Question

Marxian economic theory criticizes capitalism systemically for causing both (a) inequality of income and wealth and (b) instability or cycles/crises of macroeconomic levels of employment, income and social welfare. Explain how the basic Marxian analysis of capitalism supports this criticism.

Answer 1

The capitalist mode of production by karl marx is based on wage-labour and private ownership of the means of production and on industrial technology.

The labor theory of value is one of the most commonly criticized core tenets of Marxism.

The Austrian School and British economist Alfred Marshall attacked Marx, saying: "It is not true that the spinning of yarn in a factory is the product of the labour of the operatives. It is the product of their labour, together with that of the employer and subordinate managers, and of the capital employed". Marshal points to the capitalist as sacrificing the money he could be using now for investment in business, which ultimately produces work. By this logic, the capitalist contributes to the work and productivity of the factory because he delays his gratification through investment. Throug the law of supply and demand, Marshall attacked Marxian theory of value. According to Marshall, price or value is determined not just by supply, but by the demand of the consumer. Labour doesn't contribute to cost, but so do the wants and needs of consumers. The shift from labor being the source of all value to subjective individual evaluations creating all value undermines Marx's economic conclusions and some of his social theories.