CHAPTER TWO
Marx and His Critics
The neoclassical critique of his theory of value
Marx's theory of value has been under attack ever since Capital was first published. The most common form this attack takes is to claim that capital as well as labour creates value. After all, it is said, a worker using a machine produces much more than a worker without one, and all the time workers are being replaced by machines that do the same job. It is even possible to conceive of an economy in which all work is done by machines. So neoclassical economists argue that not only labour but also capital is involved in producing things which satisfy human need. And just as labour gets paid according to what it contributes to wealth creation, so does capital. Each "factor of production" gets a "reward" equal to its "marginal output".
There is a central fallacy in this argument against Marx. It rests of a static picture of the economy, in which capital and labour simply exist alongside each other. It ignores the palpable reality that the means and materials of production themselves have been produced. Machines and factory buildings are not things that exist in their own right. They are the product of previous human labour. The wheelbarrow which aids the toil of the labourer is itself the product of the toil of the metal worker. That was why Marx called the means of production "dead labour" (as opposed to present work, which is "living labour"). They are the products of labour that has taken place previously-and can, if necessary, be replicated by the application of labour today. The amount of socially necessary labour needed to reproduce them determines their current worth.
The failure of neoclassical theory to take into account the creation of the means of production by labour is no accidental failing. Its founders in the late 19th century-the Austrians Carl Menger and Eugen von Bohm-Bawerk, the Englishmen W Stanley Jevons and
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