I just finished a chapter of E.K. Hunt’s History of Economic Thought, where he talks about the economist Sraffa, and his attack on neoclassical economics.

Neoclassical economics is the dominant ‘economics’ today. All economists swear by it. But Sraffa showed the logical contradiction at the heart of neoclassicism. It tries to explain capitalism as a system of exchanging utilities. Everything – and in particular, wages, income distribution – are determined by individuals maximizing benefits and minimizing costs. Wages are the return to the worker; ‘interest’ (or profit) is the return to the capitalist. There is no exploitation.

"Comrades! The marginal productivity theory reflects the ideological suppositions of the bourgeoisie!"

Yet Sraffa showed that their model can’t determine production costs consistently:

“The identical assortment of physical capital goods used at identical points in time under identical conditions creates widely divergent capital values depending on the prevailing rates of interest and wages.”

Neoclassical economics says interest rates and wages are determined by that process. Sraffa shows they come from outside it. In other words, income distribution and wages aren’t natural: they depend on exploitation and power. These are extra-market factors that neoclassical economics doesn’t even consider. They’re why Marx says economics is an ideology: it exists to justify the power of capital.

If this sounds fuzzy, I’m with you. Reading Hunt is a bit like listening to Rhys Williams, an American Bolshevik who went to fight during the Russian Revolution. In one incident, angry soldiers were debating whether to execute their counter-revolutionary White Guard prisoners. He was called upon to intervene:

Loudly and fervently I spoke about the Revolution, about the battle waged throughout Russia for land and freedom, about their own betrayal by the White Guards and the justice in their wrath. But the eyes of the world turned to them as the fighting vanguard of the Social Revolution. Would they take the old bloody path of retaliation or blaze the way to a nobler code?... It was an effective speech at the outside. But not because of its content… Not one in a hundred understood what I was saying. For I spoke in English.

Dosvedanya!... Tovarich!... um, Vodka!... oh, forget it - Williams's portrait of a Bolshevik rally

I feel like the Russian soldiers cheering for Williams. I’m on Hunt’s side as he coolly destroys the neoclassical arguments. But I don’t know how he does it – I’m not really even sure what a marginal return is. I’m content to hold his towel & water bottle until I learn what the rules of the match are.