by It is not difficult to identity them: (1) the use of a proto-effective demand theory by Marx;(2) endogenous money theory;(3) Marx’s rejection of Say’s law;(4) the notion of a monetary production economy (also developed as a theory by Keynes); and(5) a conflict theory of the distribution of income, and the recognition that workers and capitalists have unequal power. However, the trouble is that none of these insights prove that Marx’s overall theory was right: far from it.There are many deeply rotten and false things in Marx. The labour theory of value is rotten to the core, and the version in volume 1 of Capital was all but abandoned by Marx by volume 3 where he adopted Classical prices of production as the anchors for the price system.Marx’s theory of wages – that wages would tend towards subsistence and reproduction of workers – was wrong. Marx made many disastrously wrong predictions derived from his theory (see here). His historical materialism was claptrap. His view that there is an eternal tendency for the rate of profit to fall is highly dubious.Worse still, Marx was also a die-hard metallist in his monetary theory, so has more in common with libertarian metallists than Keynesians on that point! Marx was an adherent of the flawed, false metallist theory of money. He thought – wrongly – that money always needed to be tied to metals like gold.
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However, the trouble is that none of these insights prove that Marx’s overall theory was right: far from it.(1) the use of a proto-effective demand theory by Marx;
(2) endogenous money theory;
(3) Marx’s rejection of Say’s law;
(4) the notion of a monetary production economy (also developed as a theory by Keynes); and
(5) a conflict theory of the distribution of income, and the recognition that workers and capitalists have unequal power.
There are many deeply rotten and false things in Marx. The labour theory of value is rotten to the core, and the version in volume 1 of Capital was all but abandoned by Marx by volume 3 where he adopted Classical prices of production as the anchors for the price system.
Marx’s theory of wages – that wages would tend towards subsistence and reproduction of workers – was wrong. Marx made many disastrously wrong predictions derived from his theory (see here). His historical materialism was claptrap. His view that there is an eternal tendency for the rate of profit to fall is highly dubious.
Worse still, Marx was also a die-hard metallist in his monetary theory, so has more in common with libertarian metallists than Keynesians on that point! Marx was an adherent of the flawed, false metallist theory of money. He thought – wrongly – that money always needed to be tied to metals like gold.
Moreover, there are issues about Marx’s originality. Take Marx’s understanding of endogenous money. This was an insightful theory for his time, but endogenous money theory was already well known to the Banking school well before Marx’s ramblings in Capital.
Marx took and incorporated fundamental ideas on endogenous money right from the work of Thomas Tooke (see Smith 2004: 62–65).
Moreover, demand-side explanations already appeared in Malthus too (e.g., Keynes took great inspiration from Malthus). Even more, the Birmingham School already had a proto-Keynesian analysis of markets. And Thomas Attwood and even Marshall understood quite well what we now call debt deflation. They deserve as much credit as Marx for making highly insightful contributions to economic theory, perhaps more so.
Finally, there is also an irrational desire that some heterodox Keynesians have to pretend that Marx was “essentially right,” often because they want to pay lip service to Marx or because they are former Marxists themselves and still have an emotional attachment to Marxian theory. But this will not do. Marx was fundamentally wrong, not right.
All in all, whatever insights Marx did have need to be balanced by his disastrous errors and the fact that his whole theory was based on a rotten foundation: the labour theory of value.
BIBLIOGRAPHY
Smith, Matthew. 2004. “Thomas Tooke’s Legacy to Monetary Economics,” in Tony Aspromourgos and John Lodewijks (eds.), History and Political Economy: Essays in Honour of P.D. Groenewegen. Routledge, London. 57–75.