The Sound Money Project Essay Contest is designed to promote scholarship in monetary and macro- economics. More specifically, it aims to encourage those working at the cutting edge of the discipline to consider the monetary institutions that would reduce nominal disturbances and promote economic growth.
In 1971, President Richard Nixon ended convertibility, thereby eliminating the last vestiges of the gold standard. The classical gold standard, which prevailed from 1873 to 1914, had anchored inflation expectations, enabled longterm contracting, and promoted international trade. This historical experience has prompted several reconsiderations of resumption over the years, including the Gold Commission in 1980, the International Financial Institution Advisory Commission of 1998, and, more recently, calls for a Centennial Monetary Commission. What are the merits of returning to the gold standard? Is such a system feasible today?
First Prize $10,000
Second Prize $2,000
Third Prize $1,000
Winners will also be invited to participate in the Sound Money Project annual meeting in Great Barrington, Massachusetts.
The contest is open to graduate students, post-graduates, untenured professors, and tenured professors from any discipline. Former winners and current AIER fellows are ineligible. Former entrants are eligible, but must submit new essays.
Essays must be the sole and original work of the entrant and not previously published. They should be in the format of a scholarly article. Any standard citation format (e.g., MLA, APA, Chicago, Harvard, etc.) is acceptable. Essays may either be written specifically for the contest or arise from previous work (e.g., term papers, dissertations, research projects, etc.). Essays shorter than 4,000 words or longer than 12,000 words will not be considered. AIER-affiliated scholars are ineligible.
Submission Instructions: Please submit your paper here.
Deadline: August 1, 2019
William J. Luther is the Director of AIER’s Sound Money Project and an Assistant Professor of Economics at Florida Atlantic University. His research focuses primarily on questions of currency acceptance. He has published articles in leading scholarly journals, including Journal of Economic Behavior & Organization, Economic Inquiry, Journal of Institutional Economics, Public Choice, and Quarterly Review of Economics and Finance. His popular works have appeared in The Economist, Forbes, and U.S. News & World Report. He has been cited by major media outlets, including NPR, VICE News, Al Jazeera, The Christian Science Monitor, and New Scientist.
Luther earned his M.A. and Ph.D. in Economics at George Mason University and his B.A. in Economics at Capital University. He was an AIER Summer Fellowship Program participant in 2010 and 2011.
William J. Luther on Facebook.
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Karl Marx is the muse behind some of today’s worse political thinking. Not that the people who echo his eat-the-rich, conflict-based social vision have ever read him. Instead, his bad ideas have trickled down by the generations in a way that echo the large themes but not the specifics of his analysis. It all just keeps reappearing: the demonization of the capitalist class, the supposed inherent conflict between workers and owners, the solution of pillaging those with profit, the claims that capitalism will lead to its own doom, and so on.
What’s actually amusing, or tragic, when you take the slog through his works are the many mistakes he keeps making. Of course there is the labor theory of value that pervades his work. But there’s also his failed predictions that stem from his complete misunderstanding of how the competitive process checks power and his anticipated but never-realized progressive impoverishment of the working class. Finally, there is a very strange and stubborn refusal to answer the core question: what precisely are you suggesting replace capitalism? We need to know so that we can do a comparative analysis.
Marx is usually said to be part of the “progressive” tradition but E.C. Harwood was more correct: he is rightly grouped with a large range of thinkers more correctly thought of as counterrevolutionary. The revolution in this case was freedom against despotism, a freedom that unleashed prosperity and human flourishing as never before. Marx reacted against that freedom and called for its overthrow. He claimed he wasn’t making history but merely embracing what was baked into the historical dialectic, which is a flim-flammy way to avoid having to argue for his position.
The question is why would the American Institute for Economic Research, which has championed a proper appreciation of markets since its founding in 1933, set out to publish Karl Marx? To encourage people to read him, see the errors, learn to recognize and refute the arguments, and battle the problem with real knowledge and awareness. Most of the works of Marx have been published with fawning introductions and extra material. Our edition deals more realistically with Marx even as we let Marx speak for himself.
The whole project came about in conjunction with our film that pits Marx against Ludwig von Mises in a rap battle. They take on all essential issues in history and theory. We tried to be fair to both thinkers. As part of this, I edited a volume I believe is long overdue. I collected what are really my own favorite essays by Mises that I find most revealing and inspiring, some of them often overlooked. The result was The Best of Ludwig von Mises.
It was our president Edward Stringham who first suggested that we do the same for Marx, an idea that seemed crazy at first but grew on me over the weeks. Then I got together with Phil Magness and we began sorting through the endless piles of his writings to find the most important ones that reveal his core teaching.
It was late one night when Edward had the completely brilliant idea of collecting endorsements of the content from V.I. Lenin, Josef Stalin, Mao Zedong, and Fidel Castro, all of whom had fawning praise for the master. The introduction is by Phil himself. The result is the first serious book of Marx’s writings that come with a realistic and serious critique as part of letting him tell his own story. It could be useful in colleges around the world, and be quite the topic of conversation at dinner parties.
For my own part, I’ve been an anti-Marxist as long as I can remember but never bothered to look carefully at his writings. This is a mistake. Reading him in the original English translations as I did in the preparation of this book strengthened my convictions. Now I’m in a much better position to recognize the real source of so many modern political arguments that I otherwise find absurd on their face. Reading the source helps you find the root errors and not get buffeted about by fake arguments that turn up on the news daily. In general, this task just granted me more confidence in a similar way that reading the right-Hegelians did.
More knowledge is always a good thing.
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Writing in the Economic Journal in 1907, C. Violet Butler succinctly captured the academic reputation of Karl Marx (1818-1883) at a quarter century after his death: “Who should tilt at such a windmill?” The comment accompanied her assessment of the posthumous second volume to Marx’s Capital. First published in German in 1885, the work had recently appeared as a new English translation. While ostensibly an extension of Marx’s first volume from 1867, purporting to contain an independently defensible demonstration of the theory of surplus value, the often-overlooked work is notable for another reason. It carried a furious introductory essay by Friedrich Engels (1820-1895) in which he defended his collaborator’s earlier volume from its own poor reception.
Engels used the occasion to rail against the speculative charge that Marx had plagiarized the surplus value concept from his socialist contemporary Johann Karl Rodbertus, and more generally to bemoan the “degradation into which official political economy has fallen.” That official political economy, Engels continued, had proven itself “unable to solve the riddle of surplus-value” – a stumbling block for David Ricardo’s intellectual heirs a half-century prior, and an even more “insoluble [challenge] for its successor, vulgar economy.” Marx’s unfinished manuscript along with a soon-to-be published third volume would deliver the necessary solution, or so Engels promised.
Even at this early date however, Marx’s solution offered little more than a foray into economic obsolescence. The study of political economy had already advanced beyond the Labor Theory of Value on which Marx’s “surplus value” explication depended. The so-called Marginal Revolution had been triggered over a decade earlier by near-simultaneous refutations of the Labor Theory by Carl Menger, William Stanley Jevons, and Leon Walras, each contesting the underlying claim that the value of a good could be obtained by aggregating the steps of its production.
If value arose from individual subjective assessments of a good’s utility, determined on the margin, or in situational reference to an additional unit, then the calculations that Marx offered were not only internally flummoxed but economically moot – a solution to a question that was no longer being asked and that the mainline of economic inquiry had rejected over a faulty premise.
Without the Labor Theory of Value to undergird it, there is no “surplus value” to calculate. And without surplus value, Marxism loses its only mechanism with which to tangibly assert and measure its claim that class stratification under capitalist productive processes functioned to separate the laborer from the fruits of his labor. By the turn of the twentieth century Marx’s academic reputation – never strong to begin with, having emerged primarily as a political movement rooted in revolutionary labor activism – had been reduced to the intellectual equivalent of Don Quixote’s windmill.
When Lenin Read a Book of Marx
Marx’s heirs would of course vigorously contest his own intellectual marginalization, as Engels did shortly after his death and as Marx’s own bromides against the vulgarization of economics by his contemporaries reveal. Today they might also point to his high academic stature – albeit in disciplines that fall almost entirely outside of economics. Marx has since acquired the position of a foundational thinker in the modern sociological canon. Marxist theory is considered a major interpretive framework for literary criticism, history and historiography, geography, cultural anthropology, and fine arts. The same is also true for several of his twentieth century progeny in the Critical Theory tradition, which exercise enormous influence across the humanities.
Indeed, as of 2015 Marx stands nearly alone as the most frequently assigned author in American college classrooms, only surpassed by the ubiquitous Strunk and White grammar manual. At 3,856 classroom syllabi, the Communist Manifesto is easily the most commonly assigned philosophical work. Only Plato’s Republic at 3,573 approaches a comparable level of use. Marx is more than twice as likely to be encountered as John Locke, Alexis de Tocqueville, John Stuart Mill, Adam Smith, and Martin Luther King, Jr. Even Marx’s second-most popular work, the substantially more complex first volume of Capital, is assigned with comparable frequency to each of their most famous contributions.
Curiously, this rapid reversal in Marx’s scholarly reputation appears to owe its credit to a single chance event. In late 1917 a group of Marxist revolutionaries under V.I. Lenin exploited the political instability of the First World War to seize control of the government of a major world power, resulting in the establishment of the Soviet Union. Through the turmoil of a violent civil war and often aided by sheer luck in outmaneuvering contesting claimants, Lenin was able to consolidate his power and proclaim a state explicitly founded upon the doctrines of Karl Marx.
The successive political history is well known, and its legacy has fallen into disfavor among most Marxist adherents today on account of its brutally totalitarian turn. Regardless of how we may evaluate the deadly legacy of the Soviet experiment and its many imitators, the events of 1917 marked a clear turning point in Marx’s own intellectual stature. Marx entered the twentieth century with reach that did not extend far beyond the crowded field of socialist political agitation, and he held at most a secondary or tertiary level of intellectual influence out of those circles. Yet between 1917 and 1932, his citation pattern in printed works approximately doubled – almost instantly making him one of the most-discussed thinkers of the entire nineteenth century. The spike in attention appears to be acutely traceable to the Russian Revolution and its aftermath. It only accelerated thereafter.
Finding Value in Marx’s Economics
The economically minded reader of today will likely find the most challenging dimension of Marx’s work to be its obsolescence in the wake of marginal analysis. As noted, Marxian economics is intractably wedded to the Labor Theory of Value. The directly dependent doctrine surplus value permits Marx to construct a theory of the laborer’s estrangement from his own production, which in turn breeds alienation and thus the mechanism by which a posited class conflict will play out. The supplanting of labor theory with subjective valuation, then, effectively removes the foundation.
Marx wedded this faulty economic premise to an elaborate philosophical system of class consciousness, and a derivative state of continuous class conflict between the owners of capital and the “exploited,” or those deprived of the surplus value of their labor. This collective identity conveniently obviated the need for Marx to grapple with the subjective variation found in individual economic preferences and, equally significant, axiomatically sidelined individual human action from his system, leaving the individual’s place in society to be judged only on account of its service to the predicted class struggle for control over the means of production. The resulting system carries a peculiar circularity with it, in which the instigation of violent leftist political upheavals functions as evidence of its own claimed inevitability. Though long a subject of jargon-filled philosophical treatises, the practical effect is to make socialist revolutionary agitation into its own self-fulfilling prophecy. It is not difficult to extrapolate from there why so many Marxist experiments in the last century have descended into democidal atrocity and the extreme political repression of disfavored beliefs.
Other subsequent developments in economic theory have further weakened auxiliary doctrines of the Marxist framework. For example, the notion that class identity functionally drives political (or really any other) type of collective action appears to be undermined by a pervasive free rider problem. Similarly as regards distributional considerations, even if one were to assume the presence of an unjust initial or subsequent allocation of property, that allocation’s economic consequences are subordinate to the question of whether property rights exist in the first place. Then there’s the practical matter of the Marxist political track record. After dozens of attempts to restructure societies around both revolutionary and nominally-democratic variants of Marxist doctrine, an unambiguous pattern of economic immiseration and mass political atrocities emerges.
Most economists since the early twentieth century have followed a pattern of assessing Marx’s contributions to economic theory very poorly and discounting their modern salience entirely. Ludwig von Mises was unsurprisingly harsh in his appraisal, noting “there is no indication that Marx ever grasped the meaning” of either Menger or Jevons’ critiques of the Labor Theory of Value, even though he lived and wrote contemporaneously to these developments. The resulting economic doctrines amounted to “a garbled rehash of the theories of Adam Smith and, first of all, of Ricardo,” – two thinkers whose uses of the labor-based valuation approach predated the emergence of socialist thought and therefore had no opportunity to assess its implications.
Such assessments are hardly the proprietary domain of free-market or laissez-faire economists. Paul Samuelson, the great popularizer of Keynesian macroeconomics, offered a similar critique: “From the viewpoint of pure economic theory, Karl Marx can be regarded as a minor post-Ricardian.” John Maynard Keynes himself openly pondered the strange political appeal of Marxian socialism against the backdrop of its Soviet revival, wondering aloud “how a doctrine so illogical and so dull can have exercised so powerful and enduring an influence over the minds of men and, through them, the events of history.” To Keynes, Capital was “an obsolete economic textbook…without interest or application for the modern world.” Marx’s enthusiasts, he continues, deployed his works as one would use a sacred text, “set up to be above and beyond criticism.” Obsolete, muddle-headed, self-contradictory, confused, incoherent – such descriptors are commonplace assessments of the value of Marx’s arguments as matters of economic theory, and seem to be present across all stripes of economists outside of the profession’s dwindling Marxist periphery.
Yet Marx’s stubborn political staying power also requires that we grapple with his theory in an intelligent fashion and that we engage him seriously even if we judge his conclusions wanting – hence the primary purpose of offering this volume. While they are not intended as a comprehensive survey of Marxian doctrine – a task that would take thousands of pages, to say nothing of the notoriously schismatic interpretive progeny they have spawned – the texts excerpted herein offer the reader a functional introduction to his economic arguments as he presented them and to his closely associated political vision for a socialist reordering of the world.
Although it is primarily a political platform, the Manifesto of the Communist Party contains the most accessible synopsis of Marx’s theory of class conflict in the context of a prescriptive economic treatise. The document was principally drafted by Marx with the assistance of Engels and issued as a self-published and anonymous pamphlet in 1848 as a series of revolutionary political movements erupted across continental Europe. The Manifesto’s authors intended it for translation and international distribution to ride on the wave of political upheaval, but a combination of delays in its preparation and Marx’s expulsion from Brussels for reputed involvement in revolutionary activities effectively limited its reach to serialization in a handful of German-language newspapers.
The document saw a slow and modest dissemination over the next few years as a handful of socialist periodicals translated and reproduced sections of its text, but it otherwise languished in nearly complete obscurity for the next two decades. Beginning around the time of the Paris Commune of 1871, Marx and Engels revived the document as a blueprint for the intellectual instigators of an anticipated workingmen’s upheaval. Its notoriety nonetheless remained confined to the far-left until after Marx’s lifetime, when Engels began publishing standalone editions for political distribution. Its mass adoption as a core text of political socialism, however, owes much to its embrace by Lenin in the early 20th century in order to strengthen his own revolutionary genealogy against other claimants of Marx’s legacy. The English-language version reproduced here comes from a translation commissioned under Engels’ tutelage in 1888.
The second selection comes from Marx’s 1871 pamphlet The Civil War in France, referring to the same events that helped to revive the Manifesto. Published just over two weeks after the collapse and suppression of the Paris Commune, the document juxtaposes Marx’s revolutionary idealism – indeed, he considered the Communards as an early model for how the anticipated worker’s upheaval would play out – with a diagnostic assessment of its recently witnessed unraveling. The fifth section, reproduced here, contains Marx’s attempt to describe and record the significance of these events while also explaining the sources of its undoing, including through missteps that Marx perceived to weaken the Communards’ ability to maintain internal cohesion and withstand suppression by the French state. The result is a curious blend between a theoretical exercise in Marxian historical analysis and practical critique, giving a direct glimpse into how he saw his otherwise abstract theories taking form as revolutionary action and – briefly – a government of the proletariat.
Marx’s brief preface to his 1859 pamphlet A Contribution to the Critique of Political Economy is distinctive as both a precursor to his magnum opus Capital and for laying out what is arguably the most succinct and cohesive version of the concept of historical materialism in his works. Observing that it was “not the consciousness of men that determines their existence, but their social existence that determines their consciousness,” Marx linked his economic critique of capitalism to a comprehensive social-stage based process of posited societal evolution. The result was a comprehensive philosophical system that not only presented a case for revolutionary socialism but purported to reveal its self-fulfilling inevitability.
The fourth selection, “Value, Price, and Profit,” contains a series of transcribed lectures that Marx delivered to a meeting of the First International Workingmen’s Association in 1865. The lectures were educational in purpose, but are distinctive for offering an accessible and general overview of the arguments he was developing at the same time into his much longer manuscript for Capital. It was posthumously published as a standalone pamphlet in 1898 under the direction of Marx’s daughter Eleanor and her partner Edward Aveling, who also worked as Engels’ translator for English editions of Marx’s other writings. In Aveling’s assessment, the manuscript displayed its author’s “patient willingness to make the meaning of his ideas plain to the humblest student,” and offered “an epitome of the first volume of Capital.” It is offered here as an accessible synopsis of Marx’s main economic arguments, as framed and presented by Marx himself.
We conclude the volume with a selection from Marx’s most significant economic work, Capital. After first publishing the text in German in 1867, Marx oversaw several revisions during his lifetime and continued to develop its core doctrine, the aforementioned mechanism of “surplus value,” in an intended three additional volumes. Engels assembled the partially completed German-language notes for volumes II and III after Marx’s death and oversaw the English translation presented here in 1887. The first volume lays out a comprehensive framework for Marxian political economy. The successor volumes consist mainly of technical attempts to prove the functional validity of surplus value and then extrapolate a general indictment of claimed contradictions in the “process of capitalist production” upon the same doctrine.
At almost a thousand pages in the first volume alone, it is impossible to fully condense the manuscript into a comprehensive abridgement of Marx’s thoughts. Much of the text of Capital consists of interminable taxonomies for concepts and definitions that are almost exclusively deployed in the insular academic literature of his followers, and nowhere else. The selections accordingly place a greater emphasis on the components of Marxist economic doctrine, while bypassing the lengthy historical digressions that populate the text. These editorial choices will necessarily meet with varying levels of agreement as to their importance, especially as evaluated against the many internecine claimants of Marx’s intellectual legacy today. Given the purpose of this volume in providing an abbreviated introduction, such decisions remind us of the economic realities imposed by scarcity and the derivative necessity of trade-offs. The resulting selections highlight, in progression, (1) Marx’s conceptualization of the commodity, (2) the classical Labor Theory of Value and Marx’s interpretation, (3) the doctrine of surplus value, and (4) the posited process of capitalist accumulation, as facilitated by extracting the surplus value of the laborer’s production.
The economically-minded reader today will likely recognize the aforementioned obsolescence of this theoretical progression. The resulting doctrines require an alternative economic universe in which marginalist solutions to a theory of value are never discovered, and where attempts to deploy a political reordering of society around the doctrine of surplus value proceed as if Marx had actually succeeded in delivering his promised and declaimed proofs of its viability. They nonetheless offer a textual glimpse into the chasm that emerged between Marxist doctrine and the mainline of economic thinking over the last 150 years.
That divergence also helps to explain the stumbling block that economic analysis often poses to other disciplines, and particularly the humanities. While economists make little use of Marx today beyond mapping his place in the history of economic thought, his continued influence outside of the profession reveals the existence of a sharp epistemic divide over theories of value and their derivative social implications. Much of that persistence appears to originate in ideological affinity for the prescriptive claims and promised outcomes of his theories, offered in detached abstraction that evades both the scrutinizing eye of subsequent advances in economic analysis and the harsh realities of the Marxist system’s attempted implementation over the last century. To the modern economist then, directly grappling with Marx’s economic theories remains a necessary step for pursuing informed and rigorous engagement with their unavoidable political progeny.
 C. Violet Butler. “Reviews: Capital by Karl Marx, Vol. II,” The Economic Journal, Vol. 17, No. 68 (Dec., 1907), p. 560
 Friedrich Engels. Introduction to Capital: Volume II. 1885
 Eugen von Böhm-Bawerk. Karl Marx and the Close of his System: A Criticism. TF Unwin, 1898.
 Author’s calculations from the Open Syllabus Project. https://opensyllabus.org
 Author’s estimations from Google Ngram citation patterns. See Phillip Magness and Michael Makovi. “The Mainstreaming of Marx: Measuring the Effect of the Russian Revolution on Karl Marx’s Influence” Working Paper, September 2019 (available upon request from authors)
 The inevitability of this struggle is seldom disputed, although the occasion of its political instigation remains a central subject of many internecine disputes of the Marxist political world – particularly those concerning assumptions about timing amid the posited stages of successive economic systems, and the tactics and agency of the revolutionary actors. Many iterations of Marxist theory unsurprisingly blame the atrocities of the last century’s experiments in Marxist governance on “errors” in the steps of revolutionary instigation, disputed assessments of the current stage of societal economic development, and the disagreements over the tactics employed by specific revolutionaries. These deviations of interpretation are then assigned blame for impeding the attainment of true Marxist socialism – itself axiomatically depicted as a stateless – as opposed to acknowledging what these observable failures might say about faults in the premises of Marx’s philosophical system. Though a doctrinaire Marxist himself through the early stages of his career, the French philosopher Michel Foucault presented a challenge along similar lines in a late-life interview: “Rather than searching [Marx’s] texts for a condemnation in advance of the Gulag, it is a matter of asking what in those texts could have made the Gulag possible…The Gulag question must be posed not in terms of error (reduction of the problem to one of theory), but in terms of reality.” Michel Foucault. Power/Knowledge: Selected Interviews and Other Writings, 1972-1977. Vintage, 1980. p. 135.
 Mancur Olson. The Logic of Collective Action. Harvard University Press, 1965. pp. 102-110.
 Ronald Coase. “The Problem of Social Cost.” Journal of Law and Economics. Vol. 3 (Oct., 1960): 1–44.
 Some of the earliest commentaries of Marx’s obsolescence date to his contemporaries. Shortly after Marx’s death, Philip Wicksteed engaged several British socialist writers by offering a marginalist critique of Marx, enlisting Jevons to undermine the “surplus value” argument found in Capital. See Philip H. Wicksteed. “The Jevonian Criticism of Marx.” To-day: A Monthly Magazine of Scientific Socialism, 3.16 (1885): 177-179. Böhm-Bawerk’s aforementioned Mengerian critique of Marx appeared in 1896 (English translation in 1898), and spawned an early twentieth century debate over the viability of socialist planning pitting the Austrian marginalists against several surplus value theoreticians in the Marxist tradition.
 Ludwig von Mises. Theory and History. Yale University Press, 1957.pp. 124-5
 Paul A. Samuelson. “Economists and the History of Ideas.” The American Economic Review 52.1 (1962): 1-18.
 John Maynard Keynes, “The End of Laissez-Faire” and “A Short View of Russia” in Essays in Persuasion. Macmillan, 1931.
 Edward Aveling, Preface to the first edition of “Value, Price, and Profit,” Swan Sonnenschein & Co., London, 1898.
Phil Magness is a Senior Research Fellow at the American Institute for Economic Research. He is the author of numerous works on economic history, taxation, economic inequality, the history of slavery, and education policy in the United States.