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Marxian Economics

Marxian Economics

Introduction

Karl Marx is arguably one of the most brilliant minds of all time. His impact on society and importance in our development as a race is undeniable. Needless to say, he had a fair share of opinions on the ever-so-famous classical economics at the time.

These thoughts and opinions are what we have come to classify as Marxian Economics. The way he viewed the subject was unprecedented; no one had brought these queries and concepts to the table before he did.

Today, we will view a few of these interesting hypotheses and learn exactly what Marxian economics is. But you must be wondering; What even is Marxian Economics? 

Note to Readers: If you haven’t read any of my articles on economics then this all may go over your head. It is essential to know the fundamentals of economics and the prevalent theories at the time to truly understand Marxian Economics. So, I suggest you check those articles out first.

What is Marxian Economics?

Marxian economics or Marxist economics is the brand of economics preached by the father of socialism, Karl Marx. Marx was a staunch opposer of the dominant economic thinking at the time; Classical economics.

If you haven’t read my previous article, here is a short definition of classical economics for you. Classical economics is a system of economics that supports the free market forces of supply and demand to allocate resources. To simplify; they believed that the economy should not be hampered with by the government and be left to the invisible hand.

Karl Marx has 2 issues with this approach;

The Unpredictability Of Supply And Demand

Karl Marx was an enthusiastic economist. He avidly read up on the latest theories and research papers. So, he was a pretty well-informed man when it came to this subject.

Thus, he correctly pointed out that the invisible hand’s actions were chaotic. There was no way to tell how much a product was demanded. This uncertainty created huge issues for suppliers at the time.

Marx suggested that the economy should be controlled by the government and not left entirely upon such unreliable and chaotic forces of nature.

Labour Surplus

As a philosophist, Karl Marx was a man of integrity. He had a strong moral code and believed in just and fair treatment for all. The invisible hand, however, is anything but fair.

This is highly evident when we view markets in capitalistic markets. There is a very strong “the early bird gets the worm” attitude when it comes to jobs. If you delay or lack in any way, you are left behind. 

Karl Marx did not stand for this cruel system. He believed that the government should provide jobs to those who are willing to work. It is an inalienable human right after all.

These criticisms made his way of viewing economics quite different. These ideas revolutionized the field and created their own branch of economics. But what are these ideas that moved people enough to make this a worldwide phenomenon?

The Theories of Marxian Economics

Karl Marx as we’ve established was a huge critic of classical economics. He felt that it was too harsh on labourers. That is why all these theories can also be called critiques of classical economics due to his strong disdain for the prevailing system at the time. Arguably the most important and fundamental theory of Marxian economics is:

Labour Theory of Value

Although it’s certainly not his magnum opus, Marx’s most significant contribution to the field of economics was his employment of the labour theory of value.

Remember the theory of value. If you haven’t read my previous article or simply don’t remember, here’s a quick recap:

Classical economics questioned how we price goods and services. This was never really analysed deeply before the pioneers of classical economics critiqued the concept.

The theory of value is exactly that. How do we put a price on a good or a service? What is the criteria for a good or service to carry a specific price tag? Classical economists gave us a set of factors that determine this price:

  • The labour wages
  • The demand for the good
  • The technology

But where does Marx differentiate?

The labour theory of value is the idea that the value of a good is determined solely by the “socially necessary labour” put into the production of that good. Don’t worry, I’ll explain the bold bit in a short while.

What does that mean though? Marx theorised that above all, the value of a product should be calculated by how much effort or work went into the production process.

This theory highlighted the exploitation of the working class as goods often did not sell at the price that justified the work that labourers put into making those goods and thus, they received low wages. 

For this reason, the labour value of theory can be considered the central concept of marxism.

Socially Necessary Labour

Another important theory of Marxian economics; socially necessary labour was never really given a solid definition. This is because Marx wanted the word to be used for multiple purposes and a rigid explanation would limit that multifunctionality.

You must be thinking; What’s so confusing about it? It’s the amount of labour needed in a society. That is wrong. The idea is too complicated to understand with a simple rephrase

So I’m going to attempt to define a concept so complex that even the creator didn’t want to. But first, let’s see what Wikipedia has to say:

“ The simplest definition of socially necessary labour time is the amount of labour time performed by a worker of average skill and productivity, working with tools of the average productive potential, to produce a given commodity. This is an “average unit labour-cost”, measured in working hours.”

This definition is fine and all but has one major issue, in my opinion, it takes a mathematical angle on things. The concept is anything but mathematical.

With this phrase, Marx intends to tackle the philosophical qualm that capitalism creates. What does the line between labour exploitation and productivity blur? How much should a worker really be working? These were all problems that a simple mathematical calculation could highlight.  

That is why Karl Marx always claimed a commodity fetishism existed in the market. This leads us to our next and final theory of the day.

Commodity Fetishism

This is a form of reification. What is reification, you ask? Reification is giving an abstract idea, something that only exists in theory, a physical significance. Are you still confused?

In Marxism, reification is the idea that relationships among people can be perceived as a part of the market. A physical value in goods. These relationships were no longer simply bonds between people but also held financial significance.

Although Marx, didn’t discover reification, commodity fetishism is the first time this concept was brought into economics. In fact, reification only came out in 1923. This theory was published in 1867.

But let’s get to the main question; what is commodity fetishism? Commodity fetishism is the idea that abstract relationships such as that between production and sales are not interpersonal relationships between the people involved but can be translated directly into the relationship between physical concrete items such as money and the goods sold. We would even consider services a physical concept here.

Karl Marx explains why people tend to think this way in this quote; 

As against this, the commodity-form, and the value-relation of the products of labour within which it appears, have absolutely no connection with the physical nature of the commodity and the material relations arising out of this. It is nothing but the definite social relation between men themselves which assumes here, for them, the fantastic form of a relation between things. In order, therefore, to find an analogy we must take flight into the misty realm of religion. There the products of the human brain appear as autonomous figures endowed with a life of their own, which enter into relations both with each other and with the human race. So it is in the world of commodities with the products of men’s hands. I call this the fetishism which attaches itself to the products of labour as soon as they are produced as commodities, and is therefore inseparable from the production of commodities”

This concept is super confusing and a highly advanced facet of marxism that an amateur such as myself can not hope to explain to perfection. So, let’s move on and take a look at the history of the subject.

The History of Marxian Economics

Marxian economics is one of the earliest modern school of economic thought but the subject itself doesn’t have much history. This is because most of the significant events and impacts of Marxism are that of socialism and Marxian economics is only a byproduct of the ideology and thus, the implication of this economic thinking is also only a by-product of an economy adopting socialism. So what do we discuss?

Let’s look at the life of the eponymous founder of the subject; what shaped his thoughts and how he led an epic revolution in the 19th century, the effects of which we still feel to this day.

Karl Marx

“The father of socialism” is often regarded as one of the most important freethinkers of all time. His ideas and theories changed social norms at the time. That really makes you wonder what sort of childhood inspired such greatness.

Childhood

Karl Heinrich Marx was born on 5th May 1818 in Trier, Kingdom of Prussia (modern-day Germany). Karl’s father, Heinrich Marx, was also a freethinker, closely following the works of  Immanuel Kant and Voltaire

Despite coming from a strict Jewish heritage, his family was never really religious. This type of environment was healthy for a mind like Karl’s who was taught to question everything. This liberalism allowed Karl to develop an unbiased and broad view of the world around him.

Perhaps one of the reasons why he was so beloved is that despite living a cushioned upper-middle-class life, Karl understood the pain of the working class and worked hard for their rights.

Early Career

Karl was not always very serious about his studies. His interest in philosophy and law pushed him towards a career as a lawyer but he was a bit of a trouble maker in his early adult years, with his father having to shift him to the more strict University of Berlin from the University of Bonn due to his deteriorating grades and several disputes including a reported duel.   

By 1841, he graduated with a PhD in law. Though he wrote a bit of fiction at the time, his writing career didn’t quite take off yet. His first career was that of a co-editor of a leftist newspaper publisher, Deutsch-Französische Jahrbücher.

Although he aspired to teach, his dreams were crushed due to his strong political opinions.

The Prussian government did not take to his classical liberalism and attachment to Heiglism and thus, blocked that career path. 

Das Kapital

So here we are, the final thing that we are going to talk about, his magnum opus, his masterpiece, the origin for all of the aforementioned theories. Marx wrote the three-volume Das Kapital in 1867, relatively late in his life.

After spending years as an editor on several renowned news outlets and publishing multiple famous books, Marx wrote the book that defined his career.

Das Kapital, known in English as Capital. A Critique of Political Economy is perhaps one of the most significant pieces of literature of all time. The book is the basis for both socialism and marxism itself. It can be said that the entire concept of Marxian economics has been derived from that single book. 

With such an illustrious career, Marx didn’t just leave a mark on history, he redefined philosophy, morals and economics as we knew it. 

Conclusion

I hope this article was able to give a clear definition of Marxian economics and you are able to understand the thoughts and theories of the great freethinker better than you did before you read this article.

Economics is a pretty broad subject and thus there are several takes on the subject. Whether it be Keynes, Smith or Marx, they all started off like you and me, just a bunch of economics enthusiasts. 

The bottom line? You too can achieve greatness like all those pioneers. All you need is hard work, determination, passion and an undying desire to change the world for the better.

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