Madsen\’s mistake


To say that that is the mistake that Marx made is a mistake: for he made more than one.

Got quite a bit right too, obviously. The bits he cribbed off Smith are just fine for example.

14 thoughts on “Madsen\’s mistake”

  1. You don’t expect us to sit through a video do you? What specifically does he say Marx got wrong?

    Also, far from cribbing a bit off Smith, Marxian economic theory is a direct descendent of Smith via Ricardo, lumbering us with the error of economic analysis by class (are ye a labourer, a rentier or a capitalist? Hmm?) and the disastrously crap Labour Theory Of Value. So I’m not sure which bits you think Marx got right, or what he cribbed off Smith, who is a classic example of the “the part which is good is not original, and the part which is original is not good”.

    I mean, you’ve got to bear in mind that Smith was smack dab in the middle of the burgeoning industrial revolution, and he seems to have been completely unaware of it, even to the extent that his most famous example, the “pin factory” was just copied out of the French Encyclopedie. Which is why he talked about “pins” when he would actually have meant “nails” in Britain.

    So anyway: Smith (LTV)–> Ricardo (classes attempting to expropriate labour value of each other, who will win?) –> Marx (the capitalists will win!) | George (the rentiers will win!).

    ranty ranty rant

  2. I’m thinking of the famous comment on a students paper, “This paper is both new and interesting, sadly those parts which are interesting are not new, and those bits which are new are not interesting”

    Marx just cribbed Hegel and Smith and got it all confused. Yet still some people give him the time of day.

  3. Philip Scott Thomas

    Ian B –

    You are in serious danger of becoming nearly as valuable an intellectual resource as Paul Marks.

    Can you explain to an economics noob such as I where Smith and Ricardo went wrong?

  4. Philip Scott Thomas:

    I’ll not go into errors into which both Smith and Ricardo may have fallen but leave that for IanB, to whom the question was addressed.

    But I will mention that neither Ricardo nor Smith (nor Marx, for that matter) had even a “whiff” of a clue as to that from which “value” was derived. Ricardo is regarded as the first to recognize the separate science of economics; thus economists after him (Marx included) are known as “classical.” Though, at that time, no well-developed theoretical explanation of “value” existed, there were several attempts, one of which was Marx’ imputation of value to the labor required or “contained” in a good.

    In about 1850, three prominent economists of the day, working independently, each came to the very same conclusion, each publishing within the space of a few months. These were Jevons (English), Walras (Swiss), and Menger (Austrian). In a nutshell, their explanation was that value was not a characteristic of that which had value but proceeded in the opposite direction: a thing’s value was what the human evaluator accorded to it.

    The new paradigm was nearly instantly and everywhere recognizable as undeniably correct
    though developed in different fashions by the “schools” following-on each of the originators.
    Marx had already published the first volume of “Das Kapital” and the second was supposedly ready for publication. It’s likely that “subjective
    value theory” dispirited him against publishing
    any more of what he could now see had been entirely discredited among the economists of the world (though political activists continued to maintain a certain fealty).

    Economists of today, i.e., subsequent to the discovery of “subjectivism” are known as “neoclassical.” IanB, like myself, is a follower of the thought proceeding from Karl Menger, known as the “Austrian School” (because its major early proponents–Menger, his pupil, Eugen von Bohm-Bawerk, and his pupil, Ludwig von Mises–were Austrians).

    The principal distinction claimed (quite justly) by the Austrian School (and it alone, insofar as I am aware) is that it does not offer governments economic plans or procedures designed to achieve what happen to be the various goals of such governments; rather, it stands ready to criticize nearly all of what governments conjure as “economic policy,” usually ready to make very general (negative) assessments of results which may be expected (sometimes predicting these far in advance).

  5. I have seen and handled 18thc. pins ( I was briefly in the Textiles dept. at the V&A many years ago.] They were finely made, and must have taken a lot of precise finishing. I saw pre-industrial making of cut-nails in Turkey in the 1980s – It was literally one man and a boy bashing them out swiftly, one blow of the hammer at a time, in a booth open to the street. English nails retrieved from 18thc. wood are very crude. The two processes are very different.

  6. I once enquired at Marginal Revolution whether Smith’s pins were carpenters’ pins or seamstresses’ pins. Memory (none too trustworthy) says that people inclined to the latter, whereas my personal guess had been for the former. Not that it matters.

  7. SMFS-

    I’m repeating this about tenth hand, and I admit to no personal knowledge of pin/nail making, but the French used a different number of processes to the English apparently, and it’s a giveaway that Smith reports the French process (by number of operations), which is the same as in the Encylclopede. Addtionally, Smith laid a charge of plagiarism against Adam Ferguson over the pin factory; Ferguson replied that he had copied nothing from Smith and that both had got it from a French source “where Smith had been before him”. It can’t be anything other than the Encyclopedie.

    Anyway, interestingly enough Smith himself had discussed supply and demand and utility (the basis of marginal utility, and ideas that were already being discussed by previous economic philosophers on ye Continent) but then abandoned it all for the LTV in his magnum opus, leading the British strand of economics on a wild goose chase for a century. Why he did so is not possible to know, but far greater minds than I have blamed it on his lapsing into his Scots Calvinism as he got older, and with it a preference for seeing labour as an intrinsically virtuous thing in itself, rather than as a means to an end (production and wealth).

    Philip Scott Thomas- the gross error of a labour theory of value is it puts the economic cart before the horse. It prevents you seeing that the price of labour (or any other factor of production) is derived from the final subjective value of the product to a consumer. In my case, if some bloke thinks a picture of Wonder Woman with her kit falling off is worth $200, the value of my labour is $200. If he’ll only pay $100, my labour value is $100.

    A LTV has me saying “my labour value is worth $300 and then blaming some mysterious other factor for having no customers, and I start saying “that is the fair price for nudey Wonder Woman” and so on.

    SMith just makes the error. Ricardo develops it to a kind of fever pitch where the labourers, the capitalists and the “rentiers” are all trying to steal the labour value off one another as homogenised class cartels, and he ends up with this thing where the price of labour is set by the marginal value of corn or something, and so what you get paid as a web designer (or whatever) depends on how much the land you’re web designing on would get in rent if you were growing corn on it. This Ricardian Socialism is still alive today, but it’s called “Georgism”.

    Marx took the view instead that the capitalists, not the rentiers, would ultimately snurf up all the labour value, but then something magical called the Hegelian Dialectic abolishes capitalism and a Utopian workers state replaces it.

  8. Ian B, what do you mean by Adam Smith being completely unaware of the Industrial Revolution? He doesn’t refer to it by name, but he knew about improved machinery. To quote from Chapter 1 of TWoN, “This great increase in the quantity of work … the same number of people are capable of performing, is owing to three different circumstances…lastly, to the invention of a great number of machines”. He even talks about an improvement made to the first steam engines (he calls them fire engines).

  9. I had to look up the pin factory thing in Rothbard, so I’ll let him reply again-

    Smith’suse of an exampleof a small Frenchpin-factoryratherthan a
    largerBritishone highlightsa curiousfact abouthis celebratedWealth of
    Nations: therenownedeconomistseemsto havehadno inklingof theIndus-
    trialRevolutiongoingon all abouthim.Althoughhe was a friendof DrJohn
    Roebuck,theownerof theCarronironworks,whoseopeningin 1760marked
    the beginningof the IndustrialRevolutionin Scotland,Smith showedno
    indicationthatheknewof its existence.Althoughhe was atleastan acquaint-
    anceof thegreatinventorJamesWatt,Smith displayedno knowledgewhat-
    everofsomeofWatt’sleadinginventions.He madeno mentionin hisfamous
    bookof the canalboomwhich had begunin the early 1760s,of the very
    existenceof theburgeoningcottontextileindustry,orofpotteryorofthenew
    methodsof makingbeer.Thereis no referenceto theenormousdropin travel

  10. Gene Berman-

    I’d just add to your last paragraph that the other distinction of the Austrian School is that it basically rejects econometrics, on the sound basis that you can’t do scientific studies of actual economies, and instead you have to reason what drives the economy from principles of human action (“praxeology”) which you can study scientifically.

    That is, the human action idea “individuals tend to choose better value products” can be scientifically tested but “lowering income tax will increase GDP” can’t practically be tested because a real economy has too many interconnected and interfering factors within it. One economist shows that in Alphaland lowering tax was followed by increased GDP, another shows in Betaland it was followed by falling GDP, and you can argue forever without actually proving anything.

    Unfortunately most mainstream economists love econometrics because it’s a bottomless bullshit source.

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