“Karl Marx was right, but it doesn’t really matter.”
I have been reading this short piece by Matthew Yglesias “Where do profits come from? The obscure feud that tears left-of-center economics apart”. As the title states, the crux of the discussion is the failure of neoclassical economics to offer a credible alternative to Marx, who asserted that labor is the source of both wages and profit. The inability of the bourgeois simpletons to offer a credible alternative to Marx’s explanation results in a rather bizarre set of assumptions:
“Heterodox economists argue that it is circular to say that the profits accruing to the owners of capital are determined by the marginal productivity of capital, and then to calculate the quantity of capital in part by asking how profitable it is to own the capital goods.”
Labor theory says that profits are simply that portion of value created in excess of the value of the wages of the workers, while mainstream economics holds profits result from the marginal productivity of capital.
It should be clear that mainstream economics has already conceded this point to labor theory: labor is the source of all profit. No matter how this argument is obscured in all the gibberish of neoclassical economics, it has been demonstrated both theoretically and practically that there is only one source for both wages and profit: the labor of the worker.
As Yglesias points out:
Mainstream economists went through a few iterations of attempting to refute this objection before essentially concluding that it was correct. This is, indeed, one of the reasons why people on the heterodox side often seem to be embittered. The mainstream concedes the point, but tends to deny its significance.
