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Contending Economic Theories: Neoclassical, Keynesian, and Marxian
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59 of 60 people found the following review helpful
on September 16, 2012
Wolff and Resnick are well known and widely acclaimed for their 1987 book "Economics: Marxian versus Neoclassical" Economics: Marxian versus Neoclassical published by John Hopkins University Press. The current book under review, "Contending Economic Theories: Neoclassical, Keynesian, and Marxian" published by MIT Press, is an extension of their previous book. The importance of "Economics: Marxian versus Neoclassical" was that it offered an impressive introduction and intermediate level presentation to both neoclassical microeconomics and Marxian economics. To this day chapter 3 of "Economics: Marxian and Neoclassical" and chapter 4 of "Contending Economic Theories: Neoclassical, Keynesian, and Marxian" are among the best introductory/intermediate presentations of Marxian economics. (Other competitors include Ernest Mandel's two volume book, "Marx's Economic Theory" Marx Economic Theory, Paul Sweezy's The Theory of Capitalist Development The Theory of Capitalist Development: Principles of Marxian Political Economy, John Weeks' "Capital and Exploitation" Capital, Exploitation and Economic Crisis (Routledge Frontiers of Political Economy), Meghnad Desai's "Marxian Economics" Marxian Economics (Littlefield, Adams quality paperback), and David Harvey's "A Companion to Marx's Capital" A Companion to Marx's Capital; all of these books are far lengthier than Wolff and Resnick, while the latter loses no depth or rigor to their far briefer introduction).

This book is worth its purchase for chapter 4 alone, but if you already own their 1987 book, you already have this chapter in that book.

The primary weakness of the 1987 book is that the presentation of Keynesian economics was not presented at the same level of depth and rigor as was neoclassical microeconomics and Marxian economics. Unfortunately, "Contending Economic Theories" does not mend the weakness. Instead, Wolff and Resnick have merely separated the sections already available in Economics: Marxian versus Neoclassical" and given these sections their own chapter heading. There is a brief and new elaboration on "Post-Keynesianism" but this section is rather obtuse and shallow. Thus, although it appears there are three new chapters, really there are two.

The two new chapters do hit their marks. Wolff and Resnick add a chapter (chapter 5) on "late neoclassical economics" co-authored with Yahya M. Madra. The chapter introduces and discusses various developments in neoclassical microeconomics including recent developments in externalities, imperfect competition (i.e. big business), transaction costs, asymmetric information, bounded rationality, behavioral economics, game theory, and evolutionary game theory. This chapter is brief, but has significant depth and breadth of recent developments in neoclassical microeconomics.

Wolff and Resnick also add a chapter on oscillations, instability, and intervention pitched in the context of three competing economic theories (neoclassical, Keynesian, Marxian). This chapter is interesting and very useful. It clearly demonstrates the symbiotic relationship between real economic oscillations and economic theory. It argues that theoretical commitments have very real consequences to the incidence of economic crisis, the political reaction to oscillations/crises, and the quality of human beings lives for those individuals enduring class relations and economic crisis.

In the end, this book will continue to be celebrated for the strengths already available in "Economics: Marxian versus Neoclassical." The chapters on "late neoclassical economics" and "Oscillations" will be welcomed and appreciated. But Wolff and Resnick have missed an opportunity to deepen their comparison to Keynesianism. Moreover, there have been some important developments in Post-Keynesianism, Neo-Keynesianism, and New Keynesian economics which could have been elaborated that can be argued to be as important as any of the developments in "late neoclassical economics." Further, I question the title "late" in "late neoclassical economics," it is almost certainly premature. Wolff and Resnick do not see these developments within neoclassical economics as any serious challenge to the orthodoxy and do not believe these developments as connecting with Marxian themes of class, exploitation, and instability. They base most of this on the philosophical foundations and entry point of neoclassical economics. I believe this to be an important point, but it is not clear whether the philosophical foundations/entry point of neoclassical economics are consistent with some of the results of behavioral economics, (evolutionary) game theory, imperfect competition, and asymmetric information. I am more optimistic that neoclassical economists working within these "late" developments may be in a position of sympathy to understanding, traditionally, more Marxian themes of class, exploitation, and instability.
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14 of 15 people found the following review helpful
on March 17, 2013
This is a really good introductory primer on the three competing economic theories: neoclassical, Keynesian, and Marxian. Although Wolff and Resnick are Marxists - of the Althusserian variety - they do an impeccable job of being completely neutral and unbiased in their assessment of the aforementioned theories. However, they do spend the majority of the book explaining the Marxian view. And, they make sure the Marxian view can be sustained in the 21st century, by adapting issues of corporate structure, state taxes, monopoly firms, etc., into the paradigm of Marxian analysis (issues Marx either was reticent on, or wrote little about). Thus, this is a good book for the Marxist who wants to bring their understanding of Das Kapital into the 21st century. Also, W&R's explication of overdetermination is fantastic. They are able to present the theory in crystal clear terminology, something Althusser failed to do.

I do have a few minor quibbles with the book, but nothing serious. First, the authors do assume the reader has taken several economic courses, thus this isn't an introduction for all layman. The graphs used in the Neoclassical and Keynesian sections are sometimes confusing, and not enough time is spent introducing the reader as to how to read these graphs. Also, W&R hop right over serious issues regarding the Marxian theory of abstract and concrete labor, and they gloss over socially necessary labor time a bit too quickly. These are concepts that could have used further explanation. Having read lots of Marx I was comfortable skimming past them, but I can safely say had this been my first time reading about them, I would have been left in the dark.

Nonetheless, W&R set lay out a crystal clear thesis - we will teach the entry points, logic, and basic analytical tools of all three theories - and they execute it to near perfection. I don't know much about Resnick, but I do Wolff's website, and youtube videos make a nice addition to this text. He speaks and teaches without air of superiority, and he's always lucid and clear. Thus, reading the book, and watching/listening to him lecture, serves as a great crash course into economics.
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2 of 3 people found the following review helpful
on May 19, 2013
It's good to leave the scary propaganda behind and see the three primary economic theories discuss side by side. All have flaws; all have good points; and all are theories. It's not a science.
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10 of 16 people found the following review helpful
on December 15, 2014
The book is a comparative and mostly clear presentation of three economic theories, or four counting late neoclassical. Despite the authors' posturing of a neutral comparison of the contending theories -- a noble aim -- there is a clear bias towards Marxism. A bit of searching, like Wikipedia and an article 'Anti-Slavery and Anti-Capitalism' available online, confirms they are Marxist. They are knowledgeable about the other theories, but their selection of what to include in the book seems "overdetermined."

Much space is devoted to Marxist economics, which consists mostly of criticism of capitalism. It is weak on criticisms by neoclassical economists of the essentials of Marxist economics -- the labor theory of value, surplus value and the exploitation theory. It relegates Böhm-Bawerk's criticisms of the labor theory of value to an appendix, and omits Menger's. It neglects most of the neoclassical (mainly Austrian) theory of capital and the attendant risk. It is weak on the role of the knowledge (and ignorance) of individual economic actors, both private actors and public officials. It includes Herbert Simon's "bounded rationality" but not F. A. Hayek (he is mentioned once) on knowledge (and ignorance). It omits the principle of comparative advantage. It doesn't include a neoclassical (nor Marxist) theory of money and credit. It omits Milton Friedman's diagnosis of the Great Depression, which focuses on the government-made Federal Reserve System. Including them would have made a better book. Agreeing with them is not the point; a neutral comparison is.

They present some traditional Marxist economics and some of their own with the "entry point" of class analysis/structure and "overdetermination". Marx's "entry points" were, in my view and clearer, the essentials in the previous paragraph. (Entry points are given for neoclassical and Keynes economics, too.) Marx's diagnosis of capital was motivated by hostility. As the authors say, Marx ridiculed the idea of "dispassionate analysis." What a neoclassical or Keynesian economist calls "finance capital" or "financial and equity capital", Marx called "fictitious capital."

Their own Marxist theory seems to have an excess of concepts. There are "fundamental class process", "subsumed class process", and "nonclass process." Similarly, there are fundamental, subsumed, and nonclass incomes. Their examples of "nonclass" income are very heterogeneous -- gifts, stealing, but also "a woman who sells her labor power to an industrial capitalist and obtains a wage income in exchange" (p. 216). Oddly, a woman who loans money to a capitalist receives interest as "subsumed income", but if she loans (or deposits) money to a bank who in turn lends it to the capitalist, the interest she receives is "nonclass income." Oddly, "noncapitalist forms of the fundamental class process also exist in the United States. Millions of individual, self-employed persons perform and appropriate their own surplus labor" (p. 164). They omitted non-profits such as mutual insurance companies, credit unions, trade associations, charities, and many hospitals. (If the Marxists are correct, worker wages in nonprofit hospitals should be higher than in for-profit hospitals since the latter are exploited. Are they higher?) There are "productive labor" and "unproductive labor." Oddly, a capitalist can employ both, and a gardener I hire to work in my yard is "unproductive." So is a manager at a capitalist firm, no matter how much he/she is valued at the firm. I believe I understand what they were trying to do, but see no "use value" in it beyond understanding them. Anyway, elsewhere they give Marx's division between direct laborer and capitalist, the exploited and the exploiter, which is clearer and more economical. Compared to Marx's concepts, I estimate the "surplus value" of their cadre of concepts is about zero.

The authors assert that the USSR was state-capitalism, not state-socialism. Very disingenuous. The USSR had near total public ownership of the means of production and near total centralized decision making by government. The assertion is a glaring contradiction, given that two essential features of capitalism are _private_ ownership of the means of production and _de-centralized_ decision making by individuals in the _private_ sector. The authors try to claim it wasn't socialism because some people in government acted corruptly, not in accordance with "true" socialism. They should label it truthfully -- the USSR economy was crony _socialism_. The USSR was the unforeseen consequence of trying to implement the socialist ideal.

Marx's innovative socialist idea of "associated workers," where capitalist corporate directors are replaced by democratic workers who meet to decide what will be produced and how, and how the surplus value should be distributed (p.323), is pure fantasy. It fails to recognize the role of knowledge (and ignorance), the division of labor, and the informative nature of market prices. Imagine that -- the janitor, fork-lift driver, cafeteria worker, and a data entry clerk given the authority to make decisions about complex production (e.g. engineering and computer architecture), research and development, mergers/disinvestment/reorganization, suppliers, customers, and financing. In the section about Herbert Simon, they write: "How does one expect individuals to make optimal decisions if it is impossible for them to process cognitively or gain access to all of this required information?" Consider that question regarding the "associated workers" as corporate directors.

These democratic workers -- or maybe their government representatives -- will also be "the main means for distributing resource and products throughout the society." More fantasy. How far does society extend - the world, the nation, province, or city? Who decides that? How do they know what society needs or wants, or might like to have even if they don't yet know it? How do they account for other enterprises that produce the same products, similar ones or substitutes? What helped anybody decide to get a cell phone? Replace a cell phone with a smart phone, along with its service level, or not do so? In capitalism market prices get used to help tackle such questions. Market prices function like "invisible hands" -- borrowing Adam Smith's famous metaphor-- even when the price tag is visible.

The authors claim that the marginal productivity of members of capitalist corporate boards of directors is zero (p. 361). That is like saying the value of wisdom about a particular business and its environment is zero because it can't be easily quantified. Suppose that Marx's fantasy were implemented as follows. The workers meet on Monday to make said decisions and do their normal job Tuesday-Friday. Then their marginal productivity on Mondays must be zero, too!

The authors follow the usual Marxist assumption that surplus value is always a positive number. What if surplus value were negative instead? Suppose an employer hires workers to produce a commodity, expecting to sell it for more than the cost of labor and materials. Instead, the money realized upon sale is even less than the cost of labor. To be consistent didn't the workers exploit the employer? Wouldn't justice be served by expropriating whatever possible from the workers to offset the deficit?

The authors are committed to "overdeterminism" rather than essentialism. They say such a commitment ends any need to look for essential causes or truth (p. 368). Be wary. Somebody not committed to seeking truth is committed to what -- propaganda?

In Appendix B the authors claim to revise Marx's "essentialist" theory of price by tweaking his theory to make it an "overdeterminist" one. The tweak is to change purchased inputs other than labor to be based on market price paid rather than Marx's assumed labor value of said inputs. It seems they consider this an advance in Marxian economics. Perhaps so. Another perspective is that their tweak is in effect a partial concession to neoclassical market price theory.

In my view the labor theory of value offers little explanatory power for market prices. Suppose I talk to an electrician about doing some work at my house. If there were twice as much of the same kind of work, I can reasonably conclude that the electrician will charge me about twice as much. If I were to get additional quotes from more electricians for the same work, then the labor theory of value starts to crumble. Different electricians will quote different prices. Such different price quotes will be affected by the quality of their work, the price of materials, the supply of and demand for electrical contractors in the local market, how eager the electrician is to get the job, scheduling, and so forth. On the other hand, the real market price to me, taking into account all these factors and perhaps more (overdetermination?), is whatever price the electrician, whom I finally select to do the work, and I agree to.

Assume two electricians -- one self-employed and the other not. The latter has an employer and is paid a wage. They are equally skilled, efficient, and work the same number of hours. The self-employed one earns $50,000 per year, partly because he has to spend more time finding jobs, buying supplies, etc. The one paid a wage earns $60,000 per year because he doesn't have to spend time doing the other things that the self-employed one does. His employer does them. Would the authors say the self-employed one ($50,000 per year) is not exploited but the other one ($60,000 per year) is. If yes, really? Or is the latter exploiting his employer?

Chapters 6 and 7 are quite interesting. They are in part about the intellectual duels between the theories over time, how the theories have changed over time, and how real world events have influenced their acceptance. But the authors are mistaken in chapter 7 about theories of truth. After stating the correspondence theory -- true ideas best fit the facts -- they call empiricism and rationalism 'theories of truth'. They are not; they are theories of _knowledge_. Empiricists typically agree with the correspondence theory, and rationalists typically agree with the _coherence_ theory of truth, which appeals to logic.
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on December 28, 2014
Great book but not compatible with the latest editions of Kindle!
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4 of 7 people found the following review helpful
on January 30, 2013
Without political judgements, author discussed the pluses and minuses of contending theories.. Very good soure for anyone wishing to understand them. They are the foundation of many divisions in our country.
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3 of 6 people found the following review helpful
on March 5, 2013
Of the many Kindle books I have read, this is the first that was missing the "Aa" font icon so that I was unable to change the font size. Additionally, it provides only a one page orientation. Amazon support was helpful in zeroing in on the issue. The webpage does indicate that this is a replica of the print book, which is something I did not notice and would not have understood the impact of it anyway.

After experimenting with the pages in this book, I discovered that if I used it in landscape orientation, and double-tapped the screen, it would fill the screen with print which was larger than what was originally shown. The font could then be enlarged more by doing a reverse-pinch maneuver with my fingers, but that put much of the page outside of the viewing area. Although these are viable workarounds to no having the "Aa" icon, they are cumbersome. This was something that the Amazon support staff person I spoke to did not appear to be aware of.

The authors have provided an interesting and logical examination of the subject matter. Although it is obviously a text book, it does a good job of presenting a complex set of economic theories, their histories, how they interrelate, and their consequences for society. It is also good in that it does not seem to assume a knowledge base that a reader may not have beyond basic economic theory. This is a book that will not provide the reader so much with the basics of the theories, but rather, it is an exploration of their genesis and how they interact with each other, especially as to how each adjusts for events that challenge their respective views.

This book opens a lot of doors, not only as to the various theories, but also as to how a person's particular way of viewing the world might influence which theory supports that world view, thus demonstrating another case of having a viewpoint and finding a theory to support it as opposed to finding a theory first and developing a viewpoint therefrom. There is also an emphasis on the sometimes shared lexicon of these competing theories with significantly different meanings assigned. What a Marxist means by class is not the same thing that a Keynesian means, so comparing apples to apples becomes yet a little more challenging for the unenlightened.
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0 of 1 people found the following review helpful
on February 25, 2013
Very good work, precise and complete in synthesizing the theoretical struggle within the invisible hand and any public policy or intervention. It matches all the essentials on these subject.
I would love to hear it red as well, trough a DVD edition
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