Adam Smith and Karl Marx Essay

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Adam Smith and Karl Marx

Modern political economic theory and philosophy can be greatly attributed to the works of two men who seemingly held polar opposite views on the subject. Adam Smith, a Scottish philosopher, published his most well known work An Inquiry into the Nature and Causes of the Wealth of Nations in 1776 and is most often associated with the ideas and principles of the political economic system known as Capitalism. At the other end of the spectrum is Karl Marx; the German philosopher most often associated with Communism and the author (or co-author) of The Communist Manifesto. This paper seeks to discuss the core differences in their respective political economic philosophies with regards to what economic value is and …show more content…
36) Smith distinguishes this from the nominal value of an item that can vary based on market forces; he holds that the real value is constant in relation to the labor that it used in its production. Smith argues in the following chapter that there are three components to the price of an item: the labor needed to produce it, the "rent of the land" or resources needed to make it, and the "profit of stock" that compensates the investor for risking his resources. In Das Kapital, Marx also recognizes the labor component of any item in the first chapter. He states that any commodity has a use-value and an exchange value that is derived from the labor needed to produce it. (Marx, 2000) Marx however viewed the "profit of stock" as the ability of the capitalist to exploit the wage laborers out of the surplus value of the things they create because of their control over the means of production. The role of government in relation to the economic system is a central theme of how ultimately successful the economic system would become. One of Smith's core arguments to the success of capitalism is summarized in his most famous metaphor of the "invisible hand" found in Chapter 2 of Book IV in The Wealth of Nations:
By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other
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