Why is Marxian Economics BadEconomics?

Lots of reasons, but I'll give you a few.

In a communist system, all power is vested in the government. From what the laws are to who get what apartment, all of it in the hands of politicians. Take a look at the US congress over the last decade, now imagine what it would be like if those people were in charge of central planning. Further absolute power corrupts absolutely, and communist governments have a lot of power. So there is a propensity for power hungry megalomaniacs to get in to power, and use that power to stay in power. Examples include: Stalin, Mao, Pol Pot, the Kims, Tito, and the Castros. Often these people are crazy and/or paranoid and lay waste to their own countries. Exampes include: the Holodomor, the Great Leap Forward, the Killing Fields, and North Korea's various famines.

But assuming your government isn't run by psychopaths or gridlocked with entrenched partisanship, you still have to somehow centrally manage the economy. Which is really hard. If you could find a way to accurately predict what to invest in over any significant length of time you would make a killing on the stock market. But despite universities, hedge funds, and banks, spending huge sums of money trying to figure it out, we still aren't very good at it. If predicting the next big thing (like cell phones or computers) is difficult for the greedy capitalists out for personal gain, what hope does a politicized bureaucracy have? Which is part of the reason why communist countries like the Soviet Union were advanced in space and weapons, but struggled with agriculture and consumer goods.

Speaking of consumer goods, they were generally terrible. In market economies the price of something is determined by scarcity, prices act as an information mechanism. With centrally planned economies and fixed prices valuable information is lost. And you end up with people queuing for goods. Not because there weren't enough, but because what was available was being rejected by consumers. A famous example is shoes, which the Soviet Union produced in huge numbers, but due to their terrible quality ended up in landfills while customers queued to buy foreign shoes. The Soviet government naturally continued to produce these worthless goods. Another famous example is the Great Leap Forward where the people produced huge volumes of worthless pig iron while they starved. The Chinese government like wise continued to produce these worthless heaps of scrap while millions succumbed to famine.

If you want to see a modern example of these three issues in action there is a great/tragic example going on in Venezuela right now. Only a few years ago it was held up as an example of socialism working. Now the poverty and inflation is +40%, there are shortages of basic goods like toilet paper, the exchange systems (yes plural) are wack, price controls and assets seizures are making things worse. The government has slowly taken over the free media and the army shot some folks during the many protests. Finally, the current President is a former bus driver who in 2013 was given the power to rule by decree.

/r/badeconomics Thread Parent