Marxist economic theory is an approach in economics which has originated from the works of Karl Marx. It is extremely different from mainstream economics providing an important investigation of capitalism and recognizing its fundamentally conflicting and exploitative nature. This is not to imply that the theory is a uniform body of work.
There are significant differences and debates over the explanation of his contribution and the legality of the many methods the theory has been developed. The rational and economic confusion since Marx’s demise, the challenge to seek links between Marxist economics and practice, the varying political and social states and the growth and lack of useful expressions of Marxist strategies, have all contributed to the diversity of his theory (Cowen 122). However, there are universal trends and arguments which replicate the fastidious technique of analysis introduced by Marx.
With a view of obtaining a correct perception, however, upon Marx’s economic approach, particularly upon its initial aspects, this needs to be viewed within the setting of his fundamental notion of historical development, of which capitalism was developed as an exceptional system (Marx 146). It is even advantageous to understand the explicitly Hegelian origins of this formation in order at any rate to appreciate the advanced shades of meaning.
For this reason, the concept of value as he found it in Ricardo was clearly extremely pleasant. This placed labor as human productive action in the forefront and made it the basis of interpretation of exchange value. It was quite natural that he should begin developing his concept of surplus-value on the basis that commodity exchanges at its value. This was not only, for the purpose, an easy method of doing so, but it was also as well an approach of expressing the basis and diligence of surplus value in the tough case.
Also, it allowed the surfacing of surplus-value, in addition to the measure of the surplus-value, to be strongly based on facts and links to production (Marx 147). Marx was conscious of what he was doing, and of the restrictions of such a case as an initial estimate, is indicated by his argument that if prices really deviate from values, people have to, first of all, shrink the former to the latter, in other words, consider the variation to be unplanned so that the incident may be analyzed in its purity, and the analysis not meddled by upsetting events that have nothing to do with the procedure in question.
But as well as its ease and suitability for his rationale, there was an official purpose why Marx should have focused on values as far as labor is concerned, and thus relied strongly on Ricardo’s approach. This is something that almost all writers on Marx appear to have ignored, at any rate until fairly lately. It would not have been reasonable in expressing the surplus-value in methods that were themselves proportionate to changes in the rate itself. It could have been stated based on a single item like Corn, hence making it a ratio, uninfluenced by changes in prices or exchange rate.
On the other hand, if the idea had been initiated by then, it could have been in something such as a typical complex item of which people shall currently articulate. But much better for Marx’s direct intention than a single item (since more universal) was its expression based on labor; as in fact, Ricardo had solved his benefit-remuneration ratio as determined at the margin of the salary-commodities factory.
The level of utilization could then be definitely illustrated as a ratio between two values of (average) labor, in addition to the origin of surplus value being concurrently identified (Cowen 153). If a commodity was exchanged at the level of labor utilized, changes in such a level could not by themselves influence relative exchange rates, nor could alterations in the latter affect the exploitation ratio when expressed in this method. The value aspect hence represented something critical that would otherwise have been missing.
The solution was logically sound as Marx evidently had in mind firstly an “untainted” labor market, determined by ideal competition and personal bargaining. Marx totally admitted, however, that the cost of labor power could rise above (or in exceptional cases be depressed below) the labor’s worth, not only temporarily but as well constantly to the level that states of an “untainted” market for labor power were adjusted or changed.
In this correlation, Marx considered joint bargaining by trade movements to be a potentially significant adjusting power and treated every mixture of working and jobless people in trade associations as upsetting the melodious action of the principle of supply and demand. Also, it should be noted that an important function was occupied in all his thinking concerning surplus value by the alleged trade reserve action (Marx 146).
In conclusion, while Ricardo’s approach of remunerations relied on the principle of population – based on the assumption of extremely elastic labor power – Marx firmly renounced this and depended instead on the constant reality, and historical development, of a jobless preserve of surplus labor.
Works Cited
Cowen, Tyler. Modern Principles: Macroeconomics. 1st ed. 2009. New York: Worth Publishers. Print.
Marx, Karl. Capital, Volume 1, London: Penguin Books, 1990. Print.