On Marxisms Empirical Failure

Luis Silva-Ball
Quite often were told by people we might even consider conservative or libertarian that Marxism isnt a bad theory, its just never been practiced the right way. This is simply fallacious. It is true, admittedly, that Marxism has never been fully implemented the way Marx intended. The reason, however, has not been the errors of practice; but instead, the theoretical mistakes that Marx himself committed. Marxs entire philosophical system was built upon what is known as the Labour Theory of Value. This theory was not of his creation; he inherited it from the Classical Economists such as Adam Smith and David Ricardo, who had developed it as a mere by-product of their vindications of free-markets. Marx, however, adopted it as the foundational stone of his entire philosophy. The Labour Theory of Value claims that the value of any given product is determined by the amount of work (past or present) that has been put into its creation. According to Marxs theory, a labourers time is divided into two parts. The first is that time which is necessary for maintaining himself and his family. The rest is the time the labourer must spend working for the benefit of the capitalist - without earning anything for himself. This last part is the surplus labour time, during which the worker creates value for the sole benefit of the capitalist. This portion of unpaid labour time is what Marx perceived as the bourgeoisies exploitation of the proletariat. If a products value is equivalent to the value of labour, the only way a capitalist can benefit is at the expense of the proletarian labourer by selling the product at its labour value but robbing the labourer by paying him less than his labours worth. The part that is stolen by the capitalist is what Marx calls surplus value in his masterpiece Das Kapital. As a consequence of this economic theory of exploitation in the capitalist system, Marx developed a political philosophy of hatred, class war, and proletarian revolution arguing that capitalism can only lead to mans exploitation. However, Marx has no reason to hold this claim: the premise upon which his politico-economic philosophy is developed is completely flawed. Marx himself realized his grave mistake (and promised to come up with a solution that never came), as just 4 years after Das Kapitals publication, Carl Mengers Principles of Economics was published. In it, Menger demolished the labour theory of value and the surplus labour theory developed in Das Kapital, and consequently destroyed the whole of Marxs theory. Its rather likely that this is why Marx never published the second volume of Das Kapital, in spite of it being practically finished (it was published post-mortem by his associate Friedrich Engels). In one simple paragraph, Menger explains exactly why the foundations of Marxism (and thus the system built upon it) is completely erred:

The value an economizing individual attributes to a good is equal to the importance of the particular satisfaction that depends on his command of the good. There is no necessary and direct connection between the value of a good and whether, or in what quantities, labor and other goods of higher order were applied to its production. A noneconomic good (a quantity of timber in a virgin forest, for example) does not attain value for men if large quantities of labor or other economic goods were applied to its production. Whether a diamond was found accidentally or was obtained from a diamond pit with the employment of a thousand days of labor is completely irrelevant for its value. In general, no one in practical life asks for the history of the origin of a good in estimating its value, but considers solely the services that the good will render him and which he would have to forgo if he did not have it at his command. Goods on which much labor has been expended often have no value, while others, on which little or no labor was expended, have a very high value. Goods on which much labor was expended and others on which little or no labor was expended are often of equal value to economizing men. The quantities of labor or of other means of production applied to its production cannot, therefore, be the determining factor in the value of a good. Comparison of the value of a good with the value of the means of production employed in its production does, of course, show whether and to what extent its production, an act of past human activity, was appropriate or economic. But the quantities of goods employed in the production of a 1 good have neither a necessary nor a directly determining influence on its value.

Having read this paragraph, it becomes impossible to hold any claims defending Marxism; it is evident that its foundations are made of thin air. A products value has no intrinsic relation to the product itself; value is assigned subjectively by the parties interested in exchange supply and demand. The laws of supply and demand also encompass a labourers wages; labour too is a product (or service) whose price is determined by the parties involved. Competition between suppliers and competition between buyers will be fundamental in this price setting. In this manner, capitalist dont exploit labourers (nor do labourers exploit capitalists), they simply hold a mutually beneficial relationship, determining wages by the market price, a price established by competition. Those who claim that Marxism has always failed in practice because it has not been properly implemented are, in a sense, correct it has not been properly implemented. It is also impossible that it should ever be properly implemented; the theory itself is entirely flawed. In order to successfully apply any theory, the theory itself must be correct. Were we to develop a theory that 2+2=5 we would surely realise upon picking two green apples and two red apples that we would have a total of four apples. Just like the theory of 2+2=5, Marxisms empirical failure is inevitable.

Menger, Carl. (1871). Principles of Economics. (2007 Tr. Ed.). Auburn, Alabama: Ludwig von Mises Institute. Pages 146 & 147