Topic 4: Marx Flashcards
VERY IMPORTANT: What did Karl Marx hate?
- capitalism
- specialization/division of labor (anti-Smith and Ricardo)
- thinks it’s dehumanizing and causes worker alienation
VERY IMPORTANT: What did Karl Marx like?
- Socialism leading to Communism
- Scientific Socialism
VERY IMPORTANT: What’re Karl Marx’s ideas?
- historical materialism
- scientific socialism
- societal change occurs through conflict b/n social classes: his chronological modes of production
- worker alienation/exploitation
- surplus value
- social classes
- Transformation Problem
Who was Marx influenced by and how?
British political economists like RICARDO and SMITH influenced Marx to shift focus from worker alienation to economic matters like EXPLOITATION
VERY IMPORTANT: What theories did Marx create?
- Labor-embodied theory of value
- Falling rate of profit theory
What was Marx’s theory of value?
Marx’s theory of value was the LABOR-EMBODIED THEORY OF VALUE
What was Marx’s LABOR-EMBODIED THEORY OF VALUE?
Marx used Ricardo’s LTV on how a commodity’s value is determined by how much labor goes into it
However, he extended Ricardo’s LTV by adding concept of surplus value, so Value = C+V+S (RHS in units of variable time) where C=Constant Capital=Ricardo’s indirect labor, V=Variable Capital=Ricardo’s direct labor, S=surplus value (new)
Surplus value is the extra profit capitalists extract from workers after paying their wages, so it represents the degree of worker exploitation
In Marx’s LABOR-EMBODIED THEORY OF VALUE, what’s surplus value?
S=surplus value= the extra profit capitalists extract from workers after paying their wages, so it represents the degree of worker exploitation
How does Marx define worker alienation?
When workers become increasingly separated from the products of their labor, their humanity, and other workers
What’s Marx’s idea of historical materialism?
That MATERIAL ECONOMIC CONDITIONS (like means of production, class relations) shape society and history, NOT ideas
Therefore, he thinks history advances thru successive modes of production
How did Marx define social classes?
He defined social classes by their relationship to the means of production (ie. who controls the resources and who works)
How did Marx define social classes in capitalism?
- CAPITALISTS control the means of production
- WORKERS sell their labor to capitalists to do production
IMPORTANT: How do you define means of production?
Means of production are the resources and tools to produce commodities
Like machinery, land, inputs etc.
What’s the purpose of Marx’s falling rate of profit theory?
Marx used it to argue that capitalism will collapse bc it causes profit rate to continuously decrease through its replacement of variable capital (humans) with constant capital (machinery)
IMPORTANT: How does Marx’s falling rate of profit theory work?
- Capitalists will continuously replace V with C to be more efficient
- This decreases V but increases C, therefore increasing organic composition of capital (=C/C+V)
- This also decreases S surplus value
- 2 and 3 continuously decrease profit rate r = S/(C+V)
(extra: rate of exploitation e=S/V, and pi sub i see notes)
CAVEAT: This continuous profit rate decrease is not linear (see notes)
IMPORTANT: How does profit rate change in Marx’s falling rate of profit theory?
Profit rate continuously decreases, BUT it’s not linear: it goes up and down bc of economic events like tech advancements, labor cost changes, etc.
What’s Marx’s Transformation Problem?
What effect did Marx have?
He inspired SOCIALIST ECONOMIES
