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EC233 Marx_Notes.pdf

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ECON 2233

Notes on Marx 1. Marx wanted to promote fundamental change not simply “to interpret society. ” 2. The object of neo-classical economic theory is to understand the every day operations of the market, whereas he object of Marxian theory is to understand the evolutionary development of capitalism. 3. Marx’ theory of history is built on three supports. First, It turns upside down the Hegelian philosophy of history. Matter not ideas becomes the motive force of history. This is dialectical materialism not dialectical idealism. Second, it drew upon notions of human perfectibility in utopian thought. Third, it incorporated Ricardian economics. 4. Marx’ vision is an example of what the economist Thomas Sowell called the “unconstrained vision.” Marx believed the course of human history would transform human nature, i.e., a change in environment would change human nature. He was similar to Rousseau who regarded man as a product of his environment. For Marx changes in the material environment move history and eventually change human nature. 5. The motive force in Marx’ theory is provided by changes in what he called the forces of production (what he called social production). These provide the material basis for society. For example, the hand mill represents a technological feature of the material basis that underlay feudalism. The steel mill is an aspect of the material basis that underlies capitalism. Feudalism and capitalism are stages in the evolution of society where change in the material substratum of society, (i.e., technology, labor skills, scientific knowledge, tools, capital goods etc.,) is the key element moving society forward. 6. The forces of production imply certain relations of production, e.g., property relations. For example, capitalism to be successful requires a widespread acceptance of private property, i.e., property that can be alienated, i.e., bought and sold. Property and the social setting provide the framework within which economic decisions are made. The relations of production include property relations, human relations, private property, the wage system, etc., and represent society’s economic structure. 7. The economic structure (relations of production) requires a certain superstructure, i.e., a legal and political structure, and forms of social consciousness, i.e., religion, art, literature, music, philosophy. These serve the function of maintaining the status quo. 8. In the course of time the following takes place: a. Technology (e.g.) changes, i.e., the forms of production change. b. The existing relations of production supportive of, and consistent with, the old forces of production become increasingly incompatible with the new technology. They stand in the way of realizing the full advantages of the new technology. A conflict emerges between the relations of production (i.e., the thesis) and the new forces of production (the antithesis.) c. Out of this conflict comes a social revolution. New relations of production consistent with the new technology emerge and harmony is restored. The synthesis is completed. d. The superstructure is transformed also. Society has moved to the new stage of history. e. The harmony is temporary. The process continues. The synthesis becomes the new thesis. Its antithesis is generated by further changes in the forces of production, and so the process continues. 9. Socialism is the stage that succeeds capitalism. The proletarians (former) now own (collectively) the means of production. The system of private incentives remains. Humanity has not yet been transformed. The individual has not given way to species being. There is a dictatorship of the proletariat. 10. The next and final stage is communism. Monetary and material incentives are no longer relied on. Social classes have disappeared. The state has withered away. From each according to his ability and to each according to his needs is the principle of social life. Marx’ Economics 1. For Marx the start is from the whole, as described above. He moves on to the analysis of the parts focusing on exchange relationships – in particular the relationship between the proletarians and the capitalists, i.e., the buying and selling of labor – the wage relationship. a. The key element in this relationship is the separation of the worker and his tools that has accompanied the rise of capitalism. The worker has only his labor to sell. b. Production has thus shifted from being production for use value to production for exchange value. An understanding of capitalism requires an understanding of this exchange relationship. c. As prices, wages represent a quantitative relationship, but they also represent a social or qualitative relationship. 2. Marx’ theory of value. Its central concept is taken from Ricardo. a. All labor time is reduced to socially necessary labor time, i.e., the time required by a workman possessing an average degree of skill. The only cost of production is labor. Differences in labor skills are measured by differences in physical output. Capital is treated as stored up labor. b. Market prices of all commodities (and labor itself is also a commodity) are determined by labor costs of production. Relative prices are determined by relative labor costs measured in hours of labor time. The market price of a commodity is broken down into three components of labor cost designated by Marx as “C”, “V”, and “S”. C is constant capital. V is variable capital. S means surplus value. The market value of a commodity equals C+V+S. C, or constant capital, refers to the hours of labor embodied in capital equipment and semi- finished goods used up in the production process. V, or variable capital, refers to the number of hours that are embodied in the wage goods that the direct labor buys with its money wage. It is the number of hours necessary to produce the wage goods that are the workers real wage. If we think of it as a daily wage, it represents the labor cost of production of the day’s labor. If labor cost of production measured in hours of a day’s labor is less than the number of hours of labor the laborer works in a day, the difference produces S, or surplus value. Surplus value can arise only from the employment of V, variable capital. The machinery and semi-finished goods represented by C are sold in the market at 2 their labor cost determined prices. The prices that employers sell products for are determined by the number of hours of direct and indirect labor that are used in production, and if this number of hours is greater than C+V the difference is S or surplus labor. c. Perfect competition is assumed. The employer pays the long run competitive price for labor, and he sells the product at the long run competitive price. So, surplus value does not arise from a wage less than the competitive price of labor, or from a product price greater than the competitive price. Thus, no one is cheated. d. To repeat, surplus value arises because the wage paid to the worker is equal to the socially necessary time required to produce the wage goods that are the real wage. And, since the capitalist owns the tools, i.e., the means of production – labor has no alternative but to work the full day required by the employer (8, 10, or 12 hours) even thought the wage good equivalent of the real wage might have taken only four hours to produce. The capitalist thus owns the surplus value that labor produced because of the laws of property. He owns the tools, and he also owns the labor time the worker was forced to sell him in order to survive. e. Marx defined the rate of surplus value (S’) as equal to S/V. This can also be called the rate of exploitation. S’ can be increased by increasing the length of the workday, by increasing the productivity of labor, and by decreasing the real wage. Marx defined the rate of profit (P) as equal to S/C+V, and he defined what he called the organic composition of capital (Q) as equal to C/C+V. f. By manipulating the three definitions above algebraicall
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