Nor can "marginal output" as defined by the neoclassical school provide an answer. This is measured, they argue, by the value of the capital used up in producing it; but when they define the value of that capital they do so in terms of the marginal output. They end up saying, in effect, that "the marginal value of capital equals the marginal value of capital", or "profit equals profit". Statements of this sort cannot explain anything. All they do is to state that if something exists, it exists.
Orthodox economics in fact does no more than state that certain things are bought and certain things are sold at present, without explaining why these things are produced and not others, why some people are rich and some poor, and why some goods pile up unsold while people who desperately need them go without, or why sometimes there are booms and at other times slumps.
These points were made against marginal economics more than 80 years ago by the Austrian Marxist Rudolf Hilferding and the Russian revolutionary Nicolai Bukharin. They have been put across more recently in a rigorously logical form by dissident academic economists known as the "Cambridge School" .7 But the capacity of dissident economists to point out the absurdities in neoclassical theory has not weakened its hold on academic economics. It has simply led to ever more obtuse mathematical models being used to provide an appearance of scientific rigour. As Joan Robinson pointed out half a century ago:
Quantitative utility has long since evaporated but it is still common to set up a model in which quantities of "capital" appear, without any indication of what it is supposed to be a quantity of. Just as the problem of giving an operational meaning to utility used to be avoided by putting it into a diagram, so the problem of giving a meaning to the quantity of "capital" is evaded by putting it into algebra.8
Recognition of the difficulties with their own theory has, on occasions, forced those who otherwise accept the neoclassical system to try to reinforce it with elements from the labour theory of value. So Marshall suggested there might occasionally be merit in using a labour theory of value: "the real value of money is better measured for some purposes in labour rather than in commodities", although he hastened to add, "This difficulty will not affect our work in the present volume <sub>.</sub> . . "9 John Maynard Keynes also half grasped the limitations of the very neoclassical system whose postulates he took for granted. At one point in his most famous work, the General Theory of Employment, Money and Interest, he recognised that you cannot simply add together different sets of physical commodities at one point in time and compare them with a different set at a later point.10 To make such comparisons involves "covertly introducing changes in value" .11 To deal with this problem, he dropped the usual assumptions of neoclassical theory and made half a turn to a labour theory of value, 12 suggesting that output could be measured by "the amount of employment associated with a given capital equipment" .13 He explained later:
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Understanding the System: Marx and Beyond