Marxist economics

Just as the term "mercantilism" had been coined and popularised by its critics, like Adam Smith, so was the term "capitalism" or Kapitalismus used by its dissidents, primarily Karl Marx. Karl Marx (1818-1883) was, and in many ways still remains the pre-eminent socialist economist. His combination of political theory represented in the Communist Manifesto and the dialectic theory of history inspired by Friedrich Hegel provided a revolutionary critique of capitalism as he saw it in the nineteenth century. The socialist movement that he joined had emerged in response to the conditions of people in the new industrial era and the classical economics which accompanied it. He wrote his magnum opus Das Kapital at the British Museum's library.

Context

Robert Owen (1771-1858) was one industrialist who determined to improve the conditions of his workers. He bought textile mills in New Lanark, Scotland where he forbade children under ten to work, set the workday from 6 a.m. to 7 p.m. and provided evening schools for children when they finished. Such meagre measures were still substantial improvements and his business remained solvent through higher productivity, though his pay rates were lower than the national average.^[50] He published his vision in The New View of Society (1816) during the passage of the Factory Acts, but his attempt from 1824 to begin a new utopian community in New Harmony, Indiana ended in failure. One of Marx's own influences was the French philosopher Pierre Proudhon. While deeply critical of capitalism, he also objected to those contemporary socialists who idolized association. In his book The Philosophy of Poverty Proudhon made a political economic attack on the classical subsistence theory of wages.(1846)^[51] In his book What is Property? (1840) he argue that property is theft, a different view than the classical Mill, who had written that "partial taxation is a mild form of robbery".^[52] However, towards the end of his life, Proudhon modified some of his earlier views. In the posthumously published Theory of Property, he argued that "property is the only power that can act as a counterweight to the State."^[53] Friedrich Engels, a published radical author, released a book titled The Condition of the Working Class in England in 1844^[54] describing people's positions as "the most unconcealed pinnacle of social misery in our day." After Marx died, it was Engels that completed the second volume of Das Kapital from Marx's notes.

After Marx

The first volume of Das Kapital was the only one Marx alone published. The second and third volumes were done with the help of Friedrich Engels and Karl Kautsky, who had become a friend of Engels, saw through the publication of volume four.

Marx had begun a tradition of economists who concentrated equally on political affairs. Also in Germany, Rosa Luxembourg was a member of the SPD, who later turned towards the Communist Party because of their stance against the First World War. Beatrice Webb in England was a socialist, who helped found both the London School of Economics (LSE) and the Fabian Society.

Neoclassical thought

In the 1860s, a revolution took place in economics. The new ideas were that of the Marginalist school. Writing simultaneously and independently, a Frenchman (Leon Walras), an Austrian (Carl Menger) and an Englishman (Stanley Jevons) were developing the theory, which had some antecedents. Instead of the price of a good or service reflecting the labor that has produced it, it reflects the marginal usefulness (utility) of the last purchase. This meant that in equilibrium, people's preferences determined prices, including, indirectly the price of labor.

This current of thought was not united, and there were three main schools working independently. The Lausanne school, whose two main representants were Walras and Vilfredo Pareto, developed the theories of general equilibrium and optimality. The main written work of this school was Walras' Elements of Pure Economics. The Cambridge school appeared with Jevons' Theory of Political Economy in 1871. This English school has developed the theories of the partial equilibrium and has insisted on markets' failures. The main representatives were Alfred Marshall, Stanley Jevons and Arthur Pigou. The Vienna school was made up of Austrian economists Menger, Eugen von Böhm-Bawerk and Friedrich von Wieser. They developed the theory of capital and has tried to explain the presence of economic crises. It appeared in 1871 with Menger's Principles of Economics.