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Economic theories and systems

Economic theories and systems

Originally published: Occasional Links & Commentary (October 1, 2020)  

In this post, I continue the draft of sections of my forthcoming book, “Marxian Economics: An Introduction.” The previous five posts (herehereherehere, and here) will serve as the basis for chapter 1, Marxian Economics Today. The text of this post is for Chapter 2, Marxian Economics Versus Mainstream Economics.

Critique of Mainstream Economic Theory

In the previous chapter, we saw that Marxian economics represents a two-fold critique: a critique of mainstream economic theory and a critique of capitalism, the economic and social system celebrated by mainstream economists.

In this chapter, we focus on the first part of that critique, the critique of the ideas that are developed and utilized by mainstream economists.

Today, mainstream economics is the approach that is predominant within colleges and universities in the United States and around the world, as well as within many government agencies, private think tanks, and mainstream media (including newspapers, television broadcasts, and web sites). It is certainly not the only approach, and may perhaps not be even the numerically most prevalent. But, in terms of importance (for example, in terms of underlying the best-selling economics textbooks, government policies, and research funding), mainstream economics is dominant.

It is also important to note that what is considered mainstream economics has changed over time. In Marx’s time, the mainstream approach is what is commonly referred to as classical political economy, associated with the writings of Adam Smith, David Ricardo, and others. In our time, mainstream economics is different, made up of an ever-shifting combination of neoclassical economics and Keynesian economics. Basically, mainstream economics today is what students will often learn in courses on microeconomics (stemming from neoclassical theory) and macroeconomics (based on Keynesian economics).

Economic Theories and Systems

Before we move on to look at the key differences between Marxian economics and mainstream economics, it’s important to stop for a moment to clear up a common confusion: economic theories are not the same as economic systems.

There is no such thing as a Marxist economy—or, for that matter, a classical, neoclassical, or Keynesian economy. All of them are names for economic theories.

And those theories are different ways of understanding—analyzing, telling a story about, or representing—a capitalist economy.

So, there’s a Marxian theory of capitalism, as against a classical theory of capitalism, a neoclassical theory of capitalism, and a Keynesian theory of capitalism. (There are also different Marxian, classical, neoclassical, and Keynesian theories of socialism and other economic systems.)

Basically, each economic theory represents a different way of seeing capitalism. In fact, economists from these different schools of thought often use different names for capitalism: while Marxian economists insist on using capitalism to describe the predominant economic system in the world today, mainstream economists often use other terms, such as “market system” or “mixed economy” or even just “the economy.” They are all supposedly referring to the same thing out there in the real world but, of course, what they see and how they analyze it depends on the theory they’re using.

Yes, it can get confusing but just keep in mind that economic theories and economic systems are not the same thing. Capitalism, one economic system, can be analyzed in many different ways, according to the economic theory being used. Therefore, we can expect a Marxist theory of capitalism to differ substantially from classical, neoclassical, and Keynesian theories of capitalism. Much the same holds true for different theories of feudalism, slavery, socialism, and communism, and other economic systems.

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