Marxian Economics

A school of economic thought that was derived from Karl Marx and Friedrich Engels

Over 1.8 million professionals use CFI to learn accounting, financial analysis, modeling and more. Start with a free account to explore 20+ always-free courses and hundreds of finance templates and cheat sheets.

What is Marxian Economics?

Marxian economics refers to a school of economic thought that was derived from Karl Marx and Friedrich Engels, who were 19th-century philosophers and economists. Marxian economics arose as a critique of classical political economy and later as a critique of capitalism.

Marxian Economics

Marxian economics’ critique of capitalism was mainly focused on the distribution of surplus products and surplus value. More specifically, Marx argued that the capitalist class gains wealth for itself at the exploitation of others. Marxian economics is not as widely used today; however, in the 20th century, aspects of Marxian economics were used in Eastern Europe, namely, the former USSR.


One of the cornerstones of Marxian economics was Karl Marx’s ideas around the labor theory of value. The labor theory of value argues that the value of a commodity is determined by the average amount of time needed to produce the commodity. An example of the labor theory of value would be if a t-shirt takes half the time to make as a hat, the hat would be priced at two times the t-shirt.

The labor theory of value was also popular among other economists, e.g., Adam Smith and David Ricardo. However, Karl Marx and Marxian economics took a further view on the labor theory of value; he applied the labor theory of value to labor, better known as labor-power. Labor-power is the ability of a worker to produce a commodity.

Karl Marx further argues that the cost of labor-power is the total hours and cost society bears to allow the worker with the necessary capacity to work; it, for example, includes feeding workers.

Marx concluded that the wage of workers should be directly proportional to the labor-power of the worker. The concept of labor-power gave rise to Marx’s questioning of the distribution of surplus value in a capitalist society; he argued that capitalists overwork employees to achieve profits, resulting in the employees producing more value than what they are being compensated for.


Karl Marx and Marxian economics believe that a commodity’s price or worth can be based on one of two things – either its value or its use-value. Value refers to the commodity’s worth compared to other commodities. Use-value refers to the usefulness of a commodity or its ability to complete further tasks or work. For example, the use-value of a car is its ability to get someone from point A to point B.

Marx argued that all value in commodities is derived from human labor. He came to the conclusion by assessing that the idea that value is common among all commodities, and human labor is mainly what creates commodities.

Also, he concluded that the value of a commodity was dependent on the amount of human labor that was put into the commodity. If the value were to increase, it would’ve been a result of an increase in labor. It is why Karl Marx and Marxian economics embraced the labor theory of value.

Marxian Economics’ Criticism of Capitalism

Marxian economics’ main two criticisms of capitalism are that capitalism alienates workers and that surplus product and surplus value are not fairly distributed. Karl Marx argued that capitalism alienates people; furthermore, he argued it happens because of supply and demand in the free market.

Marx suggested that the spontaneous nature of the free market forced people to be overworked and work on tasks that they did not desire to do. He explained that because market forces like supply and demand control how much people work, that people will feel like machines.

Additionally, he argued that capitalism did not fairly distribute surplus product and surplus value as employers and owners would overwork their workers to reap profits.

Marxian Economics Criticism

One of the major pieces of criticism of Marxian economics is its inconsistency. Also, modern socialists disagree with Marxism’s ideas of the need for a revolution to achieve a socialist society. Additionally, free markets and exchanges have proven to show significant long-term economic growth.

Further Readings

CFI is the official provider of the global Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional resources below will be useful:

Financial Analyst Certification

Become a certified Financial Modeling and Valuation Analyst (FMVA)® by completing CFI’s online financial modeling classes!

0 search results for ‘