Why Did Adam Smith Suggest a Labor Theory of Value?

Journal of Economic Behavior and Organization, Forthcoming

21 Pages Posted: 22 Jun 2020

See all articles by John Robinson

John Robinson

James Madison University

J. Robert Subrick

James Madison University- Department of Economics

Date Written: May 28, 2020

Abstract

Many commentators claim Adam Smith failed to realize that no objective standard of value exists. Instead, he adhered to the labor theory of value. Like others, we argue that in the The Wealth of Nations Smith discussed the “early and rude state” in which the labor theory of value made some sense since labor and human circumstances were relatively simple and knowable. However, because the labor theory of value is only sensible in that special case, his description of the theory suggests its own insufficiency. With the emergence of the division of labor, labor heterogeneity and the waning know-ability of circumstances render the earlier analysis moot, but that is only implicit in the Wealth of Nations. So why does Smith exposit an analytically weak position? We suggest that Smith thought that his rhetorical use of the labor theory of value would advance his “liberal plan of equality, liberty, and justice.” The labor theory of value served as a rhetorical device to underpin his claims that the movement toward an economic system based on an extensive division of labor was a movement toward a better society without any systemic injustice in labor remuneration.

Keywords: Labor Theory of Value, Liberal Plan, Esotericism, Justice, Remuneration, Wages

JEL Classification: B12, B14, B31, B53, J24, J3

Suggested Citation

Robinson, John and Subrick, J. Robert, Why Did Adam Smith Suggest a Labor Theory of Value? (May 28, 2020). Journal of Economic Behavior and Organization, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3612900 or http://dx.doi.org/10.2139/ssrn.3612900

John Robinson

James Madison University ( email )

Harrisonburg, VA 22807
United States

J. Robert Subrick (Contact Author)

James Madison University- Department of Economics ( email )

421 Bluestone Drive MSC 0204
Harrisonburg, VA 22807
United States
540-568-3083 (Phone)

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