According to Marx, the value of a product is measured in units of simple average labour. Though Marxian theory of value is based on the Ricardian theory of value, there is one main difference. Ricardo believed that the relative values of different commodities were proportional to the amount of labour expended on them, Marx argued that amount of time invested in labour determines the absolute value of goods. Thus labour is what defines the value of a product and Marx suggested that the whole fruit of labour must be received by the labourers as there is no thing that has any value devoid of human labour involved in its acquisition. This was the foundation of thought which lead to Surplus Value that capitalists extract out of exploitation of the labourers.
He also criticizes the capitalists in European economics. These people collect factories and raw materials for production, pay their laborers wages to produce goods, and as a result produce a profit due to good calculations. Although he says this is the rational thing to do to make more money, it is exploiting lower class laborers. Labor becomes an object, a type of commodity, instead of something people do. Consequently, laborers become an object and lose their humanity.
This essay will explain and discuss Marx's concept of wage labor and the worker's relationship with the capitalist as he describes in in 'wage labour and capital'. It will elaborate on Marx's definitions on such topics such as what wages really and labour really are. What are wages? To Marx wages are the sum of money a capitalist paid by the capitalist for a particular labour time or for a particular output of labour. On the outside it would seem the capitalist buys the workers labour with money but in fact this is in appearance only.
Adam Smith, an advocate of capitalism, in his book, The Wealth of Nations wrote that all individuals are selfish and by performing to the best of their capabilities towards their own selfish interests they contribute towards the nation’s collective growth. Karl Marx, on the other hand criticized capitalism and believed that socialism and communism are society’s best chance of maximizing individual happiness, about which he wrote in his book Das Kapital. In this paper, we will compare and contrast the economics theories of Adam Smith and Karl Marx on the lines of labor theory of value, division of labor, alienation of workers from labor and human happiness and surplus profit and its social implications. This paper will also discuss how… Adam Smith believes that there are two types of ‘values’ of a commodity – ‘utility value’ and ‘exchange value’. The utility value of a commodity is based on how useful a commodity is and the exchange value of a commodity refers to how much we can get in exchange for a commodity if we were to sell it.
Smith believed that wage is determined in the market through supply and demand for labour; this theory is still widely use today by economists to explain wage determination in a simple economy. However, Smith failed to provide a conclusive, definitive theory of wages and there was no detailed analysis on the demand and supply of labour. There were also lack of consistency in Smith’s theoretical pattern (Pen, Kleinsorge, Boulding,
Marxism is a socio-political ideology proposed by Karl Marx main ideology of Marxism is that the wealth has to be equally divided among the society for that Co-operative company instead of corporate company 's can be accepted that means the wealth collected or gained by the company is not targeted towards the owner of the company instead it is divided equally among all the co-operative. Marx explains history in terms of class struggles. Basically 'the haves and 'have not’s '. For Marx this class struggle is a natural process. Conflicts are usually resolved in the long run even if these conflict results in violence.
One of the pre conditions for capitalism is commodities. Capitalism was the only economic form where the majority of the products were produced as commodities (Ritzer, 2000). A commodity is a useful object or thing that is produced, not for immediate consumption by the producer, but for the specific purpose of exchange with other consumers using a medium of exchange such as money (Ritzer, 2000). As the majority of products were produced to make commodities in this manner, satisfaction of needs was no longer important nor was it the aim of the capitalist. Production now took on the sole objective to produce items for the purpose of exchange and for the subsequent acquisition of profit.
The second, is alienation from the product. In Marxist time and in today’s modern world we are involved in an abundance of mass production. In a capitalist system, people are placed in a position where they are responsible in making a minor part of the goods. The goods of work belong to the capitalist and is sold for their profit, whereas the workers gain nothing. Therefore, Marx concluded that the greater effort the workers put into their job, the lesser they benefit.
The economic views of Adam Smith and Karl Marx Microeconomics Eduardo De Oliveira Superti Table of Contents: Abstract 3 Introduction 4 The economic views of Adam Smith 5 The economic views of Karl Marx 6 Adam Smith vs. Karl Marx 7 Examples in the world of today 9 Conclusion 10 Recommendations 11 Bibliography 12 Introduction Adam Smith and Karl Marx were completely contrasting economists throughout their time and had an enormous effect on the world and the way we view economics. They represent the ideas of capitalism and socialism. According to the Chambers Concise Dictionary (2009) Capitalism is defined as “An economic system based on private, rather than state, ownership of businesses, factories, transport services, etc., with free competition and profit-making.” And Socialism is defined as “A political doctrine or system, which aims to create a classless society by removing the nation’s wealth (land, industries, transport systems etc.) Out of private and
Keynes replaced an employment formula with a price formula. Essentially aggregate nominal prices are fixed and occur at a higher price than the price to clear the goods market. This results in less employment than would occur in a non-distorted market. You can work and produce all you want, but you can 't sell it.. This is important because sticky systems reasonably well do predict the economy while classical ones do