Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

A Critique of Monetarist and Keynesian Theories 571effects of the price system, the possibility of substituting certaininputs for others, the most essential aspects of capital theoryand of the analysis of the productive structure, and finally,the microeconomic principles which govern the relationshipbetween saving and the lengthening of the productive structure.85 4THE MARXIST TRADITION AND THE AUSTRIANTHEORY OF ECONOMIC CYCLES. THE NEO-RICARDIANREVOLUTION AND THE RESWITCHING CONTROVERSYIn his critical analysis of capitalism, Karl Marx accepts theClassical School’s objectivist conception of two essential factorsof production (capital and labor) and a production processcomprised of only two stages (consumption and production).Nevertheless in Friedrich Engels’s preface to the third volumeof Karl Marx’s Capital, Engels makes explicit reference to thedifferent stages in the production process. He portrays them ina manner similar to that of the Austrian School, though he usesthe argument with the purpose of better illustrating the supposedinjustice of the capitalist economic system. Engels states:The capitalist sellers, such as the producer of raw materials,the manufacturer, the wholesale dealer, the retail dealer, allmake a profit on their transactions, each selling his productat a higher price than the purchase price, each adding a certainpercentage to the price paid by him. The laborer aloneis unable to raise the price of his commodity, he is compelled,by his oppressed condition, to sell his labor to thecapitalist at a price corresponding to its cost of production,that is to say, for the means of his subsistence. 8685 Rothbard, Man, Economy, and State, pp. 759–64.86 Friedrich Engels, Preface to the English edition of Karl Marx’s Capital:A Critique of Political Economy, vol. 3: The Process of Capitalist Productionas a Whole, Frederick Engels, ed., Ernest Untermann, trans. (Chicago:Charles H. Kerr and Company, 1909), pp. 19–20.