The theory of marginal utility on which the Neoclassical ‘Reaction’ was founded runs up against insurmountable obstacles and insoluble contra-dictions as well as practical and historical evidence. If indeed marginal utility, however “marginal” it might be, is founded ultimately on the concept of “subjective utility” and “individual choice”, it becomes impossible then to tell for certain whether market prices really correspond with subjective marginal utilities for the simple reason that – as in the “labor” theory of value – we would be “comparing” entities that are absolutely, toto genere, different in substance: “visible” monetary prices and “intangible” subjective utilities. The charge of “metaphysics” that Bohm-Bawerk had moved against the labor theory of value is now equally applicable to neoclassical theory!
Furthermore, the “ownership” of the individual of the “goods” – be they “present” or “future” goods, be they consumption or production goods (primary or intermediate in Menger’s terminology) – is taken as axiomatic when in fact it needs to be “explained”! And the ability of “labor-saving devices” as means of production assumes that the “exchange” of the goods produced through them will always occur with constant given technologies. But this means that ultimately there will be a “declining rate of marginal utility” of the productivity of the labor “absorbed” by these “devices” or means of production: which means in turn that the economy is bound for “stagnation” and that this theory cannot account for technological development and economic growth as “endogenous” to the theory, as “internal” to the capitalist system of production.
That would mean, in turn, that the system of exchange of marginal utilities would eventually lead to the economic equality of all individuals in the market economy! And the neoclassic can explain inequalities of income and “endowments” on the absurd ground that “people are different” and they have take different choices, whether rational or irrational. Yet that does not explain the existence of social classes and the minimal rate of social mobility in capitalist societies!
Finally, neoclassical theory takes the entire aim of economic behaviour in capitalist society to be that of “highest marginal utility” for the individual. But in actual fact the aim of capitalist economic activity is profit which means not just the adoption of “labor-saving devices” but rather the “accumulation” of these “devices” in such a way that the aim of capitalism in practice and in reality becomes the control and command over the labor of others!
These insuperable obstacles and insoluble contradictions (both theoretical and historical) are wonderfully illustrated in this quotation from Bohm-Bawerk:
The connection is as follows. Command over a sum of present consumption goods provides us with the means of subsistence during the current economic period. This leaves the means of production, which we may have at our disposal during this period (Labour, Uses of Land, Capital), free for the technically more productive service of the future, and gives us the more abundant product attainable by them in longer methods of production. On the other hand, command over a sum of future consumption goods leaves, of course, the present unprovided for, and, consequently, leaves us under the necessity of directing the means of production that are at our command in the present, wholly or partially, to the service of the present. But this involves curtailment of the production process, and, as consequence, a diminished product. The difference of the two products is the advantage connected with the possession of present consumption goods. (V.IV.19)
But the “possession” of present consumption goods can be due only to the prior “possession” of means of production “which we may have at our disposal during this period” which can “absorb” the labor of those im-provident individuals who are now in “want” of present consumption goods! And it is this “difference” in “want and providence” (Bedarf und Deckung) between individuals that determines “the advantage connected with the possession of present consumption goods”. Once again, this “advantage” cannot consist in the finite “present difference” between the marginal utilities of goods in exchange on the market – rather, it consists in the permanent accumulation of “labor-saving devices” or “capital” that will perpetuate (!!) this accumulation of “the labor of others”!! And here we have the whole meaning of Profit! Profit is the monetary expression of “command over living labour through the violent coercive exchange with dead objectified labour (“present consumption goods”)!
It follows from all this that both Classical and Neoclassical theories with their absolute and total theoretical dependence on the Law of Value cannot explain two things: the first is that “economic market equilibrium” is absolutely incompatible with the notion of “profit” and “accumulation of capital”; and, as a corollary, therefore neither theory can explain the existence or even the possibility (!) of economic “growth” or “development”.
But they are particularly incapable of accounting for capitalist crises! This is the conundrum of historical economic analysis that Joseph Schumpeter and JM Keynes set out to explain. Bohm-Bawerk himself allows of “Uncertainty” as a source of variations in “expectations” as to the marginal utility of “future goods”. But again this is something that can be “arbitraged” (agio) away by the market mechanism at any one time. As he rightly notes, neither “abstention” nor “Uncertainty” can determine marginal utilities or prices for the very simple reason that they are “negative” or “passive” emotions that cannot increase the “productivity” of “labor” through “labor-saving devices” or “means of production” or “capital”. “Abstention” in and of itself cannot be the source of Value. It has to be the “switched preference” between consumption and production goods – “abstinence” in this specific economic context involving “labor-saving devices” – that is economically relevant. It is not “frugality” or mere “industry” that leads to the “diversion of the existing powers of nature”, but the “diversion of time preferences” that leads to a different “distribution or exchange” of marginal utilities. Exchange is always “relative” but its “content” (marginal utility) can be of a “higher” or “lower” order for the individuals involved because of their “endowments” whose “stock” is raised by the preference for labor-saving devices. These are not “time-saving devices” because the “object” is always to save “labor” to provide for given “wants”, which will rise in kind as more capital is employed in production through roundabout methods. Wants expand to absorb the available labor productivity with scarce resources. Capital is therefore “stored-up labor” at a given time of exchange; not “labor” understood absolutely but as “dis-utility” at a given time, given that labor too is subject to time preference. Thus,
“time is money” must be read as “saving of labor-time for provision of immediate
consumption goods and diversion to production of goods for future consumption”.
Weber’s Askesis – ascetic ideal – is not relevant to “the spirit of capitalism” because it understands “labor as an end in itself”! And it is also not relevant because it calls for “abstinence”, “penitence” and “frugality”! On the contrary, for the Neoclassics what occasions Value (does not “create” it, only “makes it possible through the diversion of the powers of nature”) is the deferral of consumption and its diversion to tools for production, to means of production as “labor-saving devices”!
It is not “labor” that is “an end in itself” as Weber had it. Instead, it is “provision for want” that is the “end” that “money” embodies as “Value” and that is maximized by “labor-saving devices” or “capital”! [Marx was entirely right in the Paris Manuscripts to see clearly this difference between “labor” as “poverty” or “need” (“dis-utility”) and “money” as “wealth” in the inverted world of commodity production (or “fetishism”).] Thus, “time is money” means “labor-time-saving devices” or capital is “money” or “generic social wealth” or “claim on social resources” – remembering that “labor” is “labor-power” or “productivity” in terms of “output per unit of time” - that is, not a “quantity” but a “rate”.
[Similarly for Marx, the speed of circulation of capital would determine the amount of labour-power it could absorb. “Profit” is a “rate”, and so therefore is “value”. Marx and Bohm-Bawerk approach the “value” of goods from diametrically opposed ends but both would agree on “time preference” because a profit today is obviously greater than one tomorrow, though not for its “immediate consumption” but rather for its “greater turnover”. Again, Bohm-Bawerk confuses “utility” with “profit” or “value as command over living labour” as the real aim and purpose of capitalist production! This is why B-B has to believe in “diminishing marginal utility” of capital whereas Marx sees it in terms of the “compression of the necessary portion of labour-time” in the production process.]
“Labor-saving” is cognate with Schopenhauerian Entsagung in the opposite sense that “Nirvana is the satisfaction of all needs” (Robbins). Schopenhauer’s Will or “Want” is “extinguished” by Nirvana seen as “the annihilation of Will-as-Want”; whereas the Neoclassical Nirvana is only a “limit” for the Will-as-Want in terms of Provision in that it can never be reached! Maximum provision for wants through scarce resources or provisions is the subject-matter of economics; the negation of unattainable want is the renunciation of will by Schopenhauer. In Schopenhauer Nirvana is the attainable cessation or “bottom” of Want or Will as endless strife; in Bohm-Bawerk, Nirvana is the impossible dream or “apex” of endless striving. Schopenhauerian want can never be satisfied but can be extinguished; neoclassical want can be satisfied but never be extinguished. Schopenhauer sees “want” as “strife” from the point of view of the Will – labor as endless and meaningless and purposeless striving or “pain” because “pleasure” is extinguished in its “provision”. Neoclassics see wants in quantitative terms – labor as dis-utility or “effort/pain” that can be “exchanged” for “pleasure/provision” that is “acquired”.
Fisher will analyse more closely the “deflationary” effect that a change in expectations could have on the “contract- or term-structure” of investments, whereas Keynes will look at “liquidity preference” related to the “paradox of thrift” in a market economy made up of “individual choices”. These are “technical” factors that do not consider the antagonism of the wage relation – except in terms of the “downward rigidity of money-wages” seen by Keynes, again, more as an “institutional defect” than as a form of social antagonism. Weber notices the antagonism but sees it as something that can be “mastered” or “overcome” by the “inescapable” hardening of the “iron cage” – the subordination of wage conflict to the need to rationalize production in a mass society.
Schumpeter takes a different course altogether making “crisis” the specific difference, the historical peculiarity of capitalist economies. Like Keynes, he perceives that Classical and Neoclassical theories are “static” analyses because they cannot account for the transformation of the means of production (intermediate goods) and of consumption goods (primary goods) – and this is quite apart from the fact that “want” is a purely passive and negative notion that must assume the exogeneity of production techniques and of changes in consumption patterns. Here he is:
What we want to show now becomes obvious. The development of wants, which we observe in reality, is a consequential creation of the economic development that has already been present. It is not its motor. The fact that the human economy has remained constant over centuries heavily weighs in favor of our argument. But if the development is already under way, then it can, in a concrete case, certainly be preceded by the development of needs and desires which can trigger special economic transactions. In principle, needs sustain their own demand through economic development, and it is economic development that stirred them up in the first place. The amplification of needs is a consequence and symptom of development. Insofar as truly new needs and desires exist they will not have a practical effect on the economy. As has already been shown in the discussion above, new needs and desires as such mean nothing. But even then, if there were an original cause in the development of needs and desires, this would still require creativity and energetic activity in order to create anything new of importance, so that even the assumption of such a Law of the Heterogeneity of Social Purposes would not have much to offer in the field of economics. It is beyond doubt that in a single case a concrete demand can bring forth an entire industry.  (TED, 1st edition, ch.7)
What, then can explain “growth”? This is the conundrum of historical economic analysis that Joseph Schumpeter set out to explain.