Sunday, December 28, 2008

Adam Smith Did NOT Have a Labour Theory of Value Outside Hunting

CLS’ posts on Classically Liberal Blog (HERE):

"Marxism wasn't all wrong but when they were...."

"The Marxists were right --- sort of. Actually it would be remarkable if they were consistently wrong. But Marxism is not consistently wrong. But, often when it is wrong, it is wrong in astoundingly gigantic ways. The clearest example of that is Marx’s labor theory of value. I don’t blame Marx too much for that error, after all he borrowed it from Adam Smith and David Ricardo

I am not sure exactly what ‘CLS’ is getting at but I am sure that he does not understand Adam Smith on the so-called labour theory of value (LTV).

First, ‘CLS’ is wrong to name Adam Smith as the originator of what became known as LTV. It was a fairly common view among philosophers before Smith presented his framework (John Locke was prominent exponent long before Adam Smith). And Marx in the so-called fourth volume of Capital, ‘Theories of Surplus Value’ in which he lists all the earlier authors (including Adam Smith) from the 16th century onwards who influenced him in the 19th century (in his view) by getting their LTV wrong.

I have argued for some years now (I even have a draft paper, to which I intend to return) that Adam Smith did not have a LTV at all, except for the hunter/ scavenger – gatherer, first age of mankind.

It is quite clear that when the hunter or gatherer goes out into the bush to collect food for sustenance, animal skins for warmth, and wood to make shelter, that as it is his (or her) own labour that provides these resources, that these items belong to the labourer; he is the sole source of labour and therefore the sole owner of what he labours to produce. In that principle, in conformity with what Adam Smith understood as Natural Law (from Samuel von Pufendorf, the Natural Law jurist, he was perfectly consistent and right.

Smith makes it clear in Wealth Of Nations (I shall add references later as I am about to leave for a seasonal house party at my daughter’s) that with the appearance of property (shepherding, agriculture, and commerce), the labourer of the forest was no long the sole source of products desired by humans; it was not just his labour alone that made it possible to provide sustenance, clothing, and shelter (later the ‘annual output of the necessities, conveniences, and amusements of life).

The land was no long ‘free’; somebody else ‘owned’ it and charged for its use or exploitation; the means of subsistence (capital stock or the ‘grub stake’ until products were available) were contributed by others, who made what they owned available for use by the labourers. These other owners required a share in the output produced by whomsoever sought access or use of what they owned. The labourer’s labour was not longer the sole input; it was one of several inputs owned by others.

At this point the LTV dropped out of Adam Smith’s reckoning. He says so several times. But because this part of Wealth Of Nations is ‘badly’ explained and muddled it is not clear to fast readers, or readers of isolated quotations, or third-hand, off the cuff, remarks by tutors, media commentators, or the politically inclined, the myth has grown up that Adam Smith had a LTV for commercial (and by extension, capitalist) economies had a LTV and Karl Marx developed into his theory of surplus value.

Marx’s theory is quite different. The ‘surplus’ is the contribution of the other owners of inputs. He simply appropriates it from the other contributors!

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