INTRODUCTION
My paper mainly focusses on the
contrast between Marxian Political Economy and Neo-Classical Political Economy.
Each of these two theories, has a distinct pattern of understanding how
economies work and how it interacts with polity and society. These are two entirely distinct theories,
about the economic part of the society. It is imperative to understand, that
the base of both these theories, will usher in individuals, families, polity
and society in an altogether different direction.
There are vast theoretical
differences between the neoclassical school and the Marxian school of Political
Economy. The Neoclassical School attaches, basic importance to three economic acts
that are attributed to all individuals: owning, buying and selling. It assumes
that all goods and services are privately owned by individuals, who seek to
maximize their satisfaction from consuming the aforementioned goods and
services. Neoclassical theory outrightly based on presumptive human nature, it
celebrates the idea of the free market, which it thinks of as a self-regulating
mechanism.
On the other hand, the Marxian
School of Political Economy, stresses on class exploitation, and the struggle
to counteract it. It elucidates “class” as a process whereby some people in
society engage in active production of goods and services, for others but not
being equally remunerated for the same, it is different from the neoclassical
school, as the latter is about presumptive human nature, but in the Marxian
School, it is about presumptions regarding social relationships, which defines
and justifies human actions in a society. The analysis of social relationships
corresponds with the interwoven patterns of individual behavior, either in
society or in the market. The class difference and division of society into the
exploiters and the exploited, the haves and the havenots, is not at all
justified, as far as Marxism is concerned. It is opposed to the idea of the
Neoclassical School, where the ideas of free markets and ownership of property
by private individuals are celebrated, as it hides and preserves “class
injustice”.
Marx’s critique of Political Economy: Analyzing
“Grundrisse” as a centerpiece of
understanding Marxian Political Economy
According to Marx, Capital can
take a number of forms. It can be a social relation; or a self-increasing
value. For the Neoclassicists, it is either capital goods for investment such
as machines, the funding required for their purchase, or their ownership. The
thinking of dialectical materialism means that capital have a variability of sense.
One of the key features of capitalism is the widespread production of produces
for sale. Under capitalism, commodities are sold at their exchange value but
they wouldn’t have been sold if they lacked a use value, which is found in their
intake. The labour theory of value is the sole basis of understanding the
Marxian definition of Capitalism. Workers are paid a wage by the Capitalist, without
access to the means of production, they are forced to sell their labour in
order of a means of subsistence.
The value power is same as the
exchange value of the concerned worker. The capitalist, who has acquired the
labour power, will obtain the use value of the worker, which is labour, the skill
of the worker to manufacture goods of value which is greater than the wage.
Only labour yields surplus value. As capitalism progresses, the need for
commodities seemingly increase. This can be clearly perceived during the
history of consumption under capitalism.
Marxian Political Economy as an agency of Economic Freedom:
Understanding Amariglio’s argument as opposed to Julie Matthaei’s concept of
the Labour Theory of Value as ‘antithetic’
According to Julie
Matthaei, the Marxian labor theory of
value is "antithetical" to the concept of "choice" and
cannot theorize the freedom that economic agents have in the market place to
choose consumption bundles and work activities. (Amariglio.1986)
Marxian Theory of Value is
fully well-matched with choice in the market and with varied political and
cultural identities, Matthaei, however, does not note the arrival of readings
of Marx's theory of value that begins to develop a non- conformist discussion
of diversities within the working class. Marxian theory of Value must not
suppress the monetary character of the wage. Marxian theory of Value indeed strains
this monetary character when it is suitable for it to do so, e.g. when deliberating
the process of buildup - as, in general, it pressures the monetary character of
all exchanges through the dissimilarity between use-value and exchange-value. According
to Marx, "in a given country, at a given period, the average quantity of
the means of subsistence necessary for the laborer is practically known"
and that, therefore, the theoretical assumption of a given value of labor-power
can be translated into an assumption about a given quantity of use values containing
a given sum of exchange value. (Marx, 1967, p. 171) Thus, in Marxian theory of
Value, the supposition of a given wage bundle is a matter of model building and
not an affirmation about how the wage bundle is at any time, historically
determined. Matthaei does not see that, for Marxian theory, the actual,
historical, behavior of workers in the market place is not constrained by the
procedures of model building. Having established that the value of labor-power
is introduced in Marxian theory as the datum of a model and not as a historical
constraint, In this context, it is important to recall that Marx was critical of
the Classical Political Economists, whom he in other ways very much respected,
for their assumptions that economic agents, individuals, were possessed of a worldwide
economic rationality. It was partly in
opposition to this classical commencement of the bases of economic behavior
that Marx developed a theory of value and a theory of the dynamics of
capitalist society that formulated economic "laws" in terms of the
class production and distribution of surplus-labor and that concentrated only
on market relations through which production and distribution of surplus-labor
and that concentrated only on market relations through which production and
distribution of surplus-labor is directed in a capitalist society. Marx created
all market relations as historically strong-minded. It is exactly for this motive
that he did not diminish and could not constantly have reduced, all dealings
that take place in and through the market as just expressions of a given, non-traditional,
non-political, economic rationality. In Marxian discourse, the differences that
exist among workers with respect to consumption bundles have to be explained in
terms of the varied cultural, political, institutional, and historical forces
that have impacted on different groups of workers.
The Neoclassical-Keynesian Synthesis:
Understanding Post-War Unemployment in the West
The "Neoclassical-Keynesian Synthesis" refers to the Keynesian
Revolution as interpreted and formalized by British Economist John Hicks in the
early post-war period. The centerpiece of the Neoclassical-Keynesian Synthesis,
tended to yield the neoclassical result of "full employment". As a
result, in order to generate an "unemployment equilibrium" as a
solution to this system of equations, the Neoclassical School appealed to rigid
money wages, interest-inelastic investment demand, income-inelastic money
demand or some other imperfection to this system. Thus it is referred to as a
"synthesis" of Neoclassical and Keynesian theory in that the
conclusions of the model in the "long run" or in a "perfectly
working" Neoclassical System, but in the "short-run" or
"imperfectly working”.
The Neoclassical-Keynesian Synthesis was
wildly fruitful and dominated macroeconomics in the post-war period. For a long
time, the Neo-Keynesian system was identical with the "Keynesian
Revolution" and was highly powerful in both theoretical, applied and
policy work. Abba Lerner in 1944 was among the first to identify the insinuations
of the Keynesian system for government macroeconomic policy: by appropriate
fiscal and monetary policies, a government could "steer" the economy
away from extremes and thus smooth out the business cycle. This
policy-effectiveness was given an enormous boost by the new econometric
model-building techniques and optimal policy design criteria developed by Jan
Tinbergen (1952), James E. Meade (1951),
The Neo-Keynesian system came under continued attack in the late 1960s
and early 1970s. In 1968, Leijonhufvud claimed that the Neo-Keynesians had totally
disenchanted the meaning of J.M. Keynes's General Theory. Following Clower in
1965, Leijonhufvud proposed that as a substitute of trailing "unemployment
equilibrium" in a flawed system, they should be analyzing "prolonged
disequilibrium" in a system without inflexibilities.
Reactions to
Keynesian Model and Criticism of Neoclassical Theory
“A sizable shift in the aggregate
demand, will still cause an increase in real income and employment, but the
size of the multiplier will be diminished, the more important the induced price
rise becomes owing to the expansion of demand” (Wolff.119)
This gives us an understanding of
how actually the Keynesian Model works. Although the rate of income and employment
increases, the price of commodities will rise directly proportional to the
increasing demand. There may be significant employment, but without State
funding (Multiplier), it will not be affordable for the working gentry to
purchase goods and services, i.e. their purchasing power rapidly decreases, the
market as a self-regulating body will balance but the class parity still
ensues.
The Neoclassical Theory as a
whole is entirely unjust for the working class, the proletariat. It gives an
inadequate explanation of large companies wielding an exorbitant amount of
power in all the markets. The Neoclassical Theory omits from its explanation,
the very “visible” hand of the state in so many aspects of our lives, the
behavior of the agents of the state must be understood in all their complex
effects if we are trying to specify the mechanism of supply and demand in the
economy. Neoclassical economics is also criticized for
being extremely normative, in this view, it gives a utopic idea rather than to
comparatively analyze varying economic trends. According to Hobsbawm, the Neoclassical
Political Economy is all about "to demonstrate the social optimality if
the real world were to resemble the model", not "to explain the real world
as observed empirically". The beginning
of a "Keynesian" theory of income distribution after Roy Harrod's
model of growth is then recollected together with the astounding resurrection
of the neoclassical theory. The neoclassical theory of income distribution lacks
logical consistency and has shaky foundations, as has been revealed by the
severe critiques.
References
Amariglio, Jack, and Antonio Callari. “Marxian Economics and Freedom: A Comment.” Eastern Economic Journal, XII, no. 2, 1986, pp. 1–9.
Hoaas, David J., et al. “Economics: Marxian versus Neoclassical.” Southern Economic Journal, vol. 55, no. 2, 1987, p. 95., doi:10.2307/1059131.
Gomes, Leonard. “Early Neoclassical Contributions.” Neoclassical International Economics, 1990, pp. 10–27., doi:10.1057/9780230371552_2.
Dumenil, Gerard, and Dominique Levy. “Marxian Political Economy: Legacy and Renewal.” World Review of Political Economy, vol. 1, no. 1, 2010, pp. 7–22.
Nowicki, Florian. “The Theory of Production from Grundrisse and Its Implications for Marxism.” Nowa Krytyka, vol. 40, 2018, pp. 93–116., doi:10.18276/nk.2018.40-04.
“What Is (Wrong with) Neoclassical Economics?” Real-World Economics Review Blog, 30 Jan. 2018, https://rwer.wordpress.com/2018/01/31/what-is-wrong-with-neoclassical-economics/.
Ussher, L. “The Neoclassical-Keynesian Synthesis.” NEOCLASSICAL-KEYNESIAN SYNTHESIS, https://cruel.org/econthought/schools/synthesis.html.
