Marxist and Neoclassical Theory

I’m reading Rick Wolff and Steve Resnick’s Contending Economic Theories, which compares Marxist, Keynesian, and Neoclassical economic theories.  Wolff and Resnick are very familiar with the theories – they’ve done scholarly work contributing to the field of Marxist economic theory, and they’ve taught (mostly) neoclassical economics at the University of Massachusetts – Amherst for decades.  They are well informed and the book is easy to read.

Recently the book has made me ponder the use of economic theories in those day to day small-talk conversations.  Two years ago, while speaking with a group of friends about the recent news that paid internships for college students/grads were disappearing, a friend gave a short lesson in supply and demand to explain the change.

In retrospect, I’m now realizing that he was applying one economic theory, Neoclassical, and to add to the conversation I didn’t need to argue against his interpretation, but rather I could also add another perspective – the Marxist one.

Now, Marxism has never denied the effects of supply and demand, but rather seeks to go beyond it.  What happens when supply and demand are in equilibrium?  Why do they balance at that point?  What else is at play?

How I Could Have Responded:  Clearly supply and demand are part of it, but I don’t think they are the whole story.  There are some clear winners and some clear losers in this scenario.  Employers are getting labor for free (something they normally need to pay for, and something that is required to keep their business running), and the workers (interns) are getting nothing in return.  Class struggle also play a part in this change.  Employers needed to decide to shift from paid to unpaid interns.  That didn’t just happen magically.  If there were social taboos against not paying interns that’s something that could prevent the shift.  If there was legislation requiring interns to be paid a certain amount that could also stop the shift.  There are a whole world of forces out there beyond supply and demand that go into shaping our world.  Politics, laws, cultural norms, and class struggle are among these forces, and are clearly all influenced by each other.  So it’s fine to look at this as an effect of supply and demand, but be aware that there are other factors at play too, and some of them may even be more useful in explaining this change.

Wolff and Resnick call this approach to causation “overdeterminism”  – everything is effected by everything else.  They use it the way many other Marxist use “Dialectics”.  In fact, they introduce overdeterminism as a new more accurate term for dialectics.  Whichever word you use, it gives Marxism a clear advantage as a theory.  It makes it very flexible to use for understanding complex situations.  Instead of the caricature of Marxism where everything boils down to economic (and sometimes technological) determinism, this approach to causation allows for theorists to move between politics, science, culture, economics and more the way Marxists have often done.  Neoclassical economic theory has nothing to say about literature, while Marxism is a staple of critical literary theory – this is because Marxists have traditionally been excited by other fields of study and ready to blend and mix them with what they already know,  making the range and scope and ultimately the understanding of Marxists more broad, more deep, and more complete.

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What’s your Labor Worth?

Are you paid what your labor is worth?

I asked this question with a group of friends and got a variety of answers – “yes, but… yes, if…. not even close… depends on how you look at it…  compared to my last job…”

Then I asked a harder question “how do you know how much your labor is worth?”  This really gave them pause.  Nobody really knew how to figure that out.  We ended up with comparing to other people or to other jobs, but neither of those answers seemed satisfactory.

  • If you are consistently underpaid then comparing to other jobs you’ve had doesn’t give you the real value of your labor.
  • Comparing to other people was just too hard to do for the vast majority of jobs today – there are too many components to doing a job well and people don’t necessarily agree on them – so how could you ever measure those.

Then came the cut-the-b.s. moment.  I brought out two different ways of viewing the value of labor.

Theory one: Your labor is worth exactly how much you get paid.  Just like how a car is worth whatever it sells for, your labor is worth whatever you can get someone to pay you.  This means that you are never underpaid, you are always paid the right amount.

Theory two: Your labor is worth more than you are paid for it.  Your employer hires you only if the amount of value you create is more than the amount he will be paying you.  Otherwise there is no incentive for him to hire you.  This means that all people are underpaid (assuming their employer is smart enough to fire them if they aren’t adding enough value).

I then explained that theory one belongs to neoclassical economic theory, while the second theory belongs to Marxist economic theory.  Some friends found them both to be correct, and I agree – they both make sense.

The next interesting question is “how does each theory account for the opposing theory’s seemingly also correct stance?

Neoclassical theory basically just doesn’t.  According to neoclassical economists you don’t create more value than you are paid – that’s it, there’s only one number.  In other words, it just ignores the question.

Marxists have taken a much different approach – they recognize both numbers (how much you are paid AND how much value you create), and consider them two different but related things.

The first is the value of LABOR POWER.  Labor power is your capacity to work – your time, muscles, and brains hold this potential, and you essentially sell this potential to your employer when you are hired to do a job.

Your employer uses the commodity he has bought (by telling you what to do, and then by making sure you do it), in order to create a new thing – labor.  Labor is the actual work you do, which has greater value than labor power.

You sell labor power for it’s value (your wage), but then by the act of simply doing your job, you transform labor power into labor for your employer, and your employer pockets the difference.

Now we’ve got two distinct theoretical objects that help us distinguish between these two ideas – but how do Marxists explain the difference in value between the two?

There are two ways to approach this.  The simplest quickest answer is that Capitalism enforces a difference in the values because no employer would pay it’s employees that much – and if they did they wouldn’t remain competitive in the marketplace.  Capitalism discourages, disincentivizes and eventually purges any employers that might try to do this.

Another answer is that labor power is priced at its “cost of production” like other commodities.  Now, the “cost of production” of labor power is more slippery than that of other commodities like a shoe.  The cost of production of labor power at the very least is the cost to house, feed, and clothe a human, but also goes above and beyond that to meet a certain socially determined standard of living.  The level of this standard is something constantly debated and struggled over between the classes of society.

There you have it.  Your employer pays you what it takes to get you to show up (a socially determined standard of living that is the object of class struggle and other forces).  You then do your job which creates a greater amount of value.  The difference between these is the source of economic growth, dividends, and other payments that employers make to secure their continued privileged position of power for the future.

So what’s your labor worth? – More than the market value of your labor power.

What’s your labor power worth?  A value determined by the market, class struggle, technology and a host of other factors.

Final Point:  You are paid what society says you are “worth” (what it has to pay you), but when you work, you create much more (which is the reason they decided to hire you in the first place).

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World History

A friend recommended a Youtube series to me titled “Crash Course World History”.  I’m impressed by the quality of the videos and I’m glad that folks are growing a space for educational videos on Youtube.

crashcourse

Great Men?

My take on John Green’s (and Raoul Meyer’s) crash course in world history is that it does a relatively good job with history.  Now to be clear, I’m no professional historian nor really much of an amateur one.  But Green’s attacks on the “great men” theory of history are solid and are a much needed clarification since most primary and secondary history courses are taught using this flawed theory.  For those unfamiliar with it, the idea is essentially that great men (and every once in a while a great woman) are who make history – so you study George Washington, or Napoleon, with no or little attention to the lives of the vast majority of people.  This gives a sense that these men were leaders who changed the world, rather than simple figureheads who became a symbol of much larger and complex issues involving large groups of people.

Moving away from the “Great Men” theory leaves a narrative gap – how do you tell the story of world history if it’s not the parade of leaders?  Green only does OK with creating another narrative.  He emphasizes complexity but he admits that his format often causes him to ignore complexities.  In the end, Green offers several “lessons” of merit, but no overall framework for understanding history, which is what an understanding of Marxism could provide to a study of history.

Green on Marx

But how does Green treat Marxist thought?  Not particularly well.  He paints a caricature of Marxists as brutal dictators or as unsophisticated students, or at the best rudimentary social theorists with a one-track mind on economics only.

However, despite the bad rap that Marxism gets on his show, many of the important pieces of analysis are drawn or connected to Marxist theory.  In one episode, Green refers to himself as a Keynesian Centrist, so it’s clear he is no Marxist, but I think he, as with many liberals/centrists, has certain sympathies with Marxist theory.  If only he could overcome the rudimentary caricature of Marxism that he presents, he may find it more meaningful.  To my point and his credit, Green does favorably cite Fredric Jameson in one episode, but fails to mention Jameson being a Marxist or the quote being related to Marxist theory.

A Marxist History Course?

Noting Green’s “textbook” understanding of Marxism, I thought how a space could be made for a Marxist World History course.  This also made me think of Chris Harman’s “A People’s History of the World” which I haven’t read yet.  My point being that history has been studied by Marxists and they have applied Marxist theory to history – however, this scholarship is not popularized like other stories of History.  Harman’s book is a step in this direction, but I would love to see a World History mini-series online that would highlight the events of history using Marxist analysis.  I won’t be planning to take this on for Marxism Today – partially because that’s not what this Podcast is for and partially because I’m not well-read enough in history for that now.  But none-the-less this would certainly be a project worth exploring for the online Marxist community.

Here’s the link:

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Why I Joined the DSA Video

 

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Why I Joined the Democratic Socialists of America

Ever think about joining a socialist organization?  Here’s my thoughts on why I did.

Episode 3-01 Why I Joined the DSA

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Joining Up

Hi Readers,

I few months back I decided to join a socialist organization. I was a member of Socialist Alternative in college, and I enjoyed that. This time I’m joining up with the Democratic Socialists of America, which I’m starting to learn seem to get a little flack for not being as focused on revolution as other socialist groups. I haven’t been a member long enough to comment on that, but perhaps it will make for a good episode later on.

Anyway, the point of this post is to share a short article I wrote for the DSA newsletter upon joining, all about why I joined.

Why I Joined the DSA
I’ve considered myself a socialist for years. I starting reading Marx in college, but my participation in organized groups has always been limited. For only one semester, I joined the campus Socialist Alternative group, and now several years later I’ve decided to join up with another organized group, this time the Democratic Socialists of America.

For many leftists in the Millennial generation, mass organizations are intrinsically suspicious – corporations are money sucking con-men, the government drags us into war and bails out banks, churches seem most interested in controlling our beliefs, and our exposure to unions is either non-existent or consists of little more than paying dues. In a certain light it’s no wonder that the young left is sometimes resigned to individualistic sequestered actions: listening to radical rock or hip hop music, watching Democracy Now!, or reading the latest Slavoj Zizek book while never joining up with other leftists in their community.

I’ve made that step outside the walls of my own home to meet with others. To give up a portion of that precious commodity, free time, and joined the DSA. But why? Why now? And what am I expecting to get out of it?

I joined the DSA because, in short, I needed to. It’s been five years since the start of “the Great Recession” and little has been done about the challenges we face. Millions of people are looking for work but are left unemployed, and millions more are employed in jobs that are underpaid and unfulfilling. Because capitalism seeks only to create employment to the extent that it serves to produce average or greater profits for the 1%, it is incapable of putting together the unemployed with our country’s unused capacities (places of work and machines laying idle) in order to meet the great social need that we see all around us. Anyone in the millennial generation knows at least a few people, if not dozens or scores, that are unemployed or (more likely) grossly underemployed – their minds unstimulated by their jobs and their talents not harnessed.

I joined because we’ve had five years of recession and the banks have only gotten bigger than before. Because nothing has happened to change their basic structure or the structure of our economy. Because we’re all still waiting for a bailout for the middle and working class. At the very least we need to start discussing alternatives to a system that kicks people out of houses so they can sit empty, and workers out of jobs so workplaces can gather dust – a system that is prone to crises, that alienates us from the fruits of our labor and from each other, that barrels towards ecological destruction.

What we have is a social problem, a societal problem, a systemic problem, and attempting to solve a problem like this in and individual way is a recipe for frustration and resignation. I joined the DSA because I could not continue to individually read, think, and watch without sharing and talking with others. The first step in any movement or change is to simply talk to others. Without meeting with others we are divided and weak. We are made to feel crazy or like outcasts by the corporate media. The small and simple step of meeting and talking with others has profound psychological implications. Just knowing that you are not alone in your worries, thoughts, and struggles is healing to your psyche.

Of course, we know that while philosophers have interpreted the world, that the point is to change it, but we cannot change anything if we are divided and if we haven’t even taken the time to meet with others to discuss and work cooperatively. Only together can we save the world from the irrationality of capitalism.

-Red Wagner

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Another Year Older

Hi Folks,

We’ve ended our second season and in a few months we will be starting our third season. The second started strong, but due to some personal commitments ended relatively early with the exception of the Kristen Interview episode late in the season. The second season also brought a new video format. I’ve left the powerpoint style behind and opted instead for a simplistic drawing based video feed. I think this lends itself to providing more to the podcast than the powerpoint format did. If you have thoughts on it, let me know.

In the last episode of the season I brought in another voice besides my own. I did this briefly in season one as well, and it’s something that continues to intrigue me. I think there is certainly some potential there. Specifically in making the podcast more spontaneous and less scripted. Again, let me know your thoughts.

A review of our second season:
5 new episodes, for a total of 20
10 new posts on this blog, for a total of 33
6890 new views of this blog, for a total of 9128
5 new videos, for a total of 24
160 new video channel subscribers, for a total of 340
16,963 new video views, for a total of 23,797

In summary our rate of output was slower, but our rate of views or listens increased.

Looking forward to season three, I’m hoping to include others more in the episode, but the extent to which this will happen is an unknown. I also hope to put out more than five episodes. I think 9 episodes would be the right amount for a season. That would be one each month, but gives me a few free months for when I know I won’t be able to put out a new episode.

Thanks for listening and stay tuned!

-Red Wagner

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