workers' exchange-value, not their use-value. The difference between these two values is the surplus-value generated.


Effect of technical progress

According to Marx, the amount of actual product (i.e. use-value) that a typical worker produces in a given amount of time is the productivity of labour. It has tended to increase under capitalism. This is due to increase in the scale of enterprise, to specialisation of labour, and to the introduction of machinery. The immediate result of this is that the value of a given item tends to decrease, because the labour time necessary to produce it becomes less. In a given amount of time, labour produces more items, but each unit has less value; the total value created per time remains the same. This means that the means of subsistence become cheaper; therefore the value of labour power or necessary labour time becomes less. If the length of the working day remains the same, this results in an increase in the surplus labour time and the rate of surplus value. Technological advancement tends to increase the amount of capital needed to start a business, and it tends to result in an increasing preponderance of capital being spent on means of production (constant capital) as opposed to labour (variable capital). Marx called the ratio of these two kinds of capital the composition of capital.


Current theorizing in Marxian economics

Marxian economics has been built upon by many others, beginning almost at the moment of Marx's death. The second and third volumes of ''Das Kapital'' were edited by his close associate
Friedrich Engels Friedrich Engels ( ;"Engels"
''Random House Webster's Unabridged Dictionary''.
Theories of Surplus Value ''Theories of Surplus Value'' () is a draft manuscript written by Karl Marx between January 1862 and July 1863. It is mainly concerned with the Western Europe, Western European theorizing about ''Mehrwert'' (added value or surplus value) from abo ...
'' was edited by
Karl Kautsky Karl Johann Kautsky (; ; 16 October 1854 – 17 October 1938) was a Czech-Austrian Marxism, Marxist theorist. A leading theorist of the Social Democratic Party of Germany (SPD) and the Second International, Kautsky advocated orthodox Marxism, a ...
. The Marxian value theory and the
Perron–Frobenius theorem In matrix theory, the Perron–Frobenius theorem, proved by and , asserts that a real square matrix with positive entries has a unique eigenvalue of largest magnitude and that eigenvalue is real. The corresponding eigenvector can be chosen to ha ...
on the positive
eigenvector In linear algebra, an eigenvector ( ) or characteristic vector is a vector that has its direction unchanged (or reversed) by a given linear transformation. More precisely, an eigenvector \mathbf v of a linear transformation T is scaled by ...
of a
positive matrix In mathematics, a nonnegative matrix, written : \mathbf \geq 0, is a matrix in which all the elements are equal to or greater than zero, that is, : x_ \geq 0\qquad \forall . A positive matrix is a matrix in which all the elements are strictly gre ...
are fundamental to mathematical treatments of Marxian economics. The relation between exploitation (surplus labour) and profit has been modeled with increased sophistication. The Universities offering one or more courses in Marxian economics, or teach one or more economics courses on other topics from a perspective that they designate as Marxian or Marxist, include
Colorado State University Colorado State University (Colorado State or CSU) is a Public university, public Land-grant university, land-grant research university in Fort Collins, Colorado, United States. It is the flagship university of the Colorado State University Syst ...
,
The New School for Social Research The New School for Social Research (NSSR), previously known as The University in Exile and The New School University, is a graduate-level educational division of The New School in New York City, United States. NSSR enrolls more than 1,000 stud ...
,
School of Oriental and African Studies The School of Oriental and African Studies (SOAS University of London; ) is a public research university in London, England, and a member institution of the federal University of London. Founded in 1916, SOAS is located in the Bloomsbury area ...
,
Federal University of Rio de Janeiro The Federal University of Rio de Janeiro (, UFRJ) is a public university, public research university in Rio de Janeiro, Brazil. It is the largest federal university in the country and is one of the Brazilian centers of excellence in teaching and r ...
,
State University of Campinas The University of Campinas (), commonly called Unicamp, is a public research university in the state of São Paulo (state), São Paulo, Brazil. Established in 1962, Unicamp was designed from scratch as an integrated Research institute, researc ...
,
Maastricht University Maastricht University (abbreviated as UM; ) is a public university, public research university in Maastricht, Netherlands. Founded in 1976, it is the second youngest of the thirteen List of universities in the Netherlands, Dutch universities. In ...
,
University of Bremen The University of Bremen () is a public university in Bremen, Germany, with approximately 18,400 students from 117 countries. Its 12 faculties offer more than 100 degree programs. The University of Bremen has been among the top 50 European rese ...
,
University of California, Riverside The University of California, Riverside (UCR or UC Riverside) is a public university, public Land-grant university, land-grant research university in Riverside, California, United States. It is one of the ten campuses of the University of Cali ...
,
University of Leeds The University of Leeds is a public research university in Leeds, West Yorkshire, England. It was established in 1874 as the Yorkshire College of Science. In 1884, it merged with the Leeds School of Medicine (established 1831) and was renamed Y ...
,
University of Maine The University of Maine (UMaine) is a Public university, public Land-grant university, land-grant research university in Orono, Maine, United States. It was established in 1865 as the land-grant college of Maine and is the Flagship universitie ...
,
University of Manchester The University of Manchester is a public university, public research university in Manchester, England. The main campus is south of Manchester city centre, Manchester City Centre on Wilmslow Road, Oxford Road. The University of Manchester is c ...
,
University of Massachusetts Amherst The University of Massachusetts Amherst (UMass Amherst) is a public land-grant research university in Amherst, Massachusetts, United States. It is the flagship campus of the University of Massachusetts system and was founded in 1863 as the ...
,
University of Massachusetts Boston The University of Massachusetts Boston (stylized as UMass Boston) is a Public university, public US-based research university. It is the only public research university in Boston and the third-largest campus in the five-campus University of Ma ...
,
University of Missouri–Kansas City The University of Missouri–Kansas City (UMKC or Kansas City) is a Public university, public research university in Kansas City, Missouri, United States. UMKC is part of the University of Missouri System and has a UMKC School of Medicine, medic ...
,
University of Sheffield The University of Sheffield (informally Sheffield University or TUOS) is a public university, public research university in Sheffield, South Yorkshire, England. Its history traces back to the foundation of Sheffield Medical School in 1828, Fir ...
,
University of Utah The University of Utah (the U, U of U, or simply Utah) is a public university, public research university in Salt Lake City, Utah, United States. It was established in 1850 as the University of Deseret (Book of Mormon), Deseret by the General A ...
,
University of Calcutta The University of Calcutta, informally known as Calcutta University (), is a Public university, public State university (India), state university located in Kolkata, Calcutta (Kolkata), West Bengal, India. It has 151 affiliated undergraduate c ...
, and
York University York University (), also known as YorkU or simply YU), is a public university, public research university in Toronto, Ontario, Canada. It is Canada's third-largest university, and it has approximately 53,500 students, 7,000 faculty and staff, ...
(Toronto). English-language journals include ''
Capital & Class ''Capital & Class'' is a quarterly peer-reviewed academic journal covering the fields of politics and economics, especially concerning Marxism Marxism is a political philosophy and method of socioeconomic analysis. It uses a dialectical ...
'', ''
Historical Materialism Historical materialism is Karl Marx's theory of history. Marx located historical change in the rise of Class society, class societies and the way humans labor together to make their livelihoods. Karl Marx stated that Productive forces, techno ...
'', ''
Monthly Review The ''Monthly Review'' is an independent socialist magazine published monthly in New York City. Established in 1949, the publication is the longest continuously published socialist magazine in the United States. History Establishment Following ...
'', ''
Rethinking Marxism ''Rethinking Marxism'' is a quarterly peer-reviewed academic journal covering Marxist analyses of economics, culture, and society. It was established in 1988 and has been published by Routledge since 2003 on behalf of the Association for Economi ...
'', ''
Review of Radical Political Economics The ''Review of Radical Political Economics'' is a quarterly peer-reviewed academic journal published by SAGE Publishing on behalf of the Union for Radical Political Economics. It was established in 1968 and covers research on heterodox economics a ...
'', and ''Studies in Political Economy.''


Criticism

Much of the critique of classical Marxian economics came from Marxian economists that revised Marx's original theory, or by the Austrian School of economics. V. K. Dmitriev, writing in 1898, Ladislaus Bortkiewicz, Ladislaus von Bortkiewicz, writing in 1906–07, and subsequent critics claimed that Marx's labor theory of value and law of the tendency of the rate of profit to fall are internally inconsistent. In other words, the critics allege that Marx drew conclusions that actually do not follow from his theoretical premises. Once these alleged errors are corrected, his conclusion that aggregate price and profit are determined by, and equal to, aggregate value and surplus value no longer holds true. This result calls into question his theory that the exploitation of workers is the sole source of profit. Whether the rate of profit in capitalism has, as Marx predicted, tended to fall is a subject of debate. N. Okishio, in 1961, devised a theorem (Okishio's theorem) showing that if capitalists pursue cost-cutting techniques and if the real wage does not rise, the rate of profit must rise. The inconsistency allegations have been a prominent feature of Marxian economics and the debate surrounding it since the 1970s. The economies of Marxist states in the 20th century have been criticized for exhibiting overcentralization and shortage of goods and the prevalence of Second economy of the Soviet Union, second economies (black markets) for very basic goods, leading János Kornai and colleagues to theorize these systems as chronic shortage economy, shortage economies. While Kornai attributes some specific problems to efforts at consistency with Marxian methodological principles, and others have proposed economic planning schemes that do directly employ Marxian concepts such as labor content, the theory of shortage economy refers to measurable performance in planned economy, planned economies that employed a variety of models and techniques such as material balance planning, product balances, linear programming and input-output planning and not to Marxian economic theory. Paul Dembinski, Dembinski argued Marx's determination of "labor value", a central concept in the labor theory of value, was inconsistent, and if accurately assessed in these economies helps explain their decline.


Relevance in economics

According to economists such as
George Stigler George Joseph Stigler (; January 17, 1911 – December 1, 1991) was an American economist. He was the 1982 laureate in Nobel Memorial Prize in Economic Sciences and is considered a key leader of the Chicago school of economics. Early life and e ...
and
Robert Solow Robert Merton Solow, GCIH (; August 23, 1924 – December 21, 2023) was an American economist who received the 1987 Nobel Memorial Prize in Economic Sciences, and whose work on the theory of economic growth culminated in the exogenous growth ...
in 1988, Marxist economics are not relevant to English-speaking economics, having "virtually no impact",Robert M. Solow, "The Wide, Wide World of Wealth, "''New York Times'', March 28, 1988
excerpt
(from a review of ''The New Palgrave: A Dictionary of Economics'', 1987).
only "represent a small minority of modern economists" and are "an irrelevant dead end." Professor Jonathon Sperber says some elements, such as base and superstructure, exploitation of workers within the free market, and crises of capitalism (such as boom and Recession, bust cycles), remain salient today, albeit with contemporary updates, while others he sees as less relevant, such as the labor theory of value and Tendency of the rate of profit to fall, the tendency of the rate of profit to fall.


Neo-Marxian economics

The terms "neo-Marxian", "post-Marxian", and "radical political economics" were first used to refer to a distinct tradition of economic theory in the 1970s and 1980s that stems from Marxian economic thought. Many of the leading figures were associated with the Left politics, leftist ''
Monthly Review The ''Monthly Review'' is an independent socialist magazine published monthly in New York City. Established in 1949, the publication is the longest continuously published socialist magazine in the United States. History Establishment Following ...
'' School. The neo-Marxist approach to development economics is connected with Dependency theory, dependency and World-systems theory, world systems theories. In these cases, the 'Exploitation (Marxism), exploitation' that classifies it as Marxist is an external one, rather than the normal 'internal' exploitation of classical Marxism. In industrial economics, the neo-Marxian approach stresses the Monopoly (economics), monopolistic and Oligarchy, oligarchical rather than the Competitive capitalism, competitive nature of
capitalism Capitalism is an economic system based on the private ownership of the means of production and their use for the purpose of obtaining profit. This socioeconomic system has developed historically through several stages and is defined by ...
. This approach is associated with Michał Kalecki, Josef Steindl, Paul A. Baran and Paul Sweezy. Such theorists as Marc Fleurbaey, Samuel Bowles (economist), Samuel Bowles, David Gordon (economist), David Gordon, John Roemer, Herbert Gintis, Jon Elster, and Adam Przeworski have adopted the techniques of neoclassical economics, including game theory and mathematical modeling, to demonstrate Marxian concepts such as exploitation and class conflict. The neo-Marxian approach integrated non-Marxist or "bourgeois" economics from the Post-Keynesian economics, post-Keynesians like Joan Robinson and the Neo-Ricardianism, neo-Ricardian school of Piero Sraffa. Polish economists Michał Kalecki, Rosa Luxemburg, Henryk Grossman, Adam Przeworski, and Oskar R. Lange, Oskar Lange were influential in this school, particularly in developing theories of underconsumption. While most official Communism, communist parties denounced neo-Marxian theories as "bourgeois economics," some neo-Marxians served as advisers to socialist or Third World developing governments. Neo-marxist theories were also influential in the study of Theory of imperialism, Imperialism. Among the critics pointing out internal inconsistencies are former and current Marxian and/or Sraffian economists, such as Paul Sweezy, Nobuo Okishio, Ian Steedman, John Roemer, Gary Mongiovi, and David Laibman, who propose that the field be grounded in their correct versions of Marxian economics instead of in Marx's critique of political economy in the original form in which he presented and developed it in ''Capital''. Proponents of the temporal single-system interpretation (TSSI) of Marx's value theory claim that the supposed inconsistencies are actually the result of misinterpretation; they argue that when Marx's theory is understood as "temporal" and "single-system," the alleged internal inconsistencies disappear. In a recent survey of the debate, a proponent of the TSSI concludes that "the ''proofs'' of inconsistency are no longer defended; the entire case against Marx has been reduced to the ''interpretive'' issue." Despite being an orthodox Marxist economist, Maurice Dobb was also associated with this current.


Concepts

Big business can maintain selling prices at high levels while still competing to cut costs, advertise and market their products. However, competition is generally limited with a few large capital formations sharing various markets, with the exception of a few actual monopolies (such as the Bell System at the time). The economic surpluses that result cannot be absorbed through consumers spending more. The concentration of the surplus in the hands of the business elite must therefore be geared towards Imperialism, imperialistic and Militarism, militaristic government tendencies, which is the easiest and surest way to utilise Surplus product, surplus productive capacity. Exploitation of labour, Exploitation focuses on low wage workers and groups at home, especially minorities. Average earners see the pressures in drive for production destroy their human relationships, leading to wider alienation and hostility. The whole system is largely irrational since though individuals may make rational decisions, the ultimate systemic goals are not. The system continues to function so long as Keynesian economics, Keynesian full employment policies are pursued, but there is the continued threat to stability from less-developed countries throwing off the restraints of neo-colonial domination.


Labor theory of value

Paul A. Baran introduced the concept of potential ''economic surplus'' to deal with novel complexities raised by the dominance of Monopoly Capital, monopoly capital, in particular the theoretical prediction that monopoly capitalism would be associated with low capacity utilization, and hence potential surplus would typically be much larger than the realized surplus. With Paul Sweezy, Baran elaborated the importance of this innovation, its consistency with Marx's labor concept of Value-form, value and supplementary relation to Marx's category of
surplus value In Marxian economics, surplus value is the difference between the amount raised through a sale of a product and the amount it cost to manufacture it: i.e. the amount raised through sale of the product minus the cost of the materials, plant and ...
.Paul A. Baran, Baran, Paul A., and Paul Sweezy. 2012.
Some Theoretical Implications
" edited by John Bellamy Foster, J. B. Foster. ''
Monthly Review The ''Monthly Review'' is an independent socialist magazine published monthly in New York City. Established in 1949, the publication is the longest continuously published socialist magazine in the United States. History Establishment Following ...
'' 64(3).
According to Baran's categories: * Actual economic surplus: "the difference between what society's actual current output and its actual current consumption." Hence, it is equal to current savings or accumulation. * Potential economic surplus: "the difference between that output that could be produced in a given natural and technical environment with the help of employable productive resources, and what might be regarded as essential consumption." Baran also introduced the concept of planned surplus—a category that could only be operationalized in a rationally planned Socialist mode of production, socialist society. This was defined as "the difference between society's 'optimum' output available in a historically given natural and technological environment under conditions of planned 'optimal' utilization of all available productive resources, and some chosen 'optimal' volume of consumption." Baran used the surplus concept to analyze underdeveloped economies (or what are now more optimistically called "developing economies") in his ''Political Economy of Growth''.


See also

*List of Marxian economists *Capitalist mode of production (Marxist theory), Capitalist mode of production *Capital accumulation *Evolutionary economics *Surplus labour *Labor power, Labour power *Law of value *Unequal exchange *Value product *Productive and unproductive labour *Regulation school *Socialist economics *''The Accumulation of Capital'' *Material product *Critique of political economy


References


Works cited

*


Further reading

* * * John E. Roemer (2008). "socialism (new perspectives)," ''The New Palgrave Dictionary of Economics'', 2nd Edition,
Abstract.
* Diane Flaherty (2008). "radical economics," ''The New Palgrave Dictionary of Economics'', 2nd Edition
Abstract.
*Lenny Flank, 'Contradictions of Capitalism: An Introduction to Marxist Economics', St Petersburg, Florida: Red and Black Publishers, 2007. . * * * Thomas T. Sekine, ''The Dialectic of Capital. A Study of the Inner Logic of Capitalism'', 2 volumes (preliminary edition), Tokyo 1986; (vol. 1), (vol. 2). * * Marc Fleurbaey, "Economics and economic justice." (2004). * Althusser, Louis and Balibar, Étienne. ''Reading Capital''. London: Verso, 2009. * Bottomore, Tom, ed. ''A Dictionary of Marxist Thought''. Oxford: Blackwell, 1998. * * * Ben Fine, Fine, Ben. ''Marx's Capital.'' 5th ed. London: Pluto, 2010. * David Harvey (geographer), Harvey, David. ''A Companion to Marx's Capital.'' London: Verso, 2010. * Harvey, David. ''The Limits of Capital''. London: Verso, 2006. * Ernest Mandel, Mandel, Ernest. ''Marxist Economic Theory''. New York: Monthly Review Press, 1970. * Ernest Mandel, Mandel, Ernest. ''The Formation of the Economic Thought of Karl Marx''. New York: Monthly Review Press, 1977. * Michio Morishima, Morishima, Michio. ''Marx's Economics: A Dual Theory of Value and Growth''. Cambridge: Cambridge University Press, 1973. * Postone, Moishe. ''Time, Labor, and Social Domination: A Reinterpretation of Marx's Critical Theory.'' Cambridge [England]: Cambridge University Press, 1993. * Alfredo Saad-Filho, Saad-Filho, Alfredo. ''The Value of Marx: Political Economy for Contemporary Capitalism''. London: Routledge, 2002.


External links


Marxian Economics

fro
Schwartz center of economic policy analysis



fro
Schwartz center of economic policy analysis

A Marxian Introduction to Modern EconomicsInternational working group on value theory
Chapter 6 of ''Reformism or Revolution'' by Alan Woods
The End of the Market
A website containing a critical evaluation the idea of the market-clearing price which affirms Marx's theory that in capitalism profitability would decline
''If you're so smart, why aren't you rich?''
Monthly Review The ''Monthly Review'' is an independent socialist magazine published monthly in New York City. Established in 1949, the publication is the longest continuously published socialist magazine in the United States. History Establishment Following ...
article detailing the degeneration of Marxian economics. * {{Macroeconomics Eponymous economic ideologies Marxian economics, Schools of economic thought