No, Marx Was Not an Important Economist

An odd battle erupted on social media last week when economist Ben Golub questioned whether students in his field needed to work through “classic” authors such as Adam Smith and Karl Marx to claim expertise in economics. In a viral tweet, English professor Alex Moskowitz cited Golub’s question to indict the entire field: “[E]conomics is not a real discipline…because it hasn’t properly historicized it’s own methods of knowledge production.” “[A] knowledge of the history of one’s discipline is a fundamental part of disciplinary knowledge,” Moskowitz continued, confident he had uncovered a fundamental shortcoming of the economics profession. He then likened the alleged oversight to a sociologist who had never read W.E.B Du Bois, or a psychologist unfamiliar with Sigmund Freud.

Moskowitz’s challenge contained an unintentional revelation of his own unfamiliarity with the history of economics. While few economists would deny Adam Smith his rightful place in the modern discipline’s founding, Moskowitz’s main grievance pertained to Golub’s dismissal of Karl Marx. The rub comes from a common misperception of Marx in most humanities disciplines. To Moskowitz, Marx is an epochal figure in the development of economic theory, and thus, it is “necessary” to understand the discipline’s history. To almost any competent historian of economic thought, however, Marx was never more than a peripheral figure in the economics profession.

One need not take my word for this assessment. The famous progressive economist John Maynard Keynes concurred. In 1925, Keynes visited the Soviet Union as part of a delegation of distinguished academics from the United Kingdom. He met with leading Marxist thinkers, including Leon Trotsky, who expressed hope that Keynes would steer Britain in a socialist direction. Keynes recorded a very different assessment of the Marxist economists he encountered upon his return to Cambridge. The Soviet economists, he wrote, had set up Marx’s Das Kapital as their “bible, above and beyond criticism.” To Keynes, however, Marx’s magnum opus was nothing more than “an obsolete economic textbook which I know to be not only scientifically erroneous but without interest or application for the modern world.”

Keynes would repeat this assessment almost a decade later in correspondence with the playwright George Bernard Shaw, who visited Russia and returned to much controversy after dining with Stalin. “[W]hatever the sociological value” of Das Kapital, Keynes wrote, “I am sure that its contemporary economic value (apart from occasional but inconstructive and discontinuous flashes of insight) is nil.” 

Why would a giant of progressive economics offer such a damning indictment of Karl Marx? Quite simply, Keynes understood what most modern English professors have yet to grasp. When Marx penned Das Kapital in 1867, he adopted an antiquated theory of value that identified the laborer’s improvements on a good as the source of its economic worth. 

To Marx, the labor theory of value was not just an incidental inheritance from earlier classical economists such as Smith and David Ricardo. It was the foundational building block of his entire economic system. Marx used the notion of the laborer’s improvements on a good to derive his own theory of “surplus value,” allegedly the difference between the sale of a finished good and the cost of its production. To Marx, the laborer was deprived of this “surplus value” by factory owners, who underpaid their workforce relative to its productive contribution. Only by rising up and seizing the means of production, Marx then theorized, could labor end this perpetual state of “exploitation” by the capitalist classes.

Marx’s theory has always carried an appeal to persons seeking a justification for revolutionary socialism, modern humanities professors among them. As an economic theory, however, it was never a part of the mainstream canon. Nor did it have any meaningful influence on the development of the discipline. Just four years after Marx wrote Das Kapital, economists William Stanley Jevons in Britain and Carl Menger in Austria simultaneously upended the economics discipline by solving the classical problem of value. Since at least Smith’s time, economists have noticed a paradox in the labor theory of value. While it intuitively appeared to describe certain routine patterns of manufacturing, it could not explain why certain goods varied widely in value depending on the circumstances of a transaction. Consider, for example, the value of a bottle of water in the desert versus the same bottle of water in a convenience store in a major city. As Jevons and Menger deduced, a good’s value comes not from “intrinsic” characteristics such as labor performed in making it but rather the subjective preferences of the parties to a transaction as exercised at the margin or the occasion of the exchange.

Jevons and Menger published their solutions in 1871, sparking what became known as the “marginal revolution” in economics. Subsequent developments in the field substantiated the Subjective or marginal theory of value, effectively displacing the older labor theory of value by the late 19th century. Since Marx constructed his entire system in Das Kapital around the labor theory of value, his text was already obsolete only a few years after its publication—hence Keynes’s indictment of it.

In fact, most economist contemporaries of Marx did not even notice Das Kapital at the time of its publication or for many years later. When marginalist economist Philip Wicksteed happened upon it in 1884, he composed a withering “Jevonian” critique of Marx on account of its faulty theory of value. Additional problems in Marx’s system became apparent by the decade’s end, especially as it struggled to find a solution to the so-called “transformation problem.” Under Marx’s system, labor is operationalized as both an input of production and a priced good. This creates a mathematical circularity in practice, and Marx’s attempts to solve it in the posthumously published notes that became Volumes 2 and 3 of Das Kapital were generally regarded as unsatisfactory.

By the late 19th century, most economists had examined Marx’s arguments and found them undermined by their internal contradictions. In his classic 1890 textbook, Alfred Marshall described Marx’s theory of value as “argu[ing in] a complete circle.” To Marshall, Marx assumed the very contentions he sought to prove by writing them into his premises, then obscuring the act by keeping them “shrouded in mysterious Hegelian phrases.” In 1898, Eugen von Boehm-Bawerk, a student of Menger, published a book-length dissection of Das Kapital that surveyed its internal inconsistencies. 

By the early 20th century, Marx had reached a dead end in the economics profession. In 1920, economist Thomas Nixon Carver summarized the reputation of Marx among economists thusly:

No economist today accepts a single one of the dogmas of Marx. His materialistic interpretation of history is rejected even by most socialists; his labor theory of value is antiquated and inadequate. His theory of surplus value is childish. His theory of commercial crises is still held by a few vociferous but uninformed people in spite of the fact that it is a logical absurdity. His theory of the concentration of capital, to the effect that capital tends to be concentrated more and more into the hands of fewer and fewer persons simply does not work out in fact.

Carver taught the only advanced seminar on socialist economics at Harvard, making him one of the profession’s leading experts on the subject. Others shared his assessment. Francis Y. Edgeworth, editor of the Economic Journal (the profession’s flagship scholarly publication in the early 20th century), expressed his “sympathy with those who hold that the theories of Marx are beneath the notice of a scientific writer.” To Edgeworth, the economics profession only answered Marx out of necessity because the “refutation of prevailing fallacies has always been recognised as part of the economist’s province.”

Much of that necessity arose from a single external political event. In 1917, a tiny yet fanatical band of Marx’s followers took advantage of political instability in Russia to stage a coup d’etat and seize control of the government of a major world power. With the Bolshevik Revolution, Vladimir Lenin not only proclaimed the world’s first Marxist state. He also opened the Russian treasury to the promotion and dissemination of the same Marxist economic theories that the mainstream of the profession had already rejected with cause. In the years that followed, the Soviet promotion of Marx resuscitated him from a position of rejection and relative obscurity in economics and launched him into the academic mainstream, albeit almost entirely in other fields besides economics.

As Keynes’s assessments in 1925 and again in 1934 reveal, most economists—including left-leaning economists—continued to judge Marx’s economic contributions harshly, even after the Soviet promotion campaigns had commenced. Keynesian economist and future Nobel Prize winner Paul Samuelson signified this consensus in his 1962 presidential address to the American Economic Association, stating, “From the viewpoint of pure economic theory, Karl Marx can be regarded as a minor post-Ricardian.” Similarly, critical assessments of Marx’s economic contributions have remained a consistent feature of the discipline from their earliest notice in the 19th century to the present. 

It is true that a small number of Marxist economists still write in the vein of Marx almost 150 years after the publication of Kapital. Some still attempt to resuscitate the Marxian labor theory of value, while others argue that it can be sidestepped by deriving the “exploitation” of labor on other margins. Without exception, though, modern Marxist economists operate on the extreme heterodox periphery of the discipline. To quote George Stigler, another Nobel laureate who maintained a research interest in the history of his field, “the Marxian-Sraffian tradition represent a small minority of modern economists, and that their writings have virtually no impact upon the professional work of most economists in major English-language universities.” 

As with Keynes’s critique, Stigler’s assessment is unlikely to find favor in humanities departments, where academics routinely venture outside of their expertise and present Marx as a preeminent economic thinker. To modern Marxian academics, the judgments of Marshall, Edgeworth, Carver, Keynes, Samuelson, and Stigler may also be brushed aside as “bourgeois economists” or “neoliberals” or some other pejorative moniker. But these are not arguments so much as they are handwaving exercises among the ideologically committed.

Within the field of economics, Marx remains a non-entity for the simple reason that his theories have not withstood the scrutiny of other practitioners in the discipline. They not only failed the test of time—they never took hold among economists in the first place due to deficiencies in Marx’s system at its outset. When an English professor such as Moskovitz ventures far afield of his research competencies and declares that Marx was a preeminent figure in the history of economics, he only reveals his ideological biases while adding nothing of substance to the discipline he purports to critique.