Finance 101 | An Intro To Marxian Economics

By Vinayak Kumar - Delbarton School - NextGenVest Global Business Ambassador - Parsippany, NJ

Want to impress in your next class debate? This intro to Karl Marx and his economic theory will do just the trick.What do you know about the economy today? A few statistics, trends, maybe one or two things about the Federal Reserve. You might even dabble in a little bit of investing every now and then.But ask yourself: where exactly did you learn all of these things? Probably in school, from other people, on the news, wherever the source may have been.Now ask yourself one: What is the rock-solid basis for modern economics today?

The answer is: Capitalism.  

Some would say it’s the most productive and fair economic structure, time-tested and still running smoothly (somewhat). With a short rundown of some of the great philosophers, I hope to give you a different outlook on the economy of the world today.

Let’s get started with Karl Marx.

Marx is the co-author of The Communist Manifesto, and the founder of the socioeconomic political theory of societal analysis known as Marxism.Adam Smith, Marx’s philosophical predecessor and often-called the “father of modern economics,” thought that a commodity had two types of value:1)   A value in trade: A value in trade is the worth of the commodity in relation to other commodities i.e. my gold necklace is worth your gold ring.2)   A value in-use: Value in-use is the utility of the commodity i.e. water’s value in-use is great because it is necessary for life to survive.But how can we measure the value in-use of water and the value in-use of your new bike when they have two completely different uses?

Answer: Labor.

Marx and Smith believed that the universal measure of exchange value for an object (its cost) is the amount of labor time put into it.The amount of socially acceptable labor needed to produce a commodity determines its cost.  So, the average amount of labor it takes to make a towel would be the determinant of the towel’s cost.As technology becomes more advanced, costs become cheaper because the amount of labor needed to produce a commodity is continually lessening.

Commodity Fetishism

Commodity fetishism is one of the many critiques Marx makes of Capitalism.Marx saw that capitalists would quantify the value of something in money; which Marx believed was s fine, up to an extent. Marx thought that Capitalism overdid it, and this perception that an object’s value was determined by its cost neglected the social aspect of the commodity.The social aspect of the commodity is the labor that was actually used to create it.We often talk about the worth of something, or its cost; but do we ever pause and think about the human beings that invested their time into making this commodity—and do we incorporate that into our calculation of the object’s value?According to Marx, we don’t. We reduce the value of a commodity to its price and give money this fantastical significance in our lives. We often talk about the “power of the market” as if the market was a rational being capable of making decisions. This prevents us from having compassionate experiences with other humans, especially those within the working class.And there you have it, a light intro to Karl Marx.

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