Marxism and its Impact on Economic Theory

Marxism originated from the works of Karl Marx and Friedrich Engel (“Marxism”, 2008). Karl Marx affected the economic theory by influencing Marxian economics. The labor theory of value, which decreases profits while the concentration of wealth is increasing is a very important part of Marxian economics. Marxism helped introduce the theory of political economics. This theory analyzes the relationships between people and their classes. Political economy is described as people and the social relationships between them. Political economy is not, however, about the relationship between price, supply, demand, and commodities. Even the founders of political economics, Adam Smith and David Ricardo, both developed a labor of theory value. Which says that the labor of the working class is the source of all

Although, it is now known that capitalists don’t make profits by exploitation, but rather from taking risks and organizing consumption. He says that it is not unfair but that this exploitation is why there is a class struggle, and an economic crisis. Developing the labor theory of value even further, Karl Marx says that workers have no other choice but to be exploited, because they have no other means of production. The labor theory of value, further explained by Karl Marx’s viewpoint, says that the laboring of the proletariat, working class, is what creates new value which then translates into profit. Due to the fact that capitalists do not make profits by exploitation, the labor theory had some problems. These problems were fixed by the subjective value theory. This theory said that exchange value is not absolute and is based on individual evaluations. The subjective value theory also says that value comes from a human perception of what he views as useful. The discovery of this theory changed the relationship between input costs and market