DEFINITION: “Marxian economics” is the economic theory propounded by the nineteenth-century economist, philosopher, and revolutionary activist, Karl Marx.
The phrase is also applied to the many economists over the past century or more who have subscribed to Marx’s economic doctrines.
More recently, the term “neo-Marxian economics” has begun to be used to refer to the beliefs of Marx’s most-recent cohort of followers.
ETYMOLOGY: For the etymology of the word “economics,” see the Glossary entry, “economics.”
It should be noted that academics often distinguish between “Marxist economics,” which consists of the principles found in Karl Marx’s own books, and “Marxian economics,” which is the abstract economic theory based on Marx’s principles.
In other words, “Marxian economics,” although broadly based on Marx’s teachings, is not limited to the detailed doctrines found in Marx’s books. Rather, it has been developed in different directions by various later Marxian thinkers.
The adjective “Marxist” may also be used to refer to someone committed to the violent overthrow of capitalist society, but that is a political use of the term, not an economic one.
USAGE: Karl Marx was a prolific author. However, we will ignore his journalistic and his political writings here and focus on his contributions to economics.
Marx’s economic writings are mostly found in his three-volume magnum opus, Capital: A Critique of Political Economy.
The first and most-important volume of Capital was published (in German) in 1867. The second and third volumes were edited by Friedrich Engels from Marx’s manuscripts—Marx having died in 1883—and published posthumously in 1885 and 1894, respectively.
Capital covers a very wide range of economic topics, but the most important of these are the following:
- The analysis of capitalism, including the prediction of its inevitable crisis and collapse
- The labor theory of economic value
- The theory of so-called “surplus product” and “surplus value”
- The distribution of surplus product and surplus value in relation to different types of economic systems
- The theory of the so-called “class struggle” and its influence on the economy
- The theory of “economic evolution”
Let us take a quick look at each of these topics.
(1) It is of course true that nineteenth-century capitalism, fueled by the Industrial Revolution, had many faults. The misery of the urban masses depicted in the novels of Charles Dickens was scarcely even exaggerated.
Marx extrapolated from the growing pains he saw around him to the future collapse of the entire capitalist system. This was due to a failure to appreciate the ability of capitalism to both contribute to and adapt to technological developments in a sort of positive feedback loop.
If Marx could have risen from the grave to witness the unimaginable prosperity that capitalism had created for the vast majority of people in the industrialized countries over the course of the twentieth century, he would surely have been incredulous.
Regarding Marx’s prediction of the collapse of capitalism, there is little to say beyond: He got it about as wrong as it was possible to do.
(2) Regarding the labor theory of value, Marx swam against the current of nineteenth-century economic thought. In a nutshell, he claimed that the economic value of a good is primarily determined by the amount of labor that has gone into its production.
This idea was thoroughly debunked by the authors of the subjective theory of value not long after publication of Capital. It is now nearly universally acknowledged by economists that the economic value of a good is primarily determined by the preferences of consumers.
(3) Marx calls the difference between the sale price of a good on the market and its cost of production the “Mehrwert,” which was translated as “surplus value.” From the point of view of the capitalist—i.e., the owner of the finished good—this is simply the “profit.”
What Marx is saying is that that is the wrong perspective. Instead, we should look at the surplus value from the perspective of the workers whose labor went into the production of the good.
Marx argued, on the basis of the labor theory of value, that the surplus value rightly belonged to the laborers, not the capitalist, as their contribution to the production of the good was the most important one.
This perspective, however, relies on the labor theory of value, which has been refuted as thoroughly as any social science theory can be.
(4) Marx’s history of economic distribution was path-breaking in certain respects. However, in common with other historians of his time, his economic writings were tendentious by modern historiographic standards.
Though Marx cannot be faulted for not being ahead of his time, nevertheless, his historical discussions are vitiated by his limited perspective. For example, we have already observed how his predictions about capitalism were a dismal failure.
(5) Perhaps Marx’s single most distinctive view was his theory of the “class struggle.” He was convinced that societies are rigidly divided into hierarchical strata, which are forever locked in a violent struggle with each other.
All known human societies have been hierarchical to one extent or another. That much of Marx’s analysis is true. However, the facts do not support the thesis that capitalist societies, in general, are permanently divided into hermetically sealed strata.
These same social and political facts—which basically resolve into the relatively high degree of social mobility in industrialized capitalist societies in comparison with more traditional societies—also mean that Marx’s analysis of the economic influence of the class struggle is empirically unfounded.
(6) Finally, Marx’s discussion of “economic evolution” has many of the same strengths and weaknesses as his discussion of the forms of economic distribution in various times and places.
However, the application of the theory of evolution to social transformations is no longer considered to be scientifically valid.
As for Hegel, his theory of history is held, if anything, in even less esteem by today’s professional historians than the Social Darwinists.
On the whole, then, it seems fair to say that Marx’s influence as an economist has been slight, even if his influence as a political thinker and as an advocate of violent revolution continues unabated into the twenty-first century.