Sunday, November 7, 2010

Karl Marx, Original Real Business Cycle Theorist

From Theories of Surplus Value:
Let us assume that wages and profit fell simultaneously in total value, from whatever cause (for example, because the nation had grown lazier), and at the same time in use value (because labour had become less productive owing to bad harvests, etc.), in a word, that the part of the product whose value is equal to the revenue declines, because less new labour has been added in the past year and because the labour added has been less productive...
Prescott, Barro, Sargent, Lucas, etc. owe this guy royalties! or at least a footnote.


  1. Heh, it goes both ways -- Here's Lucas from a Minneapolis Fed paper sounding a lot like Marx:

    Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution. In this very minute, a child is being born to an American family and another child, equally valued by God, is being born to a family in India. The resources of all kinds that will be at the disposal of this new American will be on the order of 15 times the resources available to his Indian brother. This seems to us a terrible wrong, justifying direct corrective action, and perhaps some actions of this kind can and should be taken. But of the vast increase in the well-being of hundreds of millions of people that has occurred in the 200-year course of the industrial revolution to date, virtually none of it can be attributed to the direct redistribution of resources from rich to poor. The potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production.

  2. Another chapter, same book:

    Good times.

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  5. Dan-

    What do you think is specifically Marx-ish in that quote? I'm not seeing it. Whereas RBC theorists really do explain unemployment in terms of preferences for leisure. The joke that RBC implies the Great Recession is a Great Vacation is familiar. That's why I thought it was funny to find the smae suggestion (obviously as a counterfactual, not a serious argument) in Marx.


    Yes, there is an interesting affinity between new classical economics and (much of) Marxist economics in that neither see finance as playing a major independent role in capitalist dynamics. David Kotz likes to make fun of "supply-side" Marxists, and he's got a point.