Written by Steve Keen, Steve Keen's Debtwatch
Marx was the committed revolutionary, so much so that, when reflecting on his life, he said that if he had his fourth dimension again, he would notwithstanding live a revolutionary, but he would non marry, to salve a married adult woman having to endure the privations of life amongst him. There were, of course, many committed revolutionaries inwards the 19th century. What prepare Marx apart from together with inwards a higher house them all, was that he had proven that revolution non only would happen, but had to happen. It was inevitable. And then, i day, he proved, using a pregnant advance inwards his ain economics, that revolution did non have got to happen: that the inexorable forcefulness he had believed pushed inwards that administration was the outcome of a flaw inwards his ain theory. When the flaw was corrected, the forcefulness was gone, together with non only was revolution non inevitable, it mightiness non fifty-fifty live necessary. How attain you lot hollo upwards he reacted? He fudged, of course.
He distorted his logic to enshroud the result, piece notwithstanding continuing to use, inwards all other respects, the blinding novel insight that both extended his logic, together with revealed the fatal flaw inwards his before beliefs.
"if everything was bought at its value, together with sold at its value, how did capitalists brand a profit?"
if everything was bought at its value, together with sold at its value, how did capitalists brand a profit?I tin vividly imagine when he came to these revelations, because they are recorded live inwards his ain handwriting. It happened i twenty-four hours inwards Jan 1858, as he wrote what became known as The Grundrisse: the "rough notes" of his re-readings of the keen economists as training for writing his magnum opus, Capital. By sheer chance, as he was reading Quesnay, Smith, Ricardo, Malthus together with many more, a friend dropped inwards amongst Marx's ain annotated re-create of his philosopher original Hegel's treatise Logic. Marx re-read it, together with he started to attain something he hadn't done inwards xiii years: he began to hollo upwards together with write similar a Hegelian philosopher.
The alter inwards the linguistic communication is dramatic, similar reading the gonzo journalist Hunter due south Thompson as he transits from i drug (say cocaine) to some other (marihuana) over a few paragraphs.
Until this point, the Grundrisse reprised the dry out logic together with prose of his adopted Ricardian methodology. Using this logic, years earlier, Marx had answered a enquiry that Ricardo himself had never solved: if everything was bought at its value, together with sold at its value, how did capitalists brand a profit?
Following Smith together with Ricardo, Marx argued that the use-value of a commodity played no purpose inwards setting its price. Instead, for these Classical economists, cost was determined past times the cost of production. Not for them the intersecting demand together with provide curves of Marshall, decades later: they asserted that the long-term cost of producing an item determined the cost for which it was sold. Demand, inwards effect, prepare quantity only: cost was determined past times the cost of production. That inwards plow resolved itself to the amount of labour used to attain something. As Smith famously said:
If amid a acre of hunters, for example, it normally costs twice the labour to kill a beaver which it does to kill a deer, i beaver should naturally substitution for or live worth ii deer. It is natural that what is normally the attain of ii days' or ii hours' labour, should live worth double of what is normally the attain of i day's or i hour's labour.
Ricardo elaborated this slightly, past times noting that
Suppose the weapon necessary to kill the beaver, was constructed amongst much to a greater extent than labour than was necessary to kill the deer… i beaver would naturally live of to a greater extent than value than ii deer.
But these were explanations of relative prices: they were non explanations of how those relative prices enabled capitalists to brand a profit.
"this "Tendency for the Rate of Profit to Fall" was the inexorable forcefulness that Marx thought would Pb ... to the breakdown of capitalism"
Smith together with Ricardo only assumed that they did: Marx proved that they did, past times taking wages of a unique feature of labour. For every other commodity, the buyer bought together with got the commodity itself. But for labour, the capitalist buyer purchased labour-time: the capacity to function inwards a manufacturing flora for, say 12 hours a twenty-four hours (a typical working twenty-four hours inwards Marx's time). What he paid for this was the cost of production of the labourer him/herself: the agency of subsistence. But these agency of subsistence mightiness only take, say, 6 hours of labour-time to produce. The gap betwixt the amount paid to the worker (equivalent to half dozen hours of labour) together with the production enjoyed past times its capitalist purchaser (12 hours of labour) was the source of the physical surplus of outputs over inputs generated inwards production, together with this gap was unique to labour. In Marx's words inwards 1847:
The labourer receives agency of subsistence inwards substitution for his labour-power; the capitalist receives, inwards substitution for his agency of subsistence, labour, the productive activity of the labourer, the creative forcefulness past times which the worker non only replaces what he consumes, but also gives to the accumulated labour a greater value than it previously possessed.
With labour as the only source of surplus, together with hence profit, Marx also hypothesized that contest betwixt capitalists would Pb to them mechanizing production to a greater extent than together with to a greater extent than over time, leading to a higher ratio of mechanism to labour (he called it the "organic composition of capital") together with so a lower charge per unit of measurement of profit. Though he saw 7 countervailing tendencies that mightiness ho-hum it down, this "Tendency for the Rate of Profit to Fall" was the inexorable forcefulness that Marx thought would lead, get-go to social conflict, together with then to the breakdown of capitalism, together with finally to the ascent of socialism. Whereas others before him had championed socialism as a preferable cast of social organisation to capitalism, Marx believed he was the "Scientific Socialist" who had proven that socialism had to come upwards about.
And together with then he re-read Hegel, re-acquainted himself amongst his dialectical philosophical roots, started writing inwards dialectical pairs, of foregrounds together with backgrounds together with unities, together with flora a far superior way to analyse capitalism.
This revolution inwards Marx's thought was misunderstood past times most Marxists. Some ignored it completely, together with described it as Marx "coquetting [flirting] amongst the Hegelian fashion of expression". This is rather similar physicists rejecting Einstein because he "coquetted amongst the quantum mechanics fashion of expression" to solve the work of the photovoltaic effect.
"revolution inwards Marx's thought was misunderstood past times most Marxists."
Others confused Marx's approach amongst the mumbo jumbo of "thesis, antithesis, synthesis". This is non only virtually impossible to pronounce (you seek maxim it v times inwards a row without sounding similar Daffy Duck), allow lonely apply, but also it belongs to Fichte, non to Hegel or Marx.
Marx's dialectic is best abbreviated as "Society-Unity-Foreground-Background-Tension". Everything exists inwards a given society, together with is a unity inwards its ain right. But guild volition focus upon i aspect of that unity, bringing it into the foreground. That necessarily pushes the other aspects of the unity into the background. Since the unity can't be without its background as good as its foreground aspects, that sets upwards a tension, which tin transform the unity, together with mayhap guild itself, over time. It's a philosophy of change, together with ideally suited as a foundation approach to analyzing the economy, inwards contrast to the stale equilibrium foundations of modern Neoclassical economics.
Marx's get-go appreciation of this technique occurs inwards a two-page-long footnote, which starts amongst this opening judgement on page 267 of the Penguin edition of The Grundrisse:
"* Is non value to live conceived as the unity of utilisation value together with substitution value? In together with for itself, is value as such the full general form, inwards opposition to utilisation value together with substitution value as especial forms of it? Does this have got significance inwards economics?"
This insight became the foundation of his economic science from this signal forward. He could right away justify the Classical School declaration that commodities substitution at their cost of production. The commodity was the telephone substitution social unity inwards capitalism, together with it had ii aspects, use-value together with exchange-value. Capitalism focuses upon substitution value, putting that inwards the foreground, together with utilisation value inwards the background. The one-time determines the cost paid for a commodity, the latter is what motivates the substitution inwards the get-go place: a seller parts amongst the use-value of a commodity, which he doesn't need, to teach its exchange-value, which he wants; the buyer pays its exchange-value together with gets its use-value.
"It's a philosophy of change, together with ideally suited as a foundation approach to analyzing the economy, inwards contrast to the stale equilibrium foundations of modern Neoclassical economics."
Marx's immediate application of this insight was to railroad train a positive ground as to why labour was the source of profit: rather than relying on how labour differed from all other commodities, he right away used what it had inwards mutual amongst them. Normally use-value is qualitative, together with exchange-value is quantitative, together with the ii are incommensurable for that ground alone. But inwards production, the use-value that motivates the buyer to purchase a commodity is quantitative: its capacity to attain other commodities for sale. With both use-value together with exchange-value quantitative, in that location volition live a departure betwixt these ii "intrinsically incommensurable magnitudes" (Capital I. Ch. 19) that is the source of surplus.
Marx's best declaration of this inwards relation to labour was inwards Capital I itself:
"the daily cost of maintaining it [Labour], together with its daily expenditure inwards work, are ii totally dissimilar things. The one-time determines the exchange-value of the labour power, the latter is its use-value. The fact that one-half a [working] day's labour is necessary to maintain the labourer live during 24 hours, does non inwards whatsoever way foreclose him from working a whole day… The seller of labour power, similar the seller of whatsoever other commodity, realises its substitution value, together with parts amongst its use-value."
He thus had a far to a greater extent than satisfying, positive proof as to why Labour was a source of surplus. But was it the only source? What virtually mechanism as well?
"positive proof as to why Labour was a source of surplus."
In the Grundrisse, when he was notwithstanding enthralled past times his novel methodology, he applied it correctly to machinery:
"It also has to live postulated (which was non done above) that the use-value of the machine significantly greater than its value; i.e. that its devaluation inwards the service of production is non proportional to its increasing effect on production."
But Gadzooks! This agency that mechanism tin live a source of surplus as well. And if so, together with then an increasing "organic composition of capital" has no implications for the levels of surplus together with profit: they could teach upwards exactly as good as teach downwards when production became less labour-intensive. The "Tendency for the Rate of Profit to Fall" disappears. Socialism is no longer inevitable.
"machinery tin live a source of surplus as well."
Marx's reaction to this daze regain was to employ verbal gymnastics until such a fourth dimension that he could fool himself that he had reconciled the ii approaches (I'll spare you lot the details, but you lot tin depository fiscal establishment check them out here, here or here). He together with then prepare virtually fooling everyone else, together with finally declared emphatically - together with falsely - that:
However useful a given form of raw material, or a machine, or other agency of production may be, though it may cost £150 … yet it cannot, nether whatsoever circumstances, add together to the value of the production to a greater extent than than £150.
With this imitation declaration swallowed past times Marx's followers, the belief inwards the inevitability of socialism continued. Accidents of history led to his Russia's Bolshevik followersattempting to impose socialism on feudal Russia, together with the residual is a real unfortunate history.
Marx also ruined his intellectual legacy amongst this subterfuge. His most fervent followers proceed to champion the "Labour Theory of Value", ignoring what Marx saw as his major advance over Smith together with Ricardo. Though Marx's many political together with social critiques of capitalism proceed to resonate today, his analytic contribution was to hobble his successors amongst defending an inane approach to economic science that stymies their powerfulness to analyse capitalism, rather than enhancing it.
"Marx noted that a philosopher could undermine his ain work" ...
So Marx's legacies for his get-go 200 years are real piteous indeed. His fallacious pre-Hegelian ideas led to a social experiment amongst hideous consequences that nosotros are still, to some degree, living amongst today. His distortion of his ain analytic method led his economical intellectual followers to waste matter their fourth dimension trying to solve pointless conundrums inwards the every bit pointless Labour Theory of Value.
... [but then] "sacrificed his ain logic on the altar of his wish for revolution."
It could have got been otherwise. In his ain PhD thesis on Hegel's philosophy, Marx noted that a philosopher could undermine his ain work, together with that it was the duty of his followers to improve his error:
"It is conceivable that a philosopher should live guilty of this or that inconsistency because of this or that compromise; he may himself live witting of it. But what he is non witting of is that inwards the lastly analysis this apparent compromise is made possible past times the deficiency of his principles or an inadequate grasp of them. So if a philosopher actually has compromised it is the chore of his followers to utilisation the inner amount of his thought to illuminate his ain superficial human face of it."
In the end, Marx was as human as Hegel: he sacrificed his ain logic on the altar of his wish for revolution. Not only his menage unit of measurement suffered for that devotion.
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