söndag 27 april 2008

Marxism Lives

I was talking to a young man after Mass this morning, Catholic, who astonished me with his statement that Marx had things right.

Marx certainly had insights which remain of value, but his economics in particular was completely screwy, which has a considerable bearing on why Marxist economies never worked. The theory is fatally flawed in its fundamentals.

Most seriously, it regards land as a species of capital. But Land is sui generis. Both land and capital need to be carefully defined before attempting to analyse economic concepts and trying to form a coherent theory of economic relationships. Amongst the mischief done here is that it diverts attention away from the peculiarly privileged position of land owners in the economy through the mechanism of land monopoly.

The second fatal flaw is Marx's Theory of Value. This says that value comes from labour, and that value is a kind of "congealed labour", representing the sum total of the labour that has gone into the production of the item concerned. On a moment's reflection it is obvious that this does not accord even with everyday experience. This led to the development of a body of economic theory which firmly denied that value and labour were related at all. This is not so. Value and labour are indeed related, in that the value of an item is the labour that someone is prepared to give in order to aquire it - in other words, it is labour SAVED.

The third flaw, which arises from the previous two, is the false idea that equal amounts of labour result in creation of the same value. This is to ignore the value of location, which means that labour can be vastly more productive in one location than another. This observation gives rise to Ricardo's Law of Rent. To be fair, Marx seems to identify this with what he terms "surplus value", but because Marx conflates land and capital, "surplus value" is not the same thing as "economic rent". From this notion have arisen all sorts of destructive assumptions such as that the amount of tax people pay should be proportionate to people's incomes, without regard to whether or how those incomes were earned.

Marx has nothing useful to contribute towards social justice and those who are seeking to make the world a better place need to probe more deeply in their quest for a remedy for their cause of concern.

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