Adam Smith’s Theory of Value and Distribution

O’Donnell, Rory

doi:10.1007/978-1-349-10908-1

Cited by 51 publications

(4 citation statements)

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“…In contrast with classical and neoclassical theories (Hirsch 2021a;O'Donnell 1990), profit, for Knight, is not a market rate but a market residuum. As he repeatedly remarks, profit is "unimputable": it is not a return on investment or remuneration for work, which means it bears no proportion to the finite amounts of labor and capital put into a product (RUP,.…”

Section: Profitmentioning

confidence: 86%

Uncertainty, Profit, and the Limits of Markets

Hirsch

2021

Political Research Quarterly

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The neoclassical market model is the overwhelming basis for contemporary views of markets as fair, efficient, or both. But is it an appropriate starting point? The article draws on Frank Knight’s 1920s work on the economics of uncertainty to show that the ideal of perfect competition conceals a tacit trade-off between equality and certainty. Largely undetected, this trade-off continues to govern financialized capitalist democracies, evading normative and political debate. By explaining how markets and firms resolve the problem of uncertainty, Knight shows that all supposed market benefits, even allocative efficiency, are not costless to society. More specifically, Knight argued that modern markets are premised on a tacit agreement between a handful of “daring” entrepreneurs and the “risk-averse” public: the former agree to carry the uncertainties of business-life in return for a substantially larger share of its power and rewards. Despite the highly static assumptions of neoclassicism, therefore, and its linked assumption of perfect knowledge, uncertainty is far from absent in modern economics. It is built into firms and markets and manifests itself as a steep social and material hierarchy.

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Section: Profitmentioning

confidence: 86%

Uncertainty, Profit, and the Limits of Markets

Hirsch

2021

Political Research Quarterly

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“…While this "surplus" framework has been most frequently applied to Ricardo and Marx (Garegnani 1984, 1987), O'Donnell (1990 claims to have extended the approach to Smith, insisting that we nd in The Wealth of Nations "a de nition of the concept of surplus analogous to that of the Physiocrats and identical to that which was to be adopted by Ricardo and Marx." Moreover, Smith's determination of that surplus corresponds exactly to the Sraf an formula: "in analysing accumulation Smith took total produce and the capital requirements of production as given magnitudes (explained [separately] by his theories of output, technology and the real wage), leaving the surplus-pro ts plus rents-as a residual".…”

Section: Sraffian "Rational Reconstructions"mentioning

confidence: 95%

The Labor “Embodied” In Smith's Labor-Commanded Measure: A “Rationally Reconstructed” Legend

Hueckel

2000

J Hist Econ Thought

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Nearly a half-century has passed since Ronald Meek (1956, p. 63) warned us that Adam Smith's notion of the labor commanded by a commodity in the marketplace is to be understood not as an expression of the “substance” of value, varying “directly with the quantity of social labor used to produce” the object, but rather as nothing more than a unit of value measure with no fixed relationship to the labor “embodied” in production. It was this distinction that he sought to fix in our minds with his memorable image of the magnet. Indeed, it is more than three times as long since John Stuart Mill (1848, p. 568) conveyed the same distinction with his particularly apt metaphor of “the thermometer and the fire.” Further, it is now forty years since Mark Blaug (1959), reminding us of that distinction, returned our attention to Smith's use of his measure as an expression of potential productive capacity (a view advanced earlier yet by Hla Myint 1948, pp. 20–21 and by Meek 1956, p. 65), but one that conveys a subjective dimension as well. Yet in spite of a now widespread concurrence in this reading, the “legend” that Smith's concept of labor commanded is to be understood as expressing, in some way, price ratios proportional to ratios of labor embodied in production remains remarkably resilient.

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“…Smith deals with the division of labour in pre‐capitalistic economies of ‘hunters and shepherds’, where the economic activity is only directed to consumption, as well as in capitalistic monetary economies where investments are carried out as well (O’Donnell, 1990, p. 63 and references therein). In what follows, we shall only consider pre‐capitalistic economies.…”

Section: Classical Individual Choice: An Interpretative Exercisementioning

confidence: 99%