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Autor: anton • April 29, 2011 • 822 Words (4 Pages) • 565 Views
Adam Smith, the father of economics, published The Wealth of Nations in 1776. Although it made little impact in its time, it conceptualised the economy in a radical new way: in terms of individual agents, acting out of self-interest. From an individualist perspective, he argued that people produced goods in order to make money, and made money in order to purchase goods they valued most. The exchange takes place in a market, where prices are set according to costs and the demand for the good. This was a self-regulating system which he described it as being controlled "as if by an invisible hand".
In his system, labour was the final measure of valueÐ'--wages (a cost) based on the needs of the worker, and rent on the productivity of land. The market acted as a communicator and coordinator (via prices), and a motivator for individuals, such that general welfare was achieved. Another important observation was that the division of labour into specialised functions allowed for far greater production than a single worker creating the entire product from start to finish (his example was from observing produciton in a pin factory).
As a consequence, he saw taxes as a distortion of prices, and thus an obstruction to the general welfare that the market could provide, if unhindered. At the same time, he allowed that there were things for which the market couldn't accomodate for (roads, sanitation, known as public goods), and which a minimal government should provide. Later economists built on this idea that there may be goods with externalities (positive or negative), that is side effects from their consumption or production.
Next, we have Karl Marx, who conceived of history as a struggle between different types of class. Class was defined according to the relations in the forces of productionÐ'--those in a higher position could exploit those lower. In the feudal mode of production, the lords did not directly control the tools or lands of the peasant, but had control over the product. In the capitalist mode of production however, the capitalist controlled both the tools and the product. Marx saw this development in capitalism as one which had a fundamental contradiction: it tries to squeeze more and more profits out of the consumers, who are also their labour, whom they are trying to pay less. As the worker became more exploited in this manner, Marx believed that the frustration would eventually be sufficient that workers would revolt, seizing tools, land, and produce to create a communist society.
This class struggle itself became an engine for social change in his understanding of history. History for Marx was a dialectical materialist process: dialectical because it consisted of opposing forces, materialist in its emphasis on economics and politics. Through his conception of history, he believed one could then understand the nature of social change and how to effect it. Although his belief was only partially and unsuccessfully realised, this conception of production and its role