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Marx Vs Smith Essay

2073 words - 9 pages

Throughout history, economists have debated over various theories, in an effort to discover the one solution that will achieve the most efficient and beneficial economy. One school of thought titled, Classical Economics, is infamous has been called the “first modern school of economic thought.”[1] Two economist/philosophers who have been placed within this Classical category are Adam Smith and Karl Marx. Though these two men are polar opposites in the political-economic spectrum they share some similarities; and although dated, there are points of value to both Adam Smith’s and Karl Marx’s theories.
Adam Smith, the father of economics as a science, combined economics with moral theory in ...view middle of the document...

For Karl Marx, the production portion of Capitalism signaled great trouble. He believed production in Capitalist society worked in a way that the rich factory owner benefited and the poor factory workers lost. In his manner of reasoning, the Capitalist system was inherently meant to benefit the rich and exploit the poor: Marx held that, in a civilized society, production would occur among individuals. This production would be aimed to meet the needs of the individuals in the society. The need to meet society’s individuals’ desires leads to production. Marx identified the four-part economic process— production, distribution, exchange, and consumption— in this way: “Production creates the objects which correspond to the given needs; distribution divides them up according to social laws; exchange further parcels out the already divided shares in accord with individual needs; and finally, in consumption, the product steps outside this social movement and becomes a direct object and servant of individual need, and satisfies it in being consumed.”[7] 
Production is very much related to consumption in that consumption is an end product of production and the act of production itself is an act of consumption Production does not occur unless producers acquire the materials necessary to produce; consumption does not occur unless there is an object to consume. In order for production to occur, someone must produce. As human beings in a society, we actively seek out a way to sustain life, and in doing so, we produce and create. Without labor (i.e., production) citizens die, economies flounder, and countries collapse. Marx, as earlier noted, found problematic the production/labor aspects of Capitalism. It was his belief that under the Capitalist economic system, laborers were dehumanized and exploited. He believed that as people labored for multiple hours every day, they became alienated. The idea of alienation is an important part of Marx’s economic theory. As a person labors, he or she becomes alienated from society, the human race, and the object he or she produced.
Karl Marx and other classical economists are well-known for the labor theory of value— a cringe-worthy idea for all champions of the Austrian School of Economics. The simplest definition of the labor theory of value states that “the value of an exchangeable good or service lies in the amount of labor required to produce it; the source of profits under capitalism, then, is value added by workers not paid out in wages.”[11] This theory dictates that a particular commodity possesses value because of the labor that went into creating it. Marx, asserted that in order for a fair and equal change to occur between parties, the items of exchange must be commensurable. Marx’s labor theory of value included labor itself—what Marx called labor power. This is the worker’s capacity to produce goods and services. In order to produce, a worker must be fit to do so; this means that he or she must be...

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