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Journal on Stephen Resnick and Richard Wolff’s “The 1983 Nobel Prize in Economics: Neoclassical Economics and Marxism” Essay

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Journal on Stephen Resnick and Richard Wolff’s “The 1983 Nobel Prize in Economics: Neoclassical Economics and Marxism”

            Stephen Resnick and Richard Wolff’s article, “The 1983 Nobel Prize in Economics: Neoclassical Economics and Marxism,” is generally an in-depth analysis, critique, and comparison of two contradicting economic theories, Marxism and Neo-classical economics, using the papers of Nobel Prize winner, Professor Gerard Debreu as reference. In their paper, Resnick and Wolff, first began their critique by simplifying the neoclassical economic theories and Marxist economic theories into “non-class” and “class” traditions, respectively. They also first defined the basic concepts and ideas that shape the two economic theories.

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            Based on the authors’ article, Marxism mainly focuses the relationship of social classes within a society and how they interrelate in an intricate way with all the other aspects of society which are mainly non-class. On the other hand, according to them, the neoclassical tradition generally does not believe in the existence of class. Instead, it focuses on the human nature of individuals and analyzes how these people change and develop themselves mainly upon their very natures. However, the Resnick and Wolff emphasized that to simply differentiate the basic concepts of the two traditions would not suffice as a true critique. According to them, the social impacts and social consequences of both theories should first be discussed.

            Before defining these social consequences, the authors first briefly discussed the neoclassical tradition and the Marxist tradition in detail. They first differentiated the entry point of the two. Based on their paper, neoclassicism is mainly founded on three assumptions that concern the very nature of humans. The first assumption is that people choose rationally or have rational preferences among the alternatives and options presented to them. The second assumption is that people can and desire to maximize their environment and transform it into useful tools or things that may or may not be required for their use or consumption. The last assumption is that people have natural endowments or in other words, gifts that are necessary to create or produce those useful objects or tools that they consume.

            In contrast, based on Resnick and Wolff’s paper, Marxism or Marxist theories generally begin its ideas on economics based on class relationships and specific relationships which, similar to people involved in those relationships, are constantly changing. In short, the authors pointed out that one of the essential differences between the two traditions is how they begin their respective concepts and ideas on the economic life. According to them, acknowledging this difference is one of the keys to understanding their social consequences.

            Furthermore, according to the authors, based on the ideas of Nobel prize winner Debreu, that one of the objectives of a neoclassical society is to achieve “optimal” satisfaction. Based on the article, this basically means it is the nature of human beings to attain maximum economic potential wherein there is a substantial consumption of goods and accumulation of wealth. In addition, the authors depicted that the neoclassical theories have become more abstract or realistic as shown in the mathematical logic presented by Debreu in his works. According to Resnick and Wolf, since mathematics deal with “actual figures,” when it is integrated into economic theories, particularly the neoclassical ones, the concepts become “absolute.”  The authors also stressed that this is the modern view of world economics today.

On the other hand, according to the authors, Marxist theories do not recognize the absolute and that there is no ultimate cause and explanation for the condition of the world today. Instead, Marxism assumes that everything in the world constantly changes and that each cause has its own causes and each effect has its own effects. In short, there is no final essential cause for the current state of the economy, class, or anything else in the world.

Finally, the authors then differentiated the social changes and social consequences that stem from the class and non class economic traditions. According to Resnick and Wolff, following the neoclassical theory, the current state of society is governed by human nature. In other words, poor people are poor simply because of their preferences and choices. In order to escape from poverty, people must increase the amount of the resources and endowments which they can use for to improve their lives. In addition, the neoclassical theory also assumes that the state or the government directly or indirectly limits the people’s use of their natural resources and endowments by creating an imperfect market. According to the authors, the state must eliminate these imperfect barriers so that the society can maximize its full economic potential.

            In contrast, according to the article, since Marxism focuses on relationships and on the process of producing and distributing labor and not on human nature, it is class exploitation that mainly causes social changes and consequences. The authors pointed out that based on Marxist ideologies, in order for a state to eliminate poverty, it should first remove class exploitation in which certain people or class receive surplus or excess labor from other individuals without giving anything in return. In short, it is the relationships between the two classes, the ones providing labor and the ones gaining the fruits of the labor, that cause social changes.

            Generally, I agree with most of the authors points in the article. However, contrary to their ideas, I believe that social changes and social consequences are brought about by both human nature and the social institutions and classes that humans consciously or unconsciously create. In short, applying both the neoclassical and Marxist theories, I believe that the creation of social classes is an extension of human nature by which people act to manage their lives and cause social changes.

References

Wolff, R. & Resnick, S. (1984, December). The 1983 Nobel Prize in Economics: Neoclassical Economics and Marxism. Monthly Review. Vol. 36, No. 7. pp. 29-46.