Marxian economics

Marxian economics refers to economic theories on the functioning of capitalism based on the works of Karl Marx. Adherents of Marxian economics, particularly in academia, distinguish it from Marxism as a political ideology and sociological theory, arguing that Marx's approach to understanding the economy is intellectually independent of his advocacy of revolutionary socialism or his support of proletarian revolution.[1][2] Adherents consider Marx's economic theories to be the basis of a viable analytic framework, and an alternative to more conventional neoclassical economics. Marxian economists do not lean entirely upon the works of Marx and other widely-known Marxists; they draw from a range of Marxist and non-Marxist sources. Marx's major work on political economy was Capital: A Critique of Political Economy (better known by its German title Das Kapital), a three-volume work, of which only the first volume was published in his lifetime (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 Capital, especially the beginning of Volume I. Marx's notes made in preparation for writing Capital were published years later under the title Grundrisse.

Marx's response to classical economics Marx's economics took as its starting point the work of the best-known economists of his day, the British classical economists. Among these economists were Adam Smith, Thomas Malthus, and David Ricardo. Smith, in The Wealth of Nations, 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" (i.e., specialization of businesses and/or workers) and this, in turn, 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 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, in Theories of Surplus Value, Marx noted, "We see the great advance made by Adam Smith beyond the Physiocrats in the analysis of surplus-value and hence of capital. In their view, it is only one definite kind of concrete labouragricultural labour that creates surplus-value....But to Adam Smith, it is general social labourno matter in what use-values it manifests itselfthe 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", 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 an ahistorical 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. 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, was based on a labour theory of value in which the value of any produced object is equal to the labor embodied in the object. (Adam Smith also 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. [edit]Marx's theory "The wealth of those societies in which the capitalist mode of production 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, 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.[5] 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, Ip 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.