Adam Smith’s Theory of Value and the Falling Rate of Profit: Uncommon Conceptions and Common Misconceptions
Year: 2024
Type: article
Abstract: Smith’s theory of value and distribution, which emphasizes labor time as the determinant of prices, has been widely misunderstood. Ricardo misinterpreted it as relevant only to primitive societies, while Marx inaccurately aligned it with his own labor theory of value. In reality, Smith’s perspective oscillates between a labor-based and a labor-commanded approach to relative prices, intended for modern economies. Neoclassical economists further distorted Smith’s views by incorporating utility theory. Moreover, while Smith is often linked to the theory of a falling rate of profit due to competition, he actually attributed it to rising capital intensity. Contrary to the belief that Smith was a staunch advocate of free markets, he supported reasonable government intervention.
Source: Investigación Económica
Author: Lefteris Tsoulfidis
Institution: University of Macedonia
Language: English
Subfield: Sociology and Political Science
Field: Social Sciences
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4403413456