Was Karl Marx right and relevant today?
With capitalism in trouble and society becoming more stratified, many people are asking the question, was Karl Marx right? Maybe not in full but partly, did Marx’s economics make some sense? People have dismissed Marx, however, why was he so wrong? There is a very clear answer. It is so fundamental, that you do not have to look further. Karl Marx was horribly wrong and incorrect. In fact, I can not imagine how thinking people can not see this. Why anyone would think differently after they understand his basic flaw in his economic theory.
Karl Marx on price
In the communist manifesto Marx wrote:
But the price of a commodity, and therefore also of labour, is equal to its cost of production.
On this one sentence, all of his economic theory is wrong. In fact, his economic doctrine is nothing more than an optimum for the masses. Marx was wrong because the price of any good is determined by supply and demand. The price of labor is determined by supply and demand.
How crazy is it, that people somehow connect the cost of production with a price. When did cost have anything to do with the price? So does that mean if I make some expensive useless thing that no one cares about I can charge a high price? Does that mean if I am some expert on door hinges on Medieval outhouses and I did my Ph.D. on this I should be paid more for this?
I live in Kraków, Poland and a builder here told me he will be selling each unit in a building he completed for 10,000 a meter. Did I ask him why? He said he calculated the cost of production and factored in a nice profit. I said that is too much given the market conditions. People do not make that much and will go for alternative solutions, the demand will not be there. The apartment complex has been empty for years and the bank is taking it. The market does not care what you paid for something. If you buy a stock do you think the person you are trying to sell it to cares about your investment cost?
If you buy anything the value of something is determined by the aggregate demand and aggregate supply. This is marginal economics. It is illustrated in something called the diamond water paradox, that is diamonds are expensive but have no utility or value. While water is necessary for life but is cheap. Because supply and demand determine price not some abstract notion of the cost of value.
A few of my friends are anti-capitalist. They never can answer in a direct way about the question what about the Marxist theory of price and wages? Marx was more of a fictional novelist and anti-capitalist then an economist.
Now there is no need to explain this further or go into his theory further. However, I invite you to read the rest of this post as it has great internal resources that further illustrate the fabric of Marxism and socialism.
Living in a post-communist world
I live in Poland. You will find no followers of Karl Marx’s. I wonder why? Herein Eastern Europe everyone knows it is all fake. Marxism, socialism is about big government and corruption. If prices are not determined by the market, there is something called non-price rationing. Everyone suffers as it is a system built on unfairness. It does not work. Marx’s theory has not a shred of truth in it because Marx did not understand how prices or economic value is determined.
The world I live in, that is a post socialistic country is trying to rebuild from socialism. I have no idea why people living in rich America believe capitalism has failed and America will collapse. America in crisis is so rich you can not believe it. Americans are spoiled if they think capitalism has failed and socialism and Karl Marx was right. People who think Marx was right or capitalism is bad or is capitalism over, need to live in a socialist country or post-socialist country for a while.
Now that you understand why Karl Marx was wrong to take my poll on whether capitalism is good or bad.