What would Karl Marx Say? Actually, Karl Marx isn't taken seriously as an economist any more. After all, Marx was just as certain that capitalism would be overthrown by now as the early Christian martyrs were that Jesus would quickly return.

And Marx was obviously wrong about that.

However, as William Kristol mentions in today's New York Times column, nobody really knows what to do about the current economic situation. Kristol suggests going back to Friedrich Hayek and Joseph Schumpeter.

Why not Marx?

THREE LEVELS OF ANALYSIS. One handy way to think about how Marx would look at the current economic crisis would be to identify three levels of analysis.

1. Stop the Destruction. Marx claimed that what characterized economic crisis in capitalism was the destruction of all kinds of assets. What brings on a crisis is the over-production of goods, services, and infrastructure. Thus, the crisis itself is a frenzy of destruction in which goods, services, and infrastructure are destroyed. In this context, resolving the crisis without returning back to some bare minimum would involve stopping the destructive process.

2. Questions Concerning Government. My reading of the "Communist Manifesto" indicates that there are two basic Marxist questions concerning the role of government in a crisis. This is pretty dicey because Marx himself did not anticipate the development of a government apparatus for preventing and resolving economic crisis. But there are a couple of questions that emerge from his general thinking?

a. The first question is the same as the question arising from a Keynesian perspective. That question concerns how government can best pinpoint where its assets can best be used to stop the pressure for a downward economic spiral. Should the government be buying up "troubled assets" as in Paulson's original plan, buying equity in troubled banks as in Paulson's second plan, making it easier for homeowners to pay mortages, engaging in the massive public works scheme that Obama seems to be moving toward, or some combination of all of these.

b. The second question is more specifically Marxist. That's the question of whether the government's resources are on a large enough scale to contain the destructive dynamic of the crisis. The Bush administration has already taken control over several companies (Fannie Mae, Freddie Mac, AIG, etc.), relentlessly reduced interest rates, and pumped $350 billion into the financial sector. But that hasn't worked to restore confidence. In fact, the government sector itself seems to be the only sector of the economy in which investors have confidence. Over the last weekend, the incoming Obama administration has floated a proposal for another 500 to 700 billion package for investing in public infrastructure. If that doesn't work, it may be the case that the American government just does not have enough resources to contain the downward economic dynamic in a $12 trillion economy.

3. More later.