Karl Marx was not an economist: a REBUTTAL

„The Marxian contribution to economics can be readily summarized as virtually zero…“ (Thomas Sowell)

Discoveries in Marx’s Capital are recognized even by Keynesians and they are the following (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.

“While Marx’s ideas would have been discussed in economics in an earlier era, today they are nowhere to be found.” (Yash Dubey)

“Professional economics as it exists today reflects no indication that Karl Marx ever existed.” (Thomas Sowell)

Marx’s magnum opus Das Kapital is the most cited book in the economics published before 1950 with 40,237 citations according to Google Scholar. The graph below only indicates that Karl Marx’s ideas are present more than ever, with clear indication of upward trend by every year following.

“Economics simply deals with the problem of the allocation of resources. As resources are scarce, they need to be allocated efficiently to the people in society who are involved in such activities. Economics is the science that deals with the problem of resource allocation in society, which makes it a social science. Nobody has the capability to allocate these resources; thus, it is best done by the market mechanism, the so-called invisible hand.” (Yash Dubey)

The market can be viewed as computing engine – this is explicit in Hayek. Cycle time is slow, measured in months or years. The market arrives at answer by physically adjusting production up or down. The market constantly tends to overshoot in an unstable way. Human costs are enormous to these adjustments. Why computers better than markets?

Because computers are faster. Computers can predict where an ideal market economy would get to if it ever had the chance. Production can then be adjusted directly to this target. Cycle time for computation is in the order of hours not years or months.

Hayek argued that socialism could never handle the tacit dispersed knowledge that enables an economy to function. The price mechanism was a cybernetic control system that transmitted private information to where it was needed. Example he gave was of a shipping clerk who has private expert knowledge of the sailings and arrivals at various ports.

Paradoxically transport – air transport at least was the first industry to be subjected to comprehensive computerised planning. The Boadicea airline booking system opened in the 1960s. Now all airline booking is computerised and shipping clerks are a thing of the past.

Clearly it is the Airbus factories that have the information about what parts are used to make an A340. This information corresponds to what Hayek  called  tacit knowledge – but it is of course no longer human knowledge. Literally nobody knows what parts go into an A340. The information, too vast for a human to handle, is stored in a relational database.

At an earlier stage of industrial development it would have been dealt with by a complex system of paper records. Again the knowledge would have been objective, residing in objects rather than in human brains. The very possibility of large scale, coordinated industrial activity rests upon the existence of such objectivised information. Hayek’s subjectivism makes him misunderstand the objectivity of industrial information.

In many of his own works Marx deals with the problem of the allocation of resources. He strongly believed resources are scarce, that they need to be allocated efficiently to the people in society who are involved in such activities. According to him, the future communistic society frequently will have to take opportunity cost into account when planning the economy:

“If we conceive society as being not capitalistic but communistic, there will be no money-capital at all in the first place, not the disguises cloaking the transactions arising on account of it. The question then comes down to the need of society to calculate beforehand how much labour, means of production, and means of subsistence it can invest, without detriment, in such lines of business as for instance the building of railways, which do not furnish any means of production or subsistence, nor produce any useful effect for a long time, a year or more, while they extract labour, means of production and means of subsistence from the total annual production. In capitalist society however where social reason always asserts itself only post festum great disturbances may and must constantly occur. On the one hand pressure is brought to bear on the money-market, while on the other, an easy money-market calls such enterprises into being en masse, thus creating the very circumstances which later give rise to pressure on the moneymarket. Pressure is brought to bear on the money-market, since large advances of money-capital are constantly needed here for long periods of time. And this regardless of the fact that industrialists and merchants throw the money-capital necessary to carry on their business into speculative railway schemes; etc., and make it good by borrowing in the money-market.” (Capital, Volume II, p.149)

Here Marx strictly speaks of opportunity cost expressing the basic relationship between scarcity and choice. For him taking into account the notion of opportunity cost plays a crucial part in ensuring that resources are used efficiently by the communistic society. Thus, if economics is the science that deals with the problem of resource allocation in society and Marx obviously dealt with this problem in his works, then this refutes the claim of Yash Dubey that Marx cannot be considered an economist.