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How Does Keynesian Economics Differ from Marxist Economics in Its Explanation of the Capitalist Economy? What Are the Policy Implications of Keynesian Economics?

Autor:   •  April 27, 2017  •  Research Paper  •  1,983 Words (8 Pages)  •  284 Views

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Title:How does Keynesian economics differ from Marxist economics in its explanation of the capitalist economy? What are the policy implications of Keynesian economics?

Introduction:

Keynesian economics and Marxist economics are two of the most important economic schools that still affect the economic and political policies in the current world. These two economic schools have different views on the capitalist economy. This essay introduces the differences between these two economic schools in terms of explanation on the capitalist economy. The essay first points out the main arguments of these two economic schools and their main opinions on the capitalist economy. It then compares the differences of their views on the capitalist economy based on the nature of capitalist economy, solution links to economy crisis and political implication. Furthermore, following that the policy implications of Keynesian economics are given. Basically, the implications emphasize on the fiscal policy impact on the economy, in terms of government expenditure increase and counter-cyclical policy. In addition, with the support from monetary policy, the expenditure of money supply, it helps to more experienced policy implementation with government. Through these analyses, it contributes to show the efficiency and effective of the Keynesian economics from its policies aspects, such as it stimulates demand and consumption.  

Main body:

The comparison between Marxist and Keynesian economics

Marxist economics refers to the school of economic thought that was developed by Karl Marx and Friedrich Engels (Canterbery, 1995). The main argument of Marxist economics is the labor theory of value, which is that the value of a commodity is determined by the labor required to produce it (Howard and King, 1992).  Under this theory, capitalists do not pay workers the full value of the commodities they produce. Instead, they only pay the workers the necessary labor only with the rest being the surplus labors that are pocketed by the capitalists. On this basis, the capitalist market tends to obscure the social relationships and the processes of production.  In Marxist economics opinion, the capitalist economy exists for the reason that the capitalist production aims at acquiring profits instead of consumption (Sackrey et al, 2010). In other words, it is a certain result that there will be insufficient effective demand and decreasing profitability which will cause the happening of economic crisis for the capitalist economy. It points out the nature and origin of economic value and focuses on the class and the class struggle on the economic process. Therefore, Marxist economics analyses the crisis in capitalism, the role of the surplus product and surplus value and how they are distributed in the capitalist economy. 

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