Despite being one of the shorter
chapters in the book, it is by no means the least important as the spotlight in
shone on one of the founding fathers of communism- Karl Marx. In this chapter
Smith mentions how important Ricardo was to Marx, and how fundamentally
different their viewpoint was to that of Adam Smith’s:
“If the emphasis in [Adam] Smith was on
the size of the economic cake, and the prospect of it growing considerably over
time, Ricardo and Marx were more concerned with how it was divided.”
He
then begins to outline some of Marx’s analysis, and why it has not aged as well
as that of Ricardo or Smith [A.]. Marx began first with the value of products
consumed and produced, and saw a ‘fundamental flaw’ in the pricing system in
that things cost more that the paid value of labour (marginal labour cost) and value of materials- he then drew the
conclusion, that someone in the chain of production was getting cheated or
exploited. This then assumed that there was no, ‘cost of enterprise’ which is
the value of the enterprise that the entrepreneur has produced in order to actual
set up a factory, for example. Marx then attacked producers (those who produced
on a large scale, in particular) for “accumulation
for accumulation’s sake” and that this would cause technological
unemployment, prices to be forced down, the devaluing of labour (through a drop
in its derived demand). This, however, assumes that the work force will be
unable to re-skill, or even become entrepreneurs, which is simply wrong.
Despite many of his observations made being fair assumptions for the times,
they were not able to stand the test of time, and with the benefit of
hindsight, he may have adjusted his writings.
Hey guys,
Just so you know, I'll be putting some other essays that I've done up here in the next week or so regarding all sorts of things from Immigration to Collateralized Loan Obligations to teaching finance!
Keep an eye out,
K
