Adam Smith and Karl Marx

Paper Summary:

This paper explains that Adam Smith thought that the separation of ownership and control raised serious questions about the management of joint-stock companies and led him to analyze the agency problem. The author points out that Adam Smith and Karl Marx agree that an advantage of the joint-stock company is that it allows entrepreneurs to put together large sums of money and capital; furthermore, Marx concludes that the joint-stock form leads to a "tremendous expansion in the scale of production and enterprises, which would be impossible for individual capitals." The paper states that Karl Marx would have called Adam Smith's hunters simple commodity producers with each hunting with his own relatively simple weapon in a forest, which is open to all, and satisfying his needs by exchanging his excess catch against the products of other hunters.

From the Paper:

"Competition is another quantitative aspect of economics. One first needs to examine the conditions under which exchange ratios would correspond exactly to labor -time ratios. We begin with Adam Smith's famous deer-beaver example, "If among a nation of hunters, for example, it usually costs twice the labor to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer. It is natural that what is usually the produce of two days' or two hours' labor, should be worth double of what is usually the produce of one days' or one hours' labor.""

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