Over at the New York Times Room for Debate:
I have long thought that Marx's fixation on the labor theory of value made his technical economic analyses of little worth. Marx was dead certain for ontological reasons that exchange-value was created by human socially-necessary labor time and by that alone, and that after its creation exchange-value could be transferred and redistributed but never enlarged or diminished. Thus he vanished into the swamp, the dark waters closed over his head, and was never seen again. READ MOAR at the Equitablog
And I have long thought that Marx's confusion about nominal and real magnitudes, about shares and absolutes, fueled his extraordinary misapprehension that he was watching not the birth-pangs but the death-throes of capitalism. Because of this confusion, Marx could not fully grok that rising real material living standards for the working class might well go along with a rising rate of exploitation and a smaller labor share. Thus he takes a demonstration that labor's share of income might fall and without noticing turns it into a claim that the working class will starve:
The greater division of labour enables one labourer to accomplish the work of five, 10, or 20.... How... could a mass of workers thrown out of one branch of industry by machinery find refuge in another branch, unless they were to be paid more poorly?... Thus the forest of outstretched arms begging for work grows ever thicker, while the arms themselves grow ever thinner...
Moreover as Suresh Naidu pointed to me, there is a third huge mistake for this time: Marx thought increased investment and capital accumulation diminished the value of labor to employers, and thus diminished the bargaining power of workers--when actually it increased it.
But although this third belief was wrong for his day, is it wrong for ours and for our future? We (1) move things with large muscles; (2) manipulate things with small muscles; (3) use our hands, mouths, brains, eyes, and ears to make sure that ongoing processes and procedures stay on track; (4) via social reciprocity and negotiation try to keep us all pulling in the same direction; and (5) think up new things for us to do. The coming of the Industrial Revolution--the steam engine to power and the metalworking to build machinery--greatly reduced the need for human muscles and fingers for (1) and (2). But it enormously increased (3), for all those machines needed to be minded and all of that paper needed to be shuffled. Each improvement in machines made each human cybernetic control element more valuable as well.
But there is no iron law requiring that technologies of power application and matter manipulation must always advance more rapidly than technologies of governance and control. What happens when our machines take over (3) and leave humans seeking employment with only (4) and (5)? How many and at what wage can we employ people in the social arts of personal services and as inventors and creators?
Karl Marx in his day could not believe the volume of production could possibly expand enough to reemploy those who lost their jobs as handloom weavers as well-paid machine-minders or carpet-sellers. He was wrong. The optimistic view is that our collective ingenuity will create so many things for people to do that are so attractive to the rich that they will pay through the nose for them and so recreate a middle-class society. The pessimistic view is that some pieces of (3) will be (a) mind-numbingly boring while (b) stubbornly impervious to artificial intelligence, while (4) will remain limited and for the most part poorly paid. In that case, our future is one of human beings chained to desks and screens acting as numbed-mind cogs for Amazon Mechanical Turk, forever.
 Cf. "Focus" in Vernor Vinge (1999), A Deepness in the Sky (New York: Tor Books: 0-312-85683-0), passim.