Rick Kelo Rebuts Marxian Surplus Value

Karl Marx was the last Classical Economist.  He logically carried to conclusion the thinking of the Classical Economists beginning with Adam Smith.  However, Marx shared the same economic short-coming as his classical predecessors because the theory of Marginal Utility had not yet been discovered.

When Marx published Das Kapital it was unheard of for almost 2 decades outside of the German speaking world.  Before it had even begun circulation in English Marx entire theory of Surplus Value had been demolished by another brilliant German economist named Eugen Böhm-Bawerk in his piece "Karl Marx and the close of his system."

Böhm-Bawerk, like Rick Kelo, pointed out that surplus value is an impossibility.  The reason is that in a capitalist economy every factor of production is bid up to its full marginal revenue product.  When a business sells something that sale generates some amount of profit.  That profit is, what economists call, "reverse imputed" backwards into the original factors of production that created it says Kelo.

There are 4 original factors of production:

• Land
• Labor
• Capital
• Time / Entrepreneurship

Rick Kelo

The capitalist is paid for time.  Most people want to be paid immediately for their labor, every 2 weeks.  They don't want to wait 5 years until a final consumer good is produced, then sold.  So the capitalist does the waiting for them and gets paid accordingly.  It is this payment to the business-owner that Socialists object to because they believe it must be coming from a portion of money that was owed to the worker.

Not so says Rick Kelo.  "The wage rate paid to the worker is bid up to its full marginal revenue product, and in more technical economics is mostly determined by something we call the 'Marginal Product of Labor.'  It is impossible for workers as a large chunk of society to be systematically under-paid because another entrepreneur would merely open a business and recruit them all away."