Ricardo and Marx World View

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I. David Ricardo

Ricardo was a classical economist known for many contributions to economics but most notably for his labor theory of value and theory of rents. David Ricardo and several other economists also simultaneously and independently discovered the law of diminishing marginal returns. His most well-known work is the The Principles of Political Economy and Taxation (1817). [1] A.. Labor Theory of Value

Though many classical economist contributed to labor theory including Adam Smith it is Ricardo whose name is par excellence connected with labor theory of value. Ricardo was faced with two problems that he would be forced to solve in regards to his theory. First, the difference in value between different types of labor, he cavalierly considered inessential since, 'If a day's labor of a working jeweler be more valuable than a day's labor of a common laborer, it has long ago been adjusted, and placed in its proper position in the scale of value" [2]The second problem was a little harder and it resulted to what would be later called 'the time structure of production'[2] Ricardo reasoned that since the uniform rate of profit must apply to all commodities, even goods that have the same embodied labor in different stages of production would have different relative prices depending on the rate of profit. Because of this prices are not invariable to different distributions between wages and profit.[2] Ricardo struggled with this problem for the rest of his life. The inability to invoke such a commodity, a purely analytical problem which has since been resolved by Sraffa as late as 1960, later led to the abandonment of the labor theory of value proper. Ricardo, however, thought that this logical problem did not affect the basic truth of his theory and, moreover, did not himself see any even remotely plausible alternative. [2] B. Theory of Rents

Economic rent is not the same "rent" that we pay at the start of each month to our landlords, but rather it is the minimum amount money that the owner of a factor of production must receive in order to use that factor of production for an purpose. These factors of production are labor, capital, and land. [3] An example that land factor could be a famer. The rent would be the minimum amount money that the farmer must make to keep farming his land for farming or renting it out. [3] Economic rent can also be applied in labor terms. In this case it is the minimum amount to money a person must make in wages in order to continue to work at that job. If a person has monthly expenses of $1,200 a month and his job only pays him $1,000 a month than this person will not be able to afford to work at this job for long. [3] In capital terms the rent is very much the same as land. An example could be an owner of a factory. The rent would be the minimum amount of money that the factory needs to make in order to keep open either by means of production or renting out the factory. [3]

II. Karl Marx

Karl Marx was a philosopher and economist made famous or infamous depending on your point of view for ideas about capitalism and communism. His most well know work is the "The Communist Manifesto" in 1848. In this work Marx believes that the class struggle between the workers and the capitalists will inevitably result in a classless and communist society. While it was his theories of Capitalism and Communism that he is most know for Marx also published a work on labor theory of value titles "Das Kapital". [4] A. Capitalism

One can not talk about nor understand Marx's idea of Communism until one first understands Marx's anti-Capitalism philosophy. Marx's Communism and anti-Capitalism go hand in hand.[5] As politically incorrect as it might be to say Karl Marx was not completely wrong about Capitalism. Marx believed that capitalism would self destruct over time and bring about its own demise. While I don't go as far as to agree that capitalism is evil and will destroy its self there...
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