Adam Smith's Theory of Value and Distribution: A Reappraisal.

• Author: Caravale, Giovanni

Adam Smith's Theory of Value and Distribution: A Reappraisal. By Rory O'Donnell. New York: St. Martin's Press, 1990. Pp. viii, 284. $45.00.

Although often moving from radically different premises and placed in the context of different schools of thought, some relevant interpretations of Adam Smith's work--e.g., Schumpeter [7]; Hollander [4]; and Dobb [2] as a development of Sraffa [8] and clearly inspired by Marx [5]--have in common the idea that Smith's theory of the "component parts" of natural prices (wages, profits and rents) should be seen as an important anticipation of the neoclassical supply and demand approach to the theory of value and distribution.

The main purpose of this interesting and provocative book is to criticize this widely held view and to prove instead that Smith belongs in full to the Classical tradition of thought as defined--on the basis of Garegnani's contribution--by the so called "surplus approach" where profits (and rents) are viewed as the residual quantity left from aggregate production after the payment of wages.

To carry out the task the author engages first in a detailed examination of Smith's position on the question of value and distribution (Part I) and then in an equally detailed examination of some significant interpretation of Smith--those of Ricardo, Marx, Hollander, Dobb and Schumpeter (Part II). All this is done in the light of Garegnani's approach, which the Author uses as bench mark for the evaluation of both Smith's own statements and of the interpretations of his work supplied by later theorists.

Chapters 3 through 6 thus contain a discussion of several basic concepts of Smith's theoretical construction: surplus, competition, measure of value and the explanation of value and distribution--the central theme being represented by the idea that Smith did have a surplus explanation for the aggregate profits (plus rents), but did not use it to derive a theory of the rate of profit.

This conclusion represents the connection between Part I and Part II, which opens (Chapter 7) with a discussion of what the Author considers to be Ricardo's addition to Smith's analysis--the "new" theory of the rate of profit. Chapter 8 represents an attempt at a new evaluation of Marx's interpretation of Smith; Chapter 9 is a negation of Hollander's view of Smith as a "general equilibrium" theorist, while Chapter 10 focusses on a critical discussion of Dobb's "two-streams" proposition (i.e., the idea that Smith's work contributed both to the classical approach and to the neoclassical one), which is accompanied by frequent references to Schumpeter's interpretation of Smith. The final chapter (11) summarizes the findings concerning Smith's work and discusses their implications.

The general thesis of the book--as defined above--can be summarized in terms of the following points: (i) Smith did calculate the value of the social product and of the necessary consumption before that of the amount of profits, thus complying with the requisites of the surplus approach where profits are viewed as a residuum; (ii) Smith however did not use this result...