Overview

Karl Marx wasn’t just a revolutionary; he was an economist. He analyzed Capitalism and predicted it would destroy itself. He argued that profit is theft—it is the unpaid labor of the worker.

Core Idea

The core idea is Exploitation.

  1. Worker makes a chair in 4 hours.
  2. Capitalist sells the chair for $100.
  3. Capitalist pays the worker $20.
  4. Capitalist keeps $80 (Surplus Value). Marx asked: “Why does the Capitalist get $80 just for owning the factory?”

Formal Definition

A school of thought focusing on the role of labor and class struggle. Labor Theory of Value: The value of a commodity is determined by the amount of socially necessary labor time required to produce it.

Intuition

  • Feudalism: Lord and Serf. The Lord takes the harvest because he has a sword.
  • Capitalism: Boss and Worker. The Boss takes the profit because he has a contract. Marx said it’s the same thing, just hidden better.

Examples

  • Alienation: The worker doesn’t own the chair he made. He just sells his time. He becomes a cog in a machine.
  • Crisis of Overproduction: Workers are paid so little they can’t afford to buy the things they make. The warehouses fill up, prices crash, and the economy collapses.

Common Misconceptions

  • Marx hated technology: No, he admired it. He just thought it should benefit everyone, not just the factory owner.
  • Communism = USSR: Marx wrote about Capitalism. He wrote very little about how Communism should actually work. The USSR was Lenin’s interpretation.
  • Historical Materialism: The idea that history is driven by economics, not ideas. “The hand-mill gives you society with the feudal lord; the steam-mill, society with the industrial capitalist.”

Applications

  • Unions: The labor movement is based on the idea that workers need to band together to fight for their share of the surplus value.

Criticism / Limitations

  • The Transformation Problem: The Labor Theory of Value doesn’t really work mathematically. Prices are determined by Supply and Demand, not just labor time. (e.g., A mud pie takes 10 hours to make but is worth $0).

Further Reading

  • Marx, Karl. Das Kapital.
  • Harvey, David. A Companion to Marx’s Capital.