Marxian economics have been criticized for a number of reasons. Some critics point to the Marxian analysis of capitalism while others argue that the economic system proposed by Marxism is unworkable. There are also doubts that the rate of profit in
capitalism would tend to fall as Marx predicted. In 1961,
Marxian economist Nobuo Okishio devised a theorem (
Okishio's theorem) showing that if capitalists pursue cost-cutting techniques and if the real wage does not rise, the rate of profit must rise.
Labor theory of value The
labor theory of value is one of the most commonly criticized core tenets of Marxism. The
Austrian School argues that this fundamental theory of classical economics is false and prefers the subsequent and modern
subjective theory of value put forward by
Carl Menger in his book
Principles of Economics. The Austrian School was not alone in criticizing the Marxian and classical belief in the labor theory of value. British economist
Alfred Marshall attacked Marx, saying: "It is not true that the spinning of yarn in a factory [...] is the product of the labour of the operatives. It is the product of their labour, together with that of the employer and subordinate managers, and of the capital employed". Marshall points to the capitalist as sacrificing the money he could be using now for investment in business, which ultimately produces work. Shimshon Bichler and Jonathan Nitzan argue that most studies purporting to show empirical evidence of the labor theory of value often make methodological errors by comparing the total labor value to total price of multiple economic sectors, which results in a strong overall correlation but this is a statistical exaggeration; the authors argue that the correlations between labor value and price in each sector are often very small if not insignificant. Bichler and Nitzan also argue that because it is difficult to quantify a way to measure abstract labor, researchers are forced to make assumptions. However, Bichler and Nitzan argue these assumptions involve
circular reasoning:
Distorted or absent price signals The
economic calculation problem is a criticism of
socialist economics or, more precisely, of
centralized socialist planned economies. It was first proposed by
Austrian School economist Ludwig von Mises in 1920 and later expounded by
Friedrich Hayek. The problem referred to is that of how to distribute resources
rationally in an economy. The
free market solution is the
price mechanism, wherein people individually have the ability to decide how a good should be distributed based on their willingness to give money for it. The price conveys embedded information about the abundance of resources as well as their desirability which in turn allows on the basis of individual consensual decisions corrections that prevent
shortages and
surpluses. Mises and Hayek argued that this is the only possible solution and, without the information provided by market prices, socialism lacks a method to rationally allocate resources. The debate raged in the 1920s and 1930s and that specific period of the debate has come to be known by
economic historians as the
socialist calculation debate. In practice,
socialist states like the Soviet Union used mathematical techniques to determine and set prices with mixed results.
Reduced incentives Some critics of socialism argue that income sharing reduces individual incentives to work and therefore incomes should be individualised as much as possible. Critics of socialism have argued that in any society where everyone holds equal wealth there can be no material incentive to work because one does not receive rewards for work well done. They further argue that incentives increase productivity for all people and that the loss of those effects would lead to stagnation. In
Principles of Political Economy (1848),
John Stuart Mill said: It is the common error of Socialists to overlook the natural indolence of mankind; their tendency to be passive, to be the slaves of habit, to persist indefinitely in a course once chosen. Let them once attain any state of existence which they consider tolerable, and the danger to be apprehended is that they will thenceforth stagnate; will not exert themselves to improve, and by letting their faculties rust, will lose even the energy required to preserve them from deterioration. Competition may not be the best conceivable stimulus, but it is at present a necessary one, and no one can foresee the time when it will not be indispensable to progress. However, he later altered his views and became more sympathetic to socialism, particularly
Fourierism, adding chapters to his
Principles of Political Economy in defence of a socialist outlook and defending some socialist causes. Within this revised work, he also made the radical proposal that the whole wage system be abolished in favour of a co-operative wage system. Nonetheless, some of his views on the idea of flat taxation remained, albeit in a slightly toned-down form. The economist
John Kenneth Galbraith has criticised communal forms of socialism that promote egalitarianism in terms of wages or compensation as unrealistic in its assumptions about human motivation: This hope [that egalitarian reward would lead to a higher level of motivation], one that spread far beyond Marx, has been shown by both history and human experience to be irrelevant. For better or worse, human beings do not rise to such heights. Generations of socialists and socially oriented leaders have learned this to their disappointment and more often to their sorrow. The basic fact is clear: the good society must accept men and women as they are.
Edgar Hardcastle responds to this by saying: "They want to work and need no more inducement than is given by the knowledge that work must be done to keep society going, and that they are playing their part in it along with their fellow men and women." He continues by criticising what he sees are the
double standards of anti-socialists: "Notice how they object to the unemployed receiving a miserly dole without having to work, but never object to the millionaires (most of them in that position through inheritance) being able to live in luxurious idleness." Authors like
Arnold Petersen argue that arguments such as these are inaccurate as
hunter-gatherers practiced
primitive communism without problems such as these.
Inconsistency Vladimir Karpovich Dmitriev writing in 1898,
Ladislaus von Bortkiewicz writing in 1906–1907 and subsequent critics have alleged that
Karl Marx's
value theory and law of the
tendency of the rate of profit to fall are internally inconsistent. In other words, the critics allege that Marx drew conclusions that actually do not follow from his theoretical premises. Once those errors are corrected, Marx's conclusion that aggregate price and profit are determined by—and equal to—aggregate value and surplus value no longer holds true. This result calls into question his theory that the exploitation of workers is the sole source of profit. The inconsistency allegations have been a prominent feature of
Marxian economics and the debate surrounding it since the 1970s.
Andrew Kliman argues that since internally inconsistent theories cannot possibly be right, this undermines Marx's
critique of political economy and current-day research based upon it as well as the correction of Marx's alleged inconsistencies. Critics who have alleged that Marx has been proved internally inconsistent include former and current Marxian and/or
Sraffian economists, such as
Paul Sweezy,
Nobuo Okishio,
Ian Steedman,
John Roemer,
Gary Mongiovi and
David Laibman, who propose that the field be grounded in their correct versions of Marxian economics instead of in Marx's
critique of political economy in the original form in which he presented and developed it in
Capital. Proponents of the
temporal single system interpretation (TSSI) of Marx's value theory, like Kliman, claim that the supposed inconsistencies are actually the result of misinterpretation and argue that when Marx's theory is understood as "temporal" and "single-system", the alleged internal inconsistencies disappear. In a recent survey of the debate, Kliman concludes that "the proofs of inconsistency are no longer defended; the entire case against Marx has been reduced to the interpretive issue".
Relevance Marxism has been criticized as irrelevant, with many economists rejecting its core tenets and assumptions.
John Maynard Keynes referred to
Capital as "an obsolete textbook which I know to be not only scientifically erroneous but without interest or application for the modern world". Keynes also wrote "I believe that the future will learn more from the spirit of
Gesell than from that of
Marx". According to
George Stigler, "Economists working in 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". In a review of the first edition of
The New Palgrave Dictionary of Economics,
Robert Solow criticized it for overemphasizing the importance of Marxism in modern economics: Marx was an important and influential thinker, and Marxism has been a doctrine with intellectual and practical influence. The fact is, however, that most serious English-speaking economists regard Marxist economics as an irrelevant dead end. A 2006 nationally representative survey of American professors found 3% of them identify as Marxists. The share rises to 5% in the humanities and is about 18% among social scientists. == Social ==