Introduction

In the general equilibrium model of Chapters 1–3, some of the critical features of a capitalist economy that are responsible for crises are absent. The purpose of those chapters was to study Marxian value theory; the questions of crisis can be studied somewhat independently of that theory. In this chapter, a model is proposed that permits an exposition of various Marxian and neo-Marxian crises: in particular, the profit-squeeze crisis, the realization or underconsumptionist crisis, and the fiscal crisis. To do this, we need to introduce a distinction between ex ante and ex post investment and savings, a government sector, and a reserve army of the employed.

The chapter begins with an exposition of a model of Marxian simple reproduction, and then proceeds to study extended reproduction. We do not propose that the models studied in this chapter are definitive, or that the ideas lying behind them are original. In fact, more than the other chapters, this chapter represents only a “foundation” to a study of an aspect of Marxian economics, rather than an extension or elaboration of a body of Marxian theory. Some of the most important attributes of capitalism, which contribute to crises, are not modeled here, such as the role of money. Thus, the chapter should be taken simply as an exposition of some of the classical Marxian ideas.