Adam Smith and Karl Marx: Differences and Intersections in Their Labor Theory of Value

Adam Smith, often regarded as the father of modern economics, and Karl Marx, a critical theorist of capitalism, both tackled the labor theory of value in their works. However, their perspectives and interpretations diverged significantly. This article will explore the differences and intersections in their views on the labor theory of value.

The Premise of Adam Smith's Labor Theory of Value

Adam Smith, in his seminal work The Wealth of Nations, attributed the accumulation of wealth to the division of labour. Though he made significant advances in economic analysis, Smith's labor theory of value did not align with the strict, scientifically rigorous interpretation advocated by Marx a century later. According to Smith, the value of an article was determined by the labor-time used to produce it, though this principle was seen as less applicable to the more developed capitalism of his time (1777).

Karl Marx's Labor Theory of Value: An Expansion

Contrary to Smith, Marx took the labor theory of value as axiomatic. Even though he added a layer of complexity by considering the amount of "socially necessary labor time," his focus was on the social dimension of labor. Marx didn't just see labor as a physical input for production; he viewed it more holistically, as a social relationship where labor is mediated through the market. Smith, however, was more pragmatic and focused on the practical implications of labor in the market.

Key Differences and Similarities

There are fundamental differences that highlight the contrast between Smith and Marx. First, Smith believed labor determined value only under certain conditions, while Marx took labor as the sole source of value. Smith's theory was more simplistic and required the conceptual framework of lockean labor theory to make economic discussions easier. Marx, on the other hand, went beyond this and incorporated the social relations within the production process.

Secondly, Marx emphasized the social aspect of labor, stating that the value of a product is determined by the socially necessary labor time, not just the individual labor hours. This means that the value of a product is influenced by the collective effort and the overall productivity of society, rather than just the individual effort of a worker.

The Theoretical Backgrounds

Adam Smith rejected the labor theory of value by the end of his life, while Karl Marx used it as a fundamental pillar of his economic theory. Marx's justification was heavily influenced by Locke's labor theory, which Smith had himself acknowledged but seemingly did not fully integrate into his wider economic framework.

Smith often described labor as an input and did not fully explore the implications of how labor could be a form of social control or exploitation. Marx, however, delved deeply into the nature of labor and the social relationships it engenders. He argued that the value of labor is not just a natural given but a product of societal structures and historical processes.

The Impact on Economists

Mainstream economists later developed on Smith's and Marx's ideas, often simplifying the labor theory of value to a more mechanical and less complex explanation. This simplification can be seen as a critical juncture where the nuances of the original theories were lost, leading to a less comprehensive understanding of labor and value.

Conclusion

In conclusion, while Adam Smith and Karl Marx both engaged with the labor theory of value, their approaches and interpretations were fundamentally different. Smith viewed labor as a practical input for production, whereas Marx saw it as a social and historical construct that underpins the capitalist system. This difference remains a critical point of analysis in the study of economic theory and political economy.

References:

A. Filho, B. Fine, Marx's Capital, 2016. Frequently Asked Questions about the Labor Theory of Value, An A to Z of Marxism.