2024/10/11 by Lefteris Tsoulfidis · 1 voice
Economics, Econometrics and Finance · Social Sciences · #Economic Theory and Institutions #Economic Theory and Policy #Political Economy and Marxism
paper · pdf · doi:10.22201/fe.01851667p.2024.330.89801
openalex publication_date 2024/10/11 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
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.