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The Accumulation of Capital

In: Adam Smith and the Wealth of Nations

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  • Daniel Diatkine

    (University of Paris-Saclay, Univ Evry)

Abstract

A particular use of stocks, for the purpose of profit, defines capital. Capital pays productive labour when income spending pays unproductive labour. The Wealth of Nations seeks to show how monopolies maintain market rate of profit above the natural one. Smith uses the theory of the gravitation of the market price around the natural price for this purpose. Moreover, the natural rate of profit is falling with the progress of accumulation of capital, when rate of rents and rate of wage are growing. This point is crucial to demonstrate the opposition of interest between the class of merchants and common interest. Finally, this chapter studies the “invisible hand” metaphor. Smith wants to explain (against the Physiocrats) why, if the rates of profit are equal, a capitalist prefers to invest “at home” rather than in foreign trade.

Suggested Citation

  • Daniel Diatkine, 2021. "The Accumulation of Capital," Palgrave Studies in the History of Economic Thought, in: Adam Smith and the Wealth of Nations, chapter 0, pages 159-197, Palgrave Macmillan.
    • Handle: RePEc:pal:pshchp:978-3-030-81600-1_7
    DOI: 10.1007/978-3-030-81600-1_7
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