People have been celebrating the 200th birthday of economic philosopher Karl Marx. Controversially, EU chief Jean-Claude Juncker joined the company of the world's leading communists by delivering a glorifying speech at the ceremony of unveiling a Marx statue in Marx's birthplace Trier, Germany. The statue was a gift from China, whose leaders have also been celebrating Marx quite impressively. There is no denying that Marx is one of the most influential thinkers in the history of mankind. His ideas have been adopted, interpreted and modified nearly two centuries. Some argue that contemporary variations would not be recognizable by Marx himself, while others hold Marx at least partially responsible for the evils of communism.
A little less controversial statement would be that ideas have consequences. Even the most analytical explanations of the world are not isolated from value judgments and motivations for action. Knowing Marx, his work is far from the neutral and logically transparent end. Arguably, his lasting reputation stems from abstract historical, political and sociological writings than contributions to economic reasoning. However, the most famous book attached to his name is Das Kapital, an attempt to theorize economics and the role of capital for social order. Therefore I would merely go briefly back to the economic assumptions and logic he used as fundamental building blocks that defined a lot of his further conclusions and social movements inspired by them.
Marx lived most of his life between two eras of economic thinking: classical economics and marginal revolution. The first stands for a tradition covering late and post-Enlightenment-era economic philosophers such as Adam Smith (1723-1790), David Ricardo (1772-1823) and Thomas Malthus (1766-1834). Nowadays they are famous for their significant role in the development of economic thought in a similar way than Galileo Galilei and Isaac Newton are respected in astronomy and physics. Some of their contributions have stood the test of time, but not all. This is the case with many ideas of classical economics in relation to so called marginalism that revolutionized economic thinking during the 1870s.
Especially the marginalist idea of subjective preferences, subjective "marginal utility" and its role in supply and demand challenged and solved some early paradoxes of economic thinking based on the idea of an intrinsic or "objective" value. For example, classical economics struggled with the "diamond-water-paradox": despite water is vital and more useful for people, diamonds are still priced higher. Classical economics tried to explain the higher price of diamonds with the differences of effort needed to acquire or produce goods. With his labor theory Marx had adopted similar assumptions of classical economics that were problematized and debunked during the last years of his life. This is unfortunate to Marx fans but he did not participate in any breakthrough in economic thinking. The actual figures of his time who are still being celebrated as pioneers among the economists would be Carl Menger (1840-1921), William Stanley Jevons (1835-1882), and Léon Walras (1834-1910).
Labor theory of value implies a rather static and fixed explanation of production, value and distribution of income. As it neglects real unpredictable uncertainty, economic surplus cannot be identified as a return for allocating capital to a risky venture. That capital has been used to finance immediate salaries for workers while shareholders would still have to wait and wish for revenue-based cash flow. What contemporary economics identifies as a mutually beneficial division of labor between workers and risk bearing capitalists, Marxist thinking would at most realize a trade-off and a power struggle.
In light of contemporary economics it is easy for us to say that Marx misunderstood many things. So did several other classical economists too. The history of science is full of failed experiments and faulty reasoning. They are instrumentally valuable as they generate debates and stimulate reasoning further. That is what happened when marginal revolution reformed economics and questioned the relevance of many assumptions and logics held by classical economists. Thus, mystifying and glorifying Marx while ignoring the fundamentally erroneous parts of his thinking would be the last thing to do. He can be respected as a reflection of the industrial circumstances, concerns and conventional economic thinking of his time. However, the problems of Marxist economic reasoning should reinforce skepticism and careful attitude towards everything that leans on it, whatever your political motives were.