Knife-edged caricature modelling: the case of Marx's Reproduction Schema

Marx’s so-called ‘reproduction scheme’ as outlined in the Part Three of Capital II (1885) is probably the first macroeconomic model, even if the term ‘macroeconomics’ dates from only 1933. (In his own pioneering work on macroeconomics Tinbergen initially used the term ‘scheme’ for what later would be called ‘model’.) This paper explains how Marx’s model is designed – focussing on the type of its assumptions – how it works, and how it may be characterised in terms of the jargon of current economic methodology. The term ‘knife-edge model’ is borrowed from Solow (1956) and the term ‘caricature model’ from Gibbard and Varian (1978).
Marx’s method is directed at analysing capitalism from within its own logic – here the ‘strongest case’ for economic expansion. On his way to presenting this strongest case Marx seems to construct ever more ‘caricatures’ of capitalism. The end caricature shows that balanced growth is possible, although it is balancing on a knife-edge. All the same the caricatural assumptions made under way are even so many potential points for setting into motion economic crisis. Along with these caricatural assumptions Marx makes a number of ‘neglectability assumptions’. This type of assumption shows the model builder’s theoretical mastery of the object of inquiry that the model deals with: the ability to omit so as to show important aspects or even the essence of the entity. Together with the caricatural assumptions, those of neglectability show the virtue or vice of a model and therefore also the art of the model building. It is concluded that from the point of view of model building there is not a gulf between Marx and modern orthodox economics.