The Long Argument: Capital vs. Labor · Episode 3 of 12 · 22 min
The Rebuttal: The Economists Who Answered Marx
After Marx charged that the wage system is organized extraction, the economists who followed concluded nearly the opposite. Marginalists, Böhm-Bawerk, Schumpeter, Keynes, Hayek and Friedman rebuilt the case for markets, citing usefulness at the margin and rising living standards. Modern evidence on minimum wages and monopsony then shows how much marginal product can hide.
Who's who
- Carl MengerAustrian economist and founder of the Austrian school
- John Bates ClarkColumbia economist whose marginal productivity theory answered the exploitation charge
- Eugen von Böhm-BawerkAustrian economist and Marx's most formidable early critic
- Joseph SchumpeterEconomist who described capitalism's perennial gale of creative destruction
- John Maynard KeynesCambridge economist who sought to save capitalism from itself
- Friedrich HayekEconomist who wrote The Road to Serfdom and on knowledge
- Milton Friedman+1 more episodeChicago economist and author of Capitalism and Freedom
- Rudolf HilferdingAustrian Marxist who answered Böhm-Bawerk in 1904
Where it happens
- New JerseySite of the 1992 minimum-wage increase studied by Card and Krueger
Timeline
- 1871Jevons and Menger independently relocate value from labor cost to marginal utility
- 1896Böhm-Bawerk calls Marx's transformation problem a great contradiction
- 1899Clark argues each factor earns its marginal product
- 1936Keynes's General Theory treats unemployment as demand failure
- 1942Schumpeter publishes Capitalism, Socialism and Democracy
- April 1, 1992New Jersey raises its minimum wage, tested by Card and Krueger
Still debated
Historians of economics disagree on whether marginalism refuted Marx or changed the subject, and on whether interest pays for a real service or rewards ownership. Whether wages equal marginal product in practice, and what the growth record proves, are also open.