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Why did Smith suggest a labor theory of value?

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  • Robinson, John A.
  • Subrick, J. Robert

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 knowability 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.

Suggested Citation

  • Robinson, John A. & Subrick, J. Robert, 2021. "Why did Smith suggest a labor theory of value?," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 781-787.
    • Handle: RePEc:eee:jeborg:v:184:y:2021:i:c:p:781-787
    DOI: 10.1016/j.jebo.2020.08.040
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    References listed on IDEAS

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    1. Terry Peach, 2009. "Adam Smith and the Labor Theory of (Real) Value: A Reconsideration," History of Political Economy, Duke University Press, vol. 41(2), pages 383-406, Summer.
    2. Blaug,Mark, 1997. "Economic Theory in Retrospect," Cambridge Books, Cambridge University Press, number 9780521577014.
    3. Jeffrey T. Young, 1997. "Economics as a Moral Science," Books, Edward Elgar Publishing, number 842.
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    More about this item

    Keywords

    Labor theory of value; Liberal plan; Esotericism; Justice; Remuneration; Wages;
    All these keywords.

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B14 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Socialist; Marxist
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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