inevitable—even if he could not tell when it would come—would emerge not through an attack on capital from outside of capitalism, but from the collapse of the social relations that maintained its internal coherence. Ultimately, the main Marxian lesson is that we cannot reach a post-capitalist world unless we forsake, either willingly or because we must, the very relations that define capitalism as capitalism: value, capital, and wage-labour.
After Marx: The Neoclassicals
Marx is sometimes included among classical political economists because he uses the same categories (value, capital, and wage-labour) found in the political economy that came before him. Putting Marx in the classical box might be convenient, but it is more mistaken than helpful. Marx’s whole point was to critique political economy as a way of knowing, not to redo political economy in a “critical” way. He may have used the concepts the classicals developed, but he historicized and destabilized them in ways they could never have imagined.
Be that as it may, the distinctions between Marx and his predecessors do not much clarify the definitively non-Marxian “neoclassical” political economy that came after him. Most of it was largely unaffected by his thought, at least directly, and was thus not only different from Marx, but developed in ignorance of his analytical contribution. Instead, it represented a very different, liberal reaction to the same classical political economy against which he reacted so strongly. The most important differences between this liberal or neoclassical political economy and the older work of those like Smith and Ricardo lie in those “twists” on Smith’s classical take that I mentioned above.
The first twist is in the theory of distribution. There is a stark contrast between classical theories of political economy that understand prices and exchange as a function of the social relations of production and the neoclassical perspective that they are determined by demand. In fact, the well-known neoclassical doctrine that “without interference” markets will function perfectly (or “clear”) is also known as “demand theory.” The second twist is in the theory of value: while the classicals took capitalist value, the relation of general equivalence, to be inherent in some material substance or human action, the neoclassicals understand it as “subjective,” determined by individual tastes. It is worth considering each of these “neo” twists in some detail, because it is almost impossible to exaggerate how crucial they are to modern economics’ analytical justification for capitalism.
Neoclassical Twist #1: Distribution
For the classicals (in this, at least, we can include Marx), political economic analysis must be founded in society’s relations of production, exchange, and consumption. Of course, thinkers like Smith, Ricardo and Thomas Malthus (perhaps the most famous classical political economists) did not understand their analyses as specific to their historical and geographical context, but assumed their logical universality. They took nineteenth-century England as the historical and geographical centre of the world, and thus they thought they were not writing about just any old place, but about a “modern” set of economic relations that was clearly the direction in which history was headed. This is what Marx meant when he said that classical political economy was formulated as if everyone was, or at least acted like, a petit-bourgeois Brit: in one translator’s rendition, an “English shopkeeper.”
Universalized or not, social relations are the classical basics. Despite the wide range of policy goals classical political economists advocated, all their analysis was oriented toward developing a theory of distribution between the various classes involved in production (labour, capital, and landlords). The point was to explain who gets what and how much, in contrast to “neoclassical” economics. Figuring out what determined prices was a secondary concern.
Perhaps the most important steps in the transition from classical to neoclassical political economy lie in what is sometimes called the “Jevonian revolution.” Although named after William Stanley Jevons, the term in fact describes a shift in economic reason to which many contributed. The Jevonian revolution definitively ended the hold of “who gets what,” class-based analysis in orthodox economics, and instead consecrated the individual “consumer” as the unit of analysis. Like most mainstream economists to this day, he treated individuals and their preferences as ultimate data, neither produced by nor dependent upon anything but each person’s subjective and autonomous decisions regarding what they needed and what made them happy. This change is crucial, especially because it shifted how “who gets what” was understood. In the classical analysis, the distributional question is answered by what each class contributes to production. Labourers get wages, capitalists get profit, and landlords get rent. Even Marx, who felt that capital managed to get its share by “using” the commodity labour-power, understood distribution as determined by socially dominant definitions of each factor’s relative contribution—the amounts received are relative to the (capitalist) value of their “input.”13
In contrast, Jevons said the answer to the distribution question is not determined in production, but in exchange, by prices that reflect individually “given” preferences. Different individuals (forget about classes) get what they can pay for. And what they can pay for is determined by the price of what they want, which is in turn a function of how much there is, and how badly they and others want it. The market, not social relations (like property), determines distribution, and in an entirely objective, “natural” manner. This is a radical change. On this account, the market “decides” without a “decider”; it makes no promises, and it cares nothing for “justice” or what a particular contribution “deserves.” This means distribution is a secondary concern, worked out after price formation, which is a function of supply and demand (and obviously therefore the ability to pay).
It impossible to underplay how important this change turned out to be for life in modern, capitalist societies. The neoclassical doctrine is basically a bald claim that distribution is somehow not a function of, or really even affected by, social power and property relations. Instead, we are told, who gets what is determined outside those processes, in the neutral, apolitical, and un-manipulatable field of the market. This is a critical step toward the idea that “the market” is “natural” and “disinterested”—the principal, maybe the only, basis upon which the word “market” can be paired with the word “free.”
Neoclassical Twist #2: Value
The shift from classical to neoclassical political economy dramatically reconfigured the dominant understanding of value, in a manner very different from Marx’s distinctive critique. Classical economists like Smith and Ricardo held to the labour theory of value we discussed above, the one many people associate with Marx (who granted it a great deal of ideological force, but saw that as why it was necessary to abolish it). Their theory was that things have value in proportion to the amount of labour that goes into producing them. If something takes a lot of time, effort, and skill to produce, or if no one wants to do it, it will cost a lot; if it can be cooked up in a jiffy by anyone, it will be cheap. They did not posit some naïve labour-time price calculation, of course, but argued that labour value describes something like an average, and it will vary by time and place. They also understood that if something is relatively easy to produce, but producing it requires tools that are labour-intensive to produce, then the “total” labour involved will be reflected in a higher value.
Beginning with Samuel Bailey in the mid-nineteenth century, and Jevons a little later, political economists rejected this “substantive” theory of value (i.e., labour is the “stuff” of value). Just as Jevons transformed the theory of distribution in an individualized “consumer” manner, they argued instead that value is not determined “objectively” by stuff-amounts, but “subjectively,” by individuals’ tastes and preferences. If people want a lot of it, and want it badly, it has a lot of value, and its price—the expression of value—will be relatively high, and higher still if there is little of it to go around. This idea—that abstract, uncoordinated, decentralized forces of supply and demand determine the value or price of
