Wednesday, January 02, 2008

Adam Smith Was Not a 'Proto-Marxist'

The Brussels Journal (here) carries a factually incorrect assertion about Adam Smith in a mischievous article: ‘Why the “Anglosphere” Is No Alternative for the EU’ from John Laughland (2 January):

More generally, and as Murray Rothbard shows in his magnificent Economic Thought Before Adam Smith, it is precisely Protestant countries in which state power is strongest, for Catholic countries retain the notion that there is an independent source of authority (both the Church and the precepts of natural law) from the state. Catholic countries have been among the richest and most powerful in the world. Austrian economics, indeed – the discipline to which Rothbard adheres – argues that the modern theory of the free market owes far more to the natural law theory embraced by the medieval scholastics, and transmitted to the modern age by the neo-Scholastics at Salamanca in the 16th century, than it does to the clearly proto-Marxist labour theory of value embraced by Adam Smith.”

Despite the assertion, it is by no means ‘clear’ that Adam Smithembraced’ the ‘proto-Marxist labour theory of value’. That is not how I read the relevant chapters (Book I: V, VI, VII and VIII) in ‘Wealth Of Nations’.

Adam Smith, following John Locke and most contemporary and succeeding writers on philosophy and economics, was clear that in ‘rude’ society (hunting) the sole basis of exchange value was labour, which in that age, common to all human societies, labour under Natural Law theory, owned its product unambiguously; land was free, the bounties of nature were free, and labour owned its product, there being no other ‘owners’ to share claims to it. Labour was the sole factor that appropriated free resources for consumption. That is pure Natural Law philosophy embraced by Natural Law scholars and by Adam Smith.

When land became property and when property in capital-stock was invented (from savings out of production) and landlords and stockholders contributed their property to production, the sole claim of labour to its annual product was replaced by the owners’ claim to the product from their ownership of the factors of production. This transformation took place in the second, third and fourth ages of man (shepherding, farming and commerce).

Labour, then, was no longer the sole basis of exchange value.

This was elaborated by Adam Smith in the contemporary theory of Natural and Market prices. The problem for those of who read or, more likely, simply quote from, Wealth Of Nations, is that Adam Smith continually moved back and forwards between ‘rude’ and commercial society without always making clear that he had done so. A careful reading of these chapters is recommended.

The second problem is that there were several theories of exchange value based on labour. In some, especially the Marxist, labour is seen as somehow ‘embodied’ within the product. This is not how Adam Smith saw it. In others, labour is a measure, a numeraire, of the quantity of labour, though Smith showed clearly the ambiguities, not to say many difficulties of choosing labour for this purpose. Francis Hutcheson, for example, chose a “day’s plowing” as the numeraire. Adam Smith states clearly that money is the measure of exchange value, whatever the attractions of a labour theory.

Adam Smith advanced the view that the true cost to a person was the ‘toil and trouble’ of acquiring the item. In ‘rude’ society this was his labour; in commercial society it was what his ‘toil and trouble’ of working for the means of exchange or money (in concert, though not necessarily in tune with land and capital) that enabled him, due to the division of labour and specialisation, to buy products that he would never have afforded to consume in ‘rude society’ because without a division of labour there was insufficient time to produce but a small fraction of his productivity in ‘advanced’ society. By producing a product in surplus way beyond his capacity to consume it, he earned money to buy a wide range of other products and this annual consumption was the true measure of ‘wealth’ (his ‘real’ income). Landlords received rent and stock-holders received profit.

Adam Smith, not coincidently, was a firm advocate of Natural Law theory – it appears throughout Wealth Of Nations and Moral Sentiments, and in his Lectures on Jurisprudence – as taught in Scottish universities from the teachings of Grotius (16th century), Puffendorf, Carmichael and Hutcheson (18th century), and has taught by him (1751-64).

Because it is fashionable to make the connection between Adam Smith and Karl Marx (or Ricardo), it does not follow that this assertion is true. It is another distortion of Adam Smith’s legacy.


Blogger Mayfield said...

Rothbard was an anarchist. He was never a Marxist.

11:10 pm  
Blogger Gavin Kennedy said...


I stand corrected.


8:38 am  

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