The contribution of Marxian economics

1. The contribution of Marxian economics Pluralism in economics

2. Marx 200

3. Keynes on Marxism • “How can I accept a doctrine, which sets up as its bible, above and beyond criticism, an obsolete textbook which I know not only to be scientifically erroneous but without interest or application to the modern world?”

4. Keynes on Marx • Marxism is to be condemned for “exalting the boorish proletariat above the bourgeoisie and the intelligentsia, who are the quality in life and carry the seeds of all human advancement”. • Marxism is a product of a combination of ‘jewish and russian natures’.

5. A critique of political economy • "The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists." Joan Robinson (1955) • "economics limps along with one foot in untested hypotheses and the other in untestable slogans" Joan Robinson (1962).

6. Marx on ‘vulgar’ economics • It sounded the knell of scientific bourgeois economy. It was henceforth no longer a question, whether this theorem or that was true, but whether it was useful to capital or harmful, expedient or inexpedient, politically dangerous or not. In place of disinterested enquirers, there were hired prize-fighters; in place of genuine scientific research, the bad conscience and the evil intent of apologetic” • Capital French edition 1872

7. The Micro Neoclassical economics • Marginalism – marginal utility and product tends to zero with perfect competition • General equilibrium – “a still pond” • No profit, only interest for abstinence (Senior) or waiting (Austrian)

8. The Micro Heterodox economics • Marginalism but imperfect competition (Robinson, Marglin) • Profit comes from monopolistic mark-up (Post-Keynesians – Kalecki, Robinson) • Profit comes from power (institutional – Veblen, Galbraith)

9. The Micro Marxian economics • Labour theory of value • Profits comes from difference between value of product and wages (Classical) • Profits comes from exploitation of labour power (Marx) • Profitability falls if rents rise (monopoly of land) or if wages rise (Classical) • Profitability falls because of capital bias and rising productivity (opposite of marginalism) - Marx

10. The Macro Neoclassical • Says’slaw/general equilibrium • Crises are exogenous, random shocks • Central bank intervention in credit (Austrian)

11. The Macro Heterodox • No equilibrium, no Say’s law • Crises: lack of “effective demand” due to low wages, low investment, inequality; • Animal spirits (Keynes), financial instability (Minsky) • Investment leads profits (Kalecki) • Government creates profits (MMT)

12. The Macro Marxian economics • Three laws: labour theory of value; general law of accumulation; LTRPF • LTRPF; falling profitability and mass of profits recurring and regular • Profits lead Investment; • Profits come from exploitation by Capital • Crises endogenous and endemic

13. Top Marx for pluralism • Cahal Moran, Post-Crash Economics Society • https://www.rethinkeconomics.org/journal/top-marx-for-pluralism/?fbclid=IwAR35XbE7PxHQFr-qYzPwgHI5UtTNFC0e1mUgMATdzTlXgUIuPJ_ycvAyYkg • “The falling rate of profit is itself an interesting empirical phenomenon, and Marx’s theory does a good job of shedding some light on the mechanisms that drive it beyond the aggregate trend.  • A helpful device for framing the history of modern capitalism, and strangely in a way that – to my mind, at least – could be considered complementary to the standard neoclassical story. Such is the value of pluralism!”

14. The Policy • Neoclassical: free markets, privatisation (minimum state), no trade unions (laws), no monopolies (break them up) • Heterodox: • Post-Keynesian: fiscal stimulus through deficits (permanent – MMT),Regulation of finance to deal with banks Progressive taxation to deal with inequality; • Institutional: countervailing power (JK Galbraith) unions; ‘mixed economy’

15. The Policy • Marxian • Support interests of labour: unions; progressive taxation; labour conditions (laws); universal basic services (UBS) • Replacement of capitalist sector by public ownership and democratic planning • International plan of human resources

16. The Communist policy • Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.  • Centralisation of the means of communication and transport in the hands of the State.  • Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.  • From the Communist Manifesto 1848

17. A call to arms • After decades in retreat, the left must urgently begin to build a mass programme of economics education, tied to a broad political movement. The danger is that, if we do not have a functioning economics of our own, aligned to the movement, we will fail to answer the questions we don’t yet know exist.” • James Meadway, former adviser to John McDonnell

18. Dentists, plumbers, doctors • “If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.” John Maynard Keynes • “Economics is, like medicine (and unlike, say, cosmology), a practical discipline. Its goal is to make the world a better place.” Martin Wolf • Esther Duflo reckoned economists should give up on the big ideas and instead just solve problems like plumbers “lay the pipes and fix the leaks”.  (ASSA 2017)

19. We don’t know • The analysis of fundamental macroeconomic theory suggests substantial ignorance of how our economies work. This is not that surprising. We may never understand how such complex systems— animated, as they are, by human desires and misunderstandings — actually function. This does not mean that attempting to improve understanding is a foolish exercise. On the contrary, it is important. But it is arguably more vital in practice to focus on two other tasks. The first is how to make the body economic more resistant to the consequences of manias and panics. The second is how to restore it to health as quickly as possible. On both counts, we need to think more and do more. These are the practical challenges before us. • Martin Wolf

20. Nothing learnt • “Many of the main empirical questions in macroeconomics are the same as they were 80 years ago when macroeconomics came into being as a separate sub-discipline of economics in the wake of the Great Depression. These are questions such as: What are the sources of business cycle fluctuations? How does monetary policy affect the economy? How does fiscal policy affect the economy? Why do some countries grow faster than others? Those new to our field or viewing it from afar may be tempted to ask: How can it be that after all this time we don’t know the answers to these questions?”  • Emi Nakamura and Jon Steinsson ´ Identification in Macroeconomics

21. Science of political economy • Economics is a science.  More accurately, as Marx says, it is political economy, the study of the social relations of the capitalist mode of production.  • We need to test economic theories against the facts by identifying the causal variables.  Indeed, we should makepredictions to test our theories. • Unfortunately, as the global financial crash and the Great Recession showed, mainstream economics has not progressed as much as meteorologists in predicting storms and hurricanes.  Economists still look to the raingods because it’s a matter of faith not reason.