Adam Smith and Karl Marx Essay

831 Words Oct 5th, 2007 4 Pages
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 value—wages (a cost) based on the needs of the worker, and rent on the productivity of land. The
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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 in creating haves and have-nots was to have a lasting impact on economics and development studies. Many branches have drawn upon aspects of his ideas (and later Marxists) while rejecting some aspects. Clearly the formulation of class may have had applicability in the 19th century, but is a much more complicated matter today. At the same time, the identification of exploiter and exploited has helped to understand aspects of inequality that we find today.
John Maynard Keynes (later Lord Keynes) would be the most influential economist at the time when development

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