Abstract
Socialism cannot be properly understood without a foundation in Marxist economic theory. This theory differs fundamentally from mainstream economic theory in its definition of economic value. In practice, the difference between the two theories is a difference between a centrally planned economy and its free-market alternative, a difference that is determined by Marxism using labor hours, not market prices, as the definition of value. By necessity, this value definition requires a very different model for the allocation of economic resources than what is the case under a price-based value theory. To function, Marxist economics requires central economic planning and motivates the termination of private property as part of its political method.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
For simplicity, it is assumed that inputs and raw materials have been paid for. Marxist theory of capital has its own creative solution to how to define those items under the “capital” concept; that solution is of no consequence to the present example.
- 2.
- 3.
For simplicity, suppose the labor-based value of the output is identical to the market value. This is a strictly hypothetical scenario; any identity between market-price value and labor-theory value is entirely coincidental.
- 4.
Empirically, this may not be entirely accurate.
- 5.
It deserves to be noted in this context that efficiency is only partly about the use of energy and natural resources. It is also a matter of using labor, input products, finances, and land and real estate in the least wasteful, most productive way possible.
- 6.
Notably, the demographic aspect has often made its way into central planning as a corollary to strict economic planning. In the 1930s, when the Swedish social democrats laid the foundations for their welfare state, they saw a need to use indicative central planning to grow the population. In, e.g., China and India, central economic planning in various forms has been coupled with demographic control for the opposite purpose, namely to curb or prevent population growth. More recently, central-planning overtures have been coupled with arguments to limit global population for environmental purposes.
References
Alchian, A. (1950). Uncertainty, evolution and economic theory. Journal of Political Economy, 58(3), 211–221.
Barrow, C. (2000). The Marx problem in Marxian state theory. Science & Society, 64(1), 87–118.
Beach, E. (1975). Marxian analysis. Industrial Relations, 30(4), 772–775.
Berliner, J. (1978). Innovation and central economic planning. Il Politico, 43(1), 47–62.
Bideleux, R., & Jeffries, I. (1998). A history of Eastern Europe: Crisis and change. London: Routledge.
Bronfenbrenner, M. (1967). Marxian influences in “bourgeois” economics. The American Economic Review, 57(2), 624–635.
Davidson, P. (1978). Money and the real world. London: Macmillan.
Galbraith, J. (1973). Economics and the public purpose. Boston: Houghton Mifflin.
Godard, S. (2018). The Council for Mutual Economic Assistance and the failed coordination of planning in the socialist bloc in the 1960s. In M. Christian et al. (Eds,), Planning in cold war Europe: Competition, cooperation, circulations (1950s–1970s). Boston, MA: De Gruyter.
Keynes, J. M. (1936). The general theory of employment. Interest and Money: Harcourt.
Lange, O. (1936). On the economic theory of socialism: Part one. The Review of Economic Studies, 4(1), 53–71.
Larson, S. (2002). Uncertainty, macroeconomic stability and the welfare state. Aldershot, UK & Burlington, VT: Ashgate.
Lau, L. (2016). “As planning is everything, it is good for something!” A Coasian economic taxonomy of modes of planning. Planning Theory, 15(3), 255–273.
Leontief, W. (1938). The significance of Marxian economics for present-day economic theory. The American Economic Review, 28(1), 1–9.
Locke, J. (1960). Second treatise on government: Cambridge texts in the history of political thought. Cambridge: Cambridge University Press.
Manish, G., & Counter, C. (2018, May 29). Labor and capitalist exploitation: Böhm-Bawerk and the close of Marx’s system. Mises Wire.
Nove, A. (1967). Marxist economic theory today. The World Today, 23(12), 493–505.
Nozick, R. (1974). Anarchy, state and Utopia. New York: Basic Books.
Okun, A. (1981). Prices and quantities. Washington, DC: Brookings.
Robinson, J. (1973). Marxian economics today. Social Scientist, 1(8), 43–48.
Roberts, P., & Stevenson, M. (1968). Alienation and central planning in Marx. Slavic Review, 23(3).
Sau, R. (1978). On Marxian economics. Social Scientist, 7(5), 3–12.
Schneirov, R. (2003). New perspectives on socialism II socialism and capitalism reconsidered. The Journal of the Gilded Age and Progressive Era, 2(4), 351–360.
Shackle, G. L. S. (1992). Epistemics and economics. Transaction. Edinburgh: The University Press.
Shove, G. (1944). Mrs. Robinson on Marxian economics. The Economic Journal, 54, 213.
Smith, H. (1957). The definition of socialism: A rejoinder. The Economic Journal, 67(265), 139–142.
Smith, A. (1982). Robert Nozick’s critique of Marxian economics. Social Theory and Practice, 8(2), 165–188.
Sowell, T. (1963). Marxian value reconsidered. Economica, 30(119), 297–308.
Taylor IV, F. (Ed.). (2011). The great lie: Classic and recent appraisals of ideology and totalitarianism. Wilmington, DE: ISI Books.
Yagi, K. (1986). ‘Ownership in capital’ in Marxian economics. Kyoto University Economic Review, 56(1), 50–63.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2021 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this chapter
Cite this chapter
Larson, S.R. (2021). Economics of Socialism 1: Prices vs. Labor Value. In: Democracy or Socialism. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-65643-0_2
Download citation
DOI: https://doi.org/10.1007/978-3-030-65643-0_2
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-030-65642-3
Online ISBN: 978-3-030-65643-0
eBook Packages: Political Science and International StudiesPolitical Science and International Studies (R0)