I can’t tell if this correspondent of mine is impressed by, or skeptical of, Daniel Kuehn’s odd assertion.
Mr. D__ G__:
Thanks for your e-mail.
You ask what I think of Daniel Kuehn’s claim that it’s “weird that the labor theory of value is so central to peoples’ scoffing at Marx but doesn’t even register as a concern with Adam Smith.” (Before opening your e-mail I’d seen Mr. Kuehn’s claim as shared on Facebook by Phil Magness.)
Mr. Kuehn’s claim reflects his failure to understand why wise people today continue to find insight in the works of Adam Smith while they reject Marx’s economics.
None of Smith’s many insights that remain relevant and celebrated today depend upon the labor theory of value. The fallacious notion that value is created by labor plays no role in Smith’s case for free trade specifically, for free markets generally, for the productive powers of the division of labor, or for the reality of emergent social orders. Nor does this notion in any way underpin Smith’s brilliant criticisms of labor-market restrictions, of imperialism, of mercantilism, of slavery, of government indebtedness, of oppressive taxation, of state-sponsored religion, or of government attempts to suppress speculation in commodity markets.
In contrast, the labor theory of value is central and indispensable to Marx’s theory. For Marx, if the labor theory of value is invalid – as, of course, it is – his economic edifice collapses. But for Smith, if the labor theory of value is invalid, all of what we admire today in his work remains standing and true.
In short, there’s nothing at all “weird” about us admirers of Smith overlooking, in our praise and use of his countless insights, his labor theory of value, for this theory of value is simply unnecessary for Smith’s astute case for what he described as “the obvious and simple system of natural liberty.”
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030