There are a few Marxists around these days who appear to be somewhat knowledgeable. I'm not an expert in Marxian political economy, but I've spoken to many Marxians and some of my professors were Marxian/Ricardian. I'm going to lay out the core of Marx's framework, and if a Marxian finds my analysis problematic, feel free to correct me. I'm not really interested in a debate per se, I just want to be sure that I fully (or at least adequately) understand the position I am attacking.
First, Marx does not intend to explain the formation of market prices. He considers it to be far too chaotic, and as such, only attempts to explain the fundamental aspects of the "capitalist mode of production" which is inherently exploitative and ultimately doomed (internal contradiction of capital accumulation). Next, Marx is all about societal forces that are entirely independent of any individual (laws of motion); he entirely rejects methodological individualism (calls it the "vulgar method").
At the very core of his framework is the distinction between use-value, on the one hand, and exchange value on the other. The former has to do with subjective demand conditions, while the latter deals with the social needs for various commodities and the degree of socially necessary labor embodied within them, as well as the division of labor itself (alienation). But Marx differentiates between different kinds of labor: there is (a) complex labor (highly productive) and (b) abstract labor (which aggregates different degrees of productive labor--the commodification of labor). Again, all labor must be "socially necessary" if it is to effect relative price formation, that is, simply producing a product does not automatically mean that it will have value and therefore a price. Also, the fact that I value good "a" by "x" amount and you value good "a" by "y" amount is entirely immaterial. The needs of society will determine the allocation of socially necessary labor towards the production of commodities thereby determining prices.
So, essentially, market phenomena is value, which is, again, entirely objective (there seems to be a confusion of causality here--I don't entirely understand this). Next, capital goods are "embodied" or "dead labor." Their value is determined by the amount of socially necessary labor that went into them and the labor that went into the capital goods that produced them. But capital goods do not yield "surplus value" (interest/profit) because they cannot be exploited. Laborers, according to Marxists, do not have the bargaining power of capitalists who (a) force them to worker harder and longer for the same wages (absolute surplus value) and (b) can replace laborers for capital goods (decreasing the "organic composition of value" -- or the ratio of constant capital to variable capital/living capital). So this (exploitation) is the source of profit (denoted by production circuit m-c....c'-m', where ' is exploitation) and is ultimately the cause of economic crises. As the capitalists reduce their organic composition of value (become more capital intensive--expand the division of labor) they reduce their source of surplus value, which forces additional exploitation, which, again, reduces their source of surplus value. There is mass unemployment (labor reserve armies) where individuals do not have the income to purchase the goods that are produced and profit collapses. When factor prices fall enough, the bust ends, and the next boom is underway.
Marx also talks about how finance and credit expansion (fictitious capital) accelerates this process (the post-Keynesians love this crap). It actually sounds somewhat Austrian. Also, Marx, like the Austrians, believed there is a uniform rate of profit (average rate of exploitation), that is, one true interest rate (but he ignored the element of time). So, the end-game, for the Marxists, is the elimination of capitalism in favor of socialism. Socialism is the final epoch of human history where the laws of value are eliminated (no more exchange value). Individuals produce for use rather than exchange.
"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."
Excellent post. Perhaps this can be stickied by the moderators for quick future reference?
"The market is a process." - Ludwig von Mises, as related by Israel Kirzner. "Capital formation is a beautiful thing" - Chloe732.
How did marx attempt to solve the transformation problem? Oh yes, and you can't forget about commodity fetishism as a result of the division of labor/alienation.
How did marx attempt to solve the transformation problem?
Well, a Marxist would say that they're not interesting in explaining relative price formation, and for good reason. There is simply no possible way to explain the formation of prices with the LTV. Ricardo tried and failed miserably, forcing him to retreat from a pure LTV in favor of a semi cost-of-production theory of value (sometimes called the 93% LTV). Marx's framework is really a philosophical theory of history, and not a true economic doctrine. This is why, at least in my opinion, Mises' Theory and History is as powerful of a refutation of Marx as either his Economic Calculation in the Socialist Commonwealth, or Bohm-Bawerk's Karl Marx and the Close of His System.
Debating Marxists is interesting though. They are wholly uninterested in actual economic phenomena, such as economic calculation, the organization of capital at the micro and macro levels, et al.
Excellent post, Esuric.
On the topic, i'm also interested in reading on Marxist theory (no, im not planning to convert, just understand their side :-) ) Would you (or any reader) know of any good, yet fairly short, books on the subject? Being a PhD student is somewhat time consuming, so reading Das Kapital is out of the question...
Esuric:Marx's framework is really a philosophical theory of history, and not a true economic doctrine. This is why, at least in my opinion, Mises' Theory and History is as powerful of a refutation of Marx as either his Economic Calculation in the Socialist Commonwealth, or Bohm-Bawerk's Karl Marx and the Close of His System.
Fascinating insight.
Esuric:Debating Marxists is interesting though. They are wholly uninterested in actual economic phenomena, such as economic calculation, the organization of capital at the micro and macro levels, et al.
It seems that ideology comes first, and the "economics" is merely fashioned as post hoc justification. The same charge is sometimes leveled at Austrians, but at least Austrians are interested in actual prices and such - very intensely so. Plus the praxeological framework of Menger and Mises really leaves no room for ideologically convenient conclusions to be wriggled out (although it's debatable how rigorously their framework has been adhered to).
Why anarchy fails
Three points Esuric. The rest is spot on but I noticed these three things needed further explanation or were fuzzy.
'Next, Marx is all about societal forces that are entirely independent of any individual '
Not necessarily. Societal forces that reside in the upper superstructure of human activity, things such as religion, politics, morality and law were not things that Marx was necessarily interested in because they were a result of the economic base which Marx believe dictated action. Now I think, but when I asked David Gordon he said no, that Marx believe that consciousness was dictated by our economic surroundings. If you actually listen to his recent lecture on Theory and History I ask this toward the end with a question about Communist sects in the feudal age and how that would contradict historical materialism given the fact that since they were live in the feudal age they should of not realized Communism. Capitalism perhaps because it was supposedly the next step toward human evolution but not communism. I forgot to add onto that question the fact that in German Ideology Marx explicitly states that consciousness and the infrastructure it develops such as politics, philosophy, metaphysics etc, is a result of the material conditions of man. There is a famous quote 'It is not consciousness that dictates life but life that dictates consciousness' meaning that the economic base directs our abstract concepts. Now Marx was interest in class consciousness which could be see as a societal force because it does evolve in the proletariat through their immiseration. The concept of alienation from the division of labor can be a force on the collective minds but this goes back to the economic base so it is as if societal forces that are outside the base are somewhat lacking in power.
' Socialism is the final epoch of human history where the laws of value are eliminated (no more exchange value).'
It is not that socialism is the final epoch of human history but that human history has yet to start. Communism, not socialism or what Marx called 'Crude Communism' , is when human history actually does start.
'This is why, at least in my opinion, Mises' Theory and History is as powerful of a refutation of Marx as either his Economic Calculation in the Socialist Commonwealth, or Bohm-Bawerk's Karl Marx and the Close of His System.'
Absolutely. This leads me to wonder why Theory and History isn't a popular book. Really Marxism is a 'scientific' attempt to understand what Marx considered the dialectical course of history. He was really the last person to attempt to explain history in a dialectical manner.
'Debating Marxists is interesting though. They are wholly uninterested in actual economic phenomena, such as economic calculation, the organization of capital at the micro and macro levels, et al.'
Well that's probably because they aren't Marxists. They are social democrats who swoon when they hear labor laws / labor unions. They know nothing of Marxism. They just use the name because that is what they have been called improperly for decades.
'Men do not change, they unmask themselves' - Germaine de Stael
AJ:The same charge is sometimes leveled at Austrians, but at least Austrians are interested in actual prices and such - very intensely so.
Well, unfortunately, Rothbard is partially responsible for this, but, at the same time, he is also largely responsible for the Austrian revival. Also, there are young adults all around the world who are passionate about AE but who have not yet actually familiarized themselves with its fundamental doctrines. AE is not about ending central banks, or supporting the gold standard, or anarcho-capitalism (though powerful arguments can be made for all of these positions), but rather understanding the function of the price mechanism, the subjectivity of all economic phenomena, the use of knowledge in society, and the role of the entrepreneur in the organization of capital.
Andrew Cain:Not necessarily. Societal forces that reside in the upper superstructure of human activity, things such as religion, politics, morality and law were not things that Marx was necessarily interested in because they were a result of the economic base which Marx believe dictated action.
Well, my only point was that, at least according to Marx, society is not only more than the sum of each individual component, but rather something else entirely. It is its own beast.
Andrew Cain:It is not that socialism is the final epoch of human history but that human history has yet to start. Communism, not socialism or what Marx called 'Crude Communism' , is when human history actually does start.
I did not know this. Thank you.
Andrew Cain:Well that's probably because they aren't Marxists. They are social democrats who swoon when they hear labor laws / labor unions.
Even well-read Marxists simply cannot deal with the calculation problem, which is why there aren't too many actual Marxists around today.
'Also, there are young adults all around the world who are passionate about AE but who have not yet actually familiarized themselves with its fundamental doctrines. AE is not about ending central banks, or supporting the gold standard, or anarcho-capitalism (though arguments can be made for all of these positions), but rather understanding the function of the price mechanism, the subjectivity of all economic phenomena, the use of knowledge in society, and the role of the entrepreneur in the organization of capital'
I don't think that's the case. I think these are just examples of what attracts people to AE.
chloe732:Excellent post. Perhaps this can be stickied by the moderators for quick future reference?
+1
Z.
Esuric:AE is not about ending central banks, or supporting the gold standard, or anarcho-capitalism (though powerful arguments can be made for all of these positions), but rather understanding the function of the price mechanism, the subjectivity of all economic phenomena, the use of knowledge in society, and the role of the entrepreneur in the organization of capital.
A concise, clearly articulated statement about what AE is. It clears the fog.
understanding the function of the price mechanism, the subjectivity of all economic phenomena, the use of knowledge in society, and the role of the entrepreneur in the organization of capital.
I think you mean the understanding of human action. The rest of that stuff is just its corollary.