Marginalist socialism
Two economists who had adopted a theory of value different from the labour theory of value did however attempt to uphold a vision of socialism using marginalist tools (Arena 1995; Herland 1996).
Leon Walras was exposed to socialist ideas from an early age as his father Auguste Walras participated in a Saint-Simonian circle from 1829 to 1831. In an article he wrote for the Revue socialiste in 1896, Leon Walras challenged Marx’s theory of value and pointed to the difficulty of coordinating agents in a single state system of exchange and production. He was himself temporarily drawn to Saint-Simonianism and was in direct contact with Malon and other socialists; between 1895 and 1909, he published seven articles in the Revue socialiste and was seen and supported as a socialist economist by Gustave Rouanet (1894) and Charles Peguy (1897). However, having established a theory of value with no connection to the labour theory of value, his relationship with socialist ideas came under strain owing to a significantly modified scientific backdrop heavily critical of the usual socialist doctrines.
According to Leon Walras, economics covers three domains. The first, that is, pure economics, is the cornerstone: it studies the value of social wealth in conditions of hypothetical and ideal competition, and defines general equilibrium; in it, the determination of value and price stems from natural economic forces. The second domain, applied economics or the theory of economic production of social wealth, defines the rules of efficient conditions of production: organization of production, free competition organized by the state, end of scarcity. The third domain, social economics, is the science of social wealth dealing with the distribution of wealth between individuals and the state. It is based on the principle of justice (theory of property, taxation).
According to Walras (1860), when it comes to distribution, the organization of production and justice are not dependent on natural forces but instead on human will. Different from Proudhon, the Walrasian formula of justice is: “equality of conditions within the state, inequality of positions between individuals” (Walras 1860: 172, 179). Land must not be privately owned because it is something that has been given to everyone by nature. Walras thus advocated the gradual purchase of land by the state (nationalization of land) in order to ensure equality of conditions. However, this does not hold true for inheritance when it results from private resources. Inequality of positions is linked to inequality of personal abilities and thus inequality of the service provided in a working environment, with a natural inequality of wages. State intervention through state run organizations, concessions or nationalizations are also justified due to the presence of market failures stemming from collective functions or goods: public services and natural monopolies (railways). Walras accepted the term “semi-collectivist” proposed by Renard (Potier 2012) to argue that the theoretical regime of absolute free competition proves, in applied and social economics, the necessity of fighting laissez-faire. According to Walras, socialism has scientific legitimacy when it raises the social issue, even though it is politically misguided when authoritarian solutions involving the suppression of private property are chosen to address this issue. The hypothesis of “scientific socialism” is therefore legitimate if the trilogy between pure economics, applied economics and social economics is respected.Adolphe Landry strived to use marginalism to prove the superiority of socialism over capitalism (Soriot 2001), albeit differently from Walras, who attempted to conciliate liberalism and socialism within an economic regime of free exchange and private property - with the exception of land.
In his non-conformist thesis of 1901, Landry used an Austrian marginalist theory of value and showed that there is a conflict between profitability and productivity in the capitalist system, itself linked to an opposition between entrepreneur and capitalist. If the growth of future collective wealth is the aim of the economy, capitalization, hence renunciation of something in the present to obtain more in the future is decisive. The existence of a positive rate of interest creates undercapitalization because the demands of the lender are over and beyond the reimbursement and payment of an insurance premium. A fall in interest rates could be possible but lead to major behavioral reactions from private capital owners. The opposition between productivity and profitability, which is taken in part from the works of Effertz (Arena and Hagemann 1997), may produce entrepreneurial default. This may provoke underproduction or under-utilization of labour in order to preserve entrepreneurial profitability or rent. Furthermore, the private system may lead to an uneven distribution of wealth by using means of production which are only able to satisfy the needs of the most fortunate. Personal interests in a system of private property are thus not susceptible to promoting the general interest. In this way, albeit in a very general and weakly argued fashion (Maupertuis and Romani 2000), Landry advocated substituting collective property for individual property. This progressive transformation would make up for the shortcomings of production and lead to a state of equality among workers.
More on the topic Marginalist socialism:
- Marginalist socialism
- The Institutionalization of Socialist Ideas in France: 1880-1914
- The term “socialist” conveys a variety of meanings that are shaped by national contexts (German, French, and English speaking countries).
- Economic Theory of Socialism
- Class and Gender
- Statist socialism in Britain and the United States
- PPE Economics at Oxford in the Inter-War Years
- Formation and Early Work
- The nineteenth and twentieth centuries
- The Reception of the Third Volume of Capital (1894)