Summary

In the “early and rude state” of the world, before there were capitalists and landlords, the whole of the produce of the worker belonged to the worker. However, once the means of production are in the hands of capitalists, the value the worker’s labour adds to the means of production is shared between worker and capitalist in the forms of wages and profit. Under these circumstances, it is no longer the case that the relative prices of commodities are directly proportional to their labour values. This state of affairs, which in Marx falls under the problematic of the “transformation problem”, was something that it is clear Smith was fully aware of, and understood. It is also the case that Smith’s “resolution” of the price of a commodity into the components of wages, profit and rent, a procedure rejected by Marx on theoretical grounds, leads to powerful insights into the relationship between the labour embodied in commodities and their relative prices, which are in turn entirely consonant with the standpoint taken by Marx on the issues involved.

More (pdf, 202 KB): Notes on Adam Smith’s Theory of Price