Conociendo al capital, La escuela marginalista (Walras, Menger, Jevons)

Conflict in the Steel Industry: Workers vs. Owners

Workers' Demands and Economic Theories

• Jorge, representing the workers at a steel company, demands a salary increase based on Karl Marx's theories, arguing that each meter of pipe sold is the result of extensive labor by him and his colleagues.

• He highlights that only a fraction of the company's monthly revenue goes to salaries, while a significant portion is retained as profit by Louis, the owner, which he claims results from worker exploitation.

• Louis counters Jorge's argument by stating that Marx's reasoning is outdated and introduces marginalist theory as an advanced economic perspective.

Historical Context of Marginalism

• The discussion transitions to late 19th-century industrial advancements during the Second Industrial Revolution, marked by technological progress in transportation and electricity.

• This era saw capital concentration in large companies dominating global markets, leading to a robust working class advocating for their rights through unions and political parties.

Emergence of Marginalist Economics

• In response to classical economics and Marxist critiques regarding wealth distribution inequality due to capitalist exploitation, new economic theories emerged.

• The marginalist school arose in Europe with key figures like Léon Walras, Stanley Jevons, and Carl Menger publishing influential works around this time.

Alfred Marshall's Contributions

• Alfred Marshall’s publication "Principles of Economics" in 1890 solidified marginalism as he integrated ideas from earlier economists into a cohesive framework known as neoclassical economics.

• This shift represented not just continuity but also a break from classical thought; it redefined economic discourse away from social conflict towards individualistic perspectives.

Redefining Economic Analysis

• As marginalism gained traction, it replaced previous frameworks dominated by class analysis with an emphasis on individual agents rather than social groups or classes.

• The term "political economy" was simplified to just "economics," sidelining discussions about social conflicts and interests central to socialist thought.

Economic Theories and the Concept of Homo Economicus

Understanding Human Needs and Economic Resources

• The central problem of economics is maximizing satisfaction while facing limited resources, highlighting the struggle between unlimited needs and scarce resources.

• The term "homo economicus" describes an individual who makes optimal choices based on personal interest, reflecting the neoclassical view of human behavior in economics.

Marginalist Approach to Economics

• Marginalists argue that economic science can formulate universal laws akin to natural sciences, emphasizing objectivity and neutrality in economic analysis.

• They apply mathematical models to derive solutions for economic problems, often overlooking social and political influences on these choices.

Simplifications in Economic Analysis

• Marginalists isolate key variables in their analyses, but excessive simplification may lead to a disconnect from real-world scenarios.

• Their assumption that markets naturally tend toward perfect competition ignores the presence of unions, pressure groups, and other societal factors affecting market dynamics.

Value Theory: Classical vs. Marginalist Perspectives

• Classical economists determine value based on production costs or labor invested, while marginalists propose a subjective theory where value arises during exchange based on consumer judgment.

• According to marginalists, prices are influenced by scarcity rather than inherent utility; thus, water's abundance leads to lower marginal utility compared to diamonds despite its greater overall usefulness.

Utility and Price Determination

• The concept of marginal utility explains that consumers assess value based on the additional benefit derived from consuming one more unit of a good.

• Louis challenges Marxist views by asserting that all goods—including labor—are subject to market forces without class distinctions influencing their valuation.

Understanding Labor Market Dynamics

The Role of Supply and Demand in Wages

• Market Determination of Wages: Gains arise from the supply and demand for labor, with the market dictating wages based on individual contributions to production. Louis indicates that his company’s wage structure is influenced by market conditions.

• Productivity and Wage Negotiation: Louis expresses willingness to increase salaries if productivity improves, suggesting a merit-based approach to compensation. He believes discussions about salary should occur individually with each worker.

Marginalist Perspective on Income Distribution

• Equilibrium Wage Theory: According to marginalist theory, the equilibrium wage equals the value of what a worker contributes to production. Class struggle is deemed irrelevant as objective forces dictate income distribution between workers and capitalists.

• Opposition to State Intervention: Marginalists argue against state intervention in economic activities, asserting that free markets are best suited for maximizing consumer welfare and business profits.

Unemployment and Market Forces

• Unemployment Causes: Marginalists attribute unemployment to factors disrupting free competition, such as unions and labor laws that prevent wage flexibility. They believe that allowing wages to fluctuate freely would eliminate unemployment.

• Historical Context of Economic Theory: Early marginalist economists significantly shaped modern economic theory since the early 20th century, promoting a system focused on universal economic laws where markets organize economic activity effectively.

Limitations of Market Solutions

• Market Failures in History: Despite its theoretical strengths, historical instances show that markets have failed to address various economic issues throughout the 20th century.

Workers' Response to Wage Discussions

• Worker Solidarity and Action: Jorge shares Louis's arguments with coworkers; however, they find them unrealistic given their lack of control over work hours. This leads them to consider organizing collectively for better representation in negotiations.