Value and Distribution

Abstract

The central questions which this chapter is designed to answer are: did Adam Smith succeed in developing a logically coherent theory of value and distribution and, if he did not, in what way did his analysis fall short of a solution to the problem of value? The identification of what he called the ‘component parts of price’ was central to his attempt to find such a theory. In Section 1 this analysis of the component parts of price is examined in great detail and some common misconceptions about it are cleared up. The resolution of price into wages, profits and rents brought Smith to a theory of value only in so far as he had a prior theory of these magnitudes — a theory of distribution. Consequently, in the second section of the chapter Smith’s account of distribution is examined. It is shown that his explanation of profit and, in particular, of the falling rate of profit, was quite unclear — sometimes suggesting a theory of the rate of profit consistent with his surplus view of the amount of profit, at other times explaining profit by reference to other forces such as competition. Some neglected aspects of his discussion of both profit and rent are brought to light and, though these do not overcome the basic problem in the analysis, they do enhance our view of Smith’s approach to distribution.KeywordsNatural RateLabour TheoryMoney PriceAggregate ProfitIndirect LabourThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.