Timeline of Main Events and Concepts

Ancient Times (Pre-Industrial Society)

• Division of Labor Begins: In primitive societies, specialization arises naturally; individuals become skilled in specific tasks (e.g., armorer, house-carpenter, smith) and exchange their products. This is the beginning of the division of labor.
• Early Barter Systems: Direct exchange of goods and services (e.g., cattle, venison for carpentry).
• Use Value vs. Exchange Value: The inherent usefulness of things (“use value”) is distinguished from the value derived from exchange (“exchange value”). Riches are an attribute of man, value is an attribute of commodities.
• Early Philosophers and Moralists: Philosophers of all ages note humans’ tendency toward self-conceit and presumption of good fortune.
• Money as a Symbol: The idea that money is a symbol, and the value of precious metals is imaginary, starts in the legal sphere, in service to monarchs.
• Development of Money
• Coins and Debasement: Princes and states have historically debased coinage, reducing the amount of precious metal it contains. For example, the Roman As was debased to one twenty-fourth of its original value.
• Money as a Commodity: Metals like gold and silver come to be seen as commodities that can be exchanged for other commodities. Bullion is recognised as a tradable substance.
• Money as a Measure of Value: Money, especially precious metals, becomes a standard for measuring the value of goods, allowing comparisons, though it can be both a measure of value and a standard of price. The standard of price for gold is based on fixed weight, such as a pound.
• Value Expressed in Money: The value of a thing is expressed through price, where money is the form under which that value appears. Price is a “money-name” for the realized labor.
• Money as a Means of Circulation: Money facilitates the exchange of commodities.
• The quantity of circulating money is determined by the sum of the prices of all commodities and the velocity of the currency, which is the number of moves a coin makes in a given period of time.
• The amount of money in circulation must adjust to accommodate for increases or decreases in prices, and the quantity of commodities in the market.
• Coins vs. Bullion: The form of money varies but value is the basis. Coins wear down over time, separating nominal and real weight.
• Paper Money: Tokens of value, such as paper notes, can replace metallic currency once the symbolic value of coin is established, but must not exceed the amount of coin they replace.
• Development of Capital
• Circulating Capital: Capital employed to produce goods that are to be resold; this capital changes hands.
• Fixed Capital: Capital that yields revenue without changing hands (e.g., land, machinery); does not circulate.
• Simple Circulation of Commodities: Represented as C-M-C (Commodity – Money – Commodity), where goods are sold for money which is then used to buy other goods.
• Circulation of Money as Capital: Represented as M-C-M (Money – Commodity – Money). Here money is used to buy commodities, which are then sold to make more money. This involves the concept of advancement of capital (a sort of investment), with the aim of getting back more money than originally put in.
• Hoarding: Accumulation of money for its own sake is a key aspect of wealth acquisition and represents a type of self-denial where the desire for money becomes insatiable.
• Hoarding also acts as a way of storing value and adapting to fluctuations in currency and the supply of money.
• Labor Power as a Commodity: Workers must sell their labor power for wages, because they don’t have other means of production or means of subsistence to create other marketable goods. Labor power is the source of added value.
• Early Modern to Industrial Era (Emergence of Capitalism)
• Theories of Value: Economists debate the source of value. Some suggest that the value of a good is determined by the quantity of labor required to produce it.
• Division of Labor & Manufacturing: In the industrial era, the division of labor intensifies within workshops. The division of labor within workshops becomes more rigidly controlled by the employer as the overall division of labor in society decreases in explicit regulation.
• Surplus Value: The capitalist’s profit originates in the fact that the laborer’s work produces more value than the laborer is paid for in wages.
• The Capitalist as “Abstainer”: The capitalist is portrayed as abstaining from consuming capital to reinvest it.
• This also presents a paradox of accumulation and consumption.
• The Process of Reproduction: Capital is not only about single transactions, it requires consistent reproduction, and re-investment, to continually generate surplus value.
• Accumulation and Hoarding: The accumulation of wealth is seen as both a result and a cause of the capitalist drive. Hoarding is part of the reproduction process.
• Industrialization and its Effects: Industrialization leads to the decline of small-scale trades and increases in large-scale manufacturing.
• Separation of Labor: Workers become increasingly divorced from the means of production, and increasingly more dependent on wage labor.
• The Poor Laws: The English Poor Laws are created, changing traditional forms of land ownership and subsistence for agricultural workers. The poor are reduced to laborers by denying them land.
• Migration and Rural Issues: The move towards industrialization causes a large migration to urban areas, and the creation of “open” and “closed” villages. In “closed villages” land and housing is owned by large landowners, creating tenant labor and dependency. Open villages become places of refuge for the poor, and are often overcrowded.
• The Irish Famine: The Irish Potato Famine is mentioned as an example of social and economic upheaval. The famine is seen as being deliberately used to “thin the population of Ireland” and make it suitable to grazing land.

Cast of Characters

• Adam Smith: (1723-1790) Scottish economist and philosopher. Author of The Wealth of Nations. Discussed the division of labor, the nature of capital, and how exchange works.
• Karl Marx: (1818-1883) German philosopher, economist, sociologist, historian, journalist, and socialist revolutionary. Author of Capital. Analyzes the nature of capitalism, emphasizing concepts such as commodity, labor, surplus value, and the nature of capital.
• Buckle: (1821-1862) English historian. A proponent of the idea that history is governed by laws, not by individuals. Quoted as valuing The Wealth of Nations as the most valuable work on the principles of government.
• M’Culloch: (1789-1864) Scottish political economist, known for his work on economic theory and statistics. Believed that The Wealth of Nations had a beneficial influence on public opinion.
• Lord Mahon (1806 – 1875) English historian and politician. Believed that The Wealth of Nations had a significant impact on society.
• Dogberry: A character from Shakespeare’s play Much Ado About Nothing. Used by Marx in a humorous context to criticize the idea that value is inherent in objects.
• Nicholas Barbon: (c. 1640-1698) English economist and merchant. His work is quoted on the nature of value, and the idea that there is no “intrinsic” value to a commodity.
• John Locke: (1632-1704) English philosopher and political theorist. Cited as having stated that the “worth” of something lies in its ability to meet the needs of human life.
• Le Trosne: (1728-1780) French Physiocrat economist. Cited on the exchange relation between products and how “all products of the same kind form a single mass.”
• Aristotle: (384-322 BCE) Ancient Greek philosopher. Used to illustrate the nature of value, where objects can be used, and also exchanged, but for a different purpose.
• Proudhon: (1809-1865) French socialist and political theorist. Criticized by Marx for trying to reconcile the production of commodities with an ideal of justice.
• Galiani: (1728-1787) Italian economist. Quoted regarding the value of metals before they are money, and on money as the universal commodity.
• Verri (1728-1797) Italian economist and thinker. Quoted regarding money as a “universal commodity.”
• William Petty: (1623-1687) English economist, scientist, and philosopher. Quoted on the natural price of a commodity and how it is based on the cost of production.
• William Roscher: (1817-1894) German economist. Criticized by Marx for his vague and eclectic pronouncements on money.
• Sir Dudley North: (1641-1691) English merchant and economist. His ideas are discussed concerning money being a commodity, and also as the standard of price being regulated by law.
• David Urquhart: (1805-1877) Scottish diplomat and writer. Cited for his comments on the falsity of money names, and the manipulation of gold weights in modern society.
• Montesquieu: (1689-1755) French political philosopher. His ideas on money being a symbol are critiqued.
• Heraclitus: (c. 535 – c. 475 BCE) Pre-Socratic Greek philosopher. Quoted in the context of the exchange between commodities and fire as a symbolic representation.
• Lassalle (1825-1864) German-Jewish philosopher and socialist. Discusses the views of Heraclitus on exchange.
• Dr Quesnay (1694-1774) French economist and physician. His statement that “every sale is a purchase,” is cited.
• Mercier de la Riviere (1720 – 1793) French economist. His views on money being exchanged with products, and his use of phrases like, “To have money, one must sell,” are referenced.
• James Mill: (1773-1836) Scottish historian, political philosopher, and economist. Cited as someone who attempted to reduce relationships to simple commodity relations.
• John Stuart Mill: (1806-1873) English philosopher and economist. His eclecticism is criticized, particularly in how he attempted to adopt and synthesize contradictory ideas of different economists.
• A. Young (1741-1820) English writer on agriculture and political arithmetic. Used in the debate over monetary policy.
• Jacob Vanderlint (c. 1690 – 1750) English writer on trade and finance. Is cited as expressing the view that prices depend on the amount of precious metals in circulation.
• Henry III of France: (1551-1589) King of France, mentioned as having robbed cloisters of relics and turned them into money.
• Anacharsis (c 600 BCE) Scythian philosopher who visited Greece. His quote is used to show the ancient uses for money as reckoning.
• Plutus: Greek god of wealth. Mentioned in the context of the pursuit of money.
• Luther: (1483-1546) German theologian and key figure in the Reformation. Cited to show the medieval view of the usurer.
• Diderot (1713-1784) French Enlightenment philosopher. Quoted in relation to the desire to appear rich in addition to being rich.
• John Bellers (1654-1725) English Quaker merchant and social reformer. His view that “money is a pledge” is cited.
• Senior: (1790-1864) English economist. Quoted concerning “wages of abstinence”.
• Malthus: (1766-1834) English economist and demographer. His theory of population is referred to as a way to look at Irish society.
• Balzac (1799-1850) French novelist. His portrayal of the character Gobseck is cited to illustrate the nature of hoarding.
• Necker (1732-1804) Swiss statesman. His views of “luxury” are referenced, regarding the concentration of wealth in the hands of a few.
• Ricardo (1772 – 1823) English political economist. Cited regarding wages and profits, and the general relationship of prices and values.
• Storch (1766-1835) German economist and public official. Cited for expressing a difficulty in reducing the price of commodities to its most basic elements.
• Jeremy Bentham (1748 – 1832) English philosopher and social reformer. His principles of utility are discussed in terms of how the bourgeois shopkeeper became the “normal man.”
• S. Bailey: (1791-1870) English philosopher and writer, criticized the idea that commodities are the sole agents of production.
• Corbet: (1777-1842) English writer and politician. Quoted regarding overproduction and non-exchange of capital.
• Dr. Hunter: A commissioner for the English Children’s Employment Commission. His reports are used to discuss issues of poverty and working conditions in England, particularly in rural areas.
• Lord Leicester: A landowner whose comments on loneliness in his created solitude are cited to show the problems of closed villages.
• Th. Sadler: (1780-1835) English politician and social reformer. His work on Ireland is cited as an alternative view to Malthus’s population theory.
• Nassau Senior (1790-1864) English economist and lawyer. His view that Ireland should be turned into grazing land is given.
• Fullerton: (1784 – 1858) English banker and writer. Discussed concerning the functions of money, especially that it can be replaced by other, inconvertible tokens.
• William Cobbett (1763-1835) English journalist and writer. Cited for commentary on the Protestant reformation.
• Fletcher of Saltoun (1653 – 1716) Scottish politician. Cited as advocating for serfdom in response to the high number of poor people.
• R. Blakey (1795-1870) British author. Quoted regarding some specific historical opinions on the poor and the laws.
• Eden (1739-1799) English diplomat and politician. Referenced for comments on the origin of poor people.
• George Roberts: (1804-1860) English antiquarian and author. Quoted regarding laws determining the allocation of land to laborers.

Briefing Document: Key Economic Concepts and Historical Analysis

Introduction:

This document reviews key economic concepts and historical analyses presented in excerpts from Adam Smith’s “The Wealth of Nations” and Karl Marx’s “Capital, Volume I.” These foundational texts in economic theory offer contrasting perspectives on the nature of wealth, labor, value, and the dynamics of capitalist development.

I. Adam Smith: The Wealth of Nations (Excerpts)

A. Core Themes & Ideas:

• Division of Labor: Smith emphasizes the importance of the division of labor as a primary driver of increased productivity. He illustrates this with examples of how specialization in simple tasks leads to greater efficiency.
• “…he becomes a sort of armourer. Another excels in making the frames and covers of their little huts or movable houses. He is accustomed to be of use in this way to his neighbours… till at last he finds it his interest to dedicate himself entirely to this employment…”
• Accumulation of Capital: Smith discusses the accumulation of stock or capital as necessary for economic progress. He distinguishes between circulating capital (used in trade and production, like raw materials) and fixed capital (used to create revenue, like tools and machines).
• “Different occupations require very different proportions between the fixed and circulating capitals employed in them.”
• Money: Smith views money as a specific branch of society’s general stock, a medium of exchange that facilitates transactions. He notes that the value of coins can be debased by governments over time by reducing the metal content.
• “For in every country of the world, I believe, the avarice and injustice of princes and sovereign states, abusing the confidence of their subjects, have by degrees diminished the real quantity of metal, which had been originally contained in their coins.”
• Rent: He examines the concept of rent, considering the produce of land that always, sometimes, or never affords rent, categorizing the factors that contribute to a difference in rent earned by different land plots.
• “The particular consideration, first, of those parts of the produce of land which always afford some rent; secondly, of those which sometimes may and sometimes may not afford rent; and, thirdly, of the variations which, in the different periods of improvement, naturally take place in the relative value of those two different sorts of rude produce, when compared both with one another and with manufactured commodities, will divide this chapter into three parts.”
• Human Nature and Ambition: Smith touches upon the natural overconfidence and presumption people have regarding their own abilities and luck, acknowledging their implications on the larger economy.
• “The overweening conceit which the greater part of men have of their own abilities is an ancient evil remarked by the philosophers and moralists of all ages. Their absurd presumption in their own good fortune has been less taken notice of.”
• Importance of Accumulated Stock: In early societies, Smith contends that before division of labor and exchange, little stored capital is required, as each person provides for their own needs.
• “In that rude state of society in which there is no division of labour, in which exchanges are seldom made, and in which every man provides everything for himself, it is not necessary that any stock should be accumulated or stored up beforehand in order…”

B. Key Definitions:

• Circulating Capital: Capital that is frequently exchanged or used up in the production process. (e.g., commodities).
• Fixed Capital: Capital that is used for repeated or ongoing use in producing goods, without changing ownership. (e.g., tools, buildings).

II. Karl Marx: Capital, Volume I (Excerpts)

A. Core Themes & Ideas:

• Commodities and Value: Marx distinguishes between use-value (the practical utility of a thing) and exchange-value (the value of a thing in relation to other commodities). He argues that labor is the source of value in capitalist production and thus, in exchange value.
• “‘Riches’ (use value) ‘are the attribute of men, value is the attribute of commodities. A man or a community is rich, a pearl or a diamond is valuable…’”
• Money as a Commodity: Marx views money, particularly gold and silver, as a special commodity that serves as the universal equivalent. He describes the historical processes by which precious metals have come to function as money.
• “Hence the magic of money. In the form of society now under consideration, the behaviour of men in the social process of production is purely atomic. Hence their relations to each other in production assume a material character independent of their control and conscious individual action.”
• Money as a Measure of Value: Money serves both as a measure of value (in which commodities are expressed) and as a standard of price (a fixed weight of metal). Marx notes historical disruptions of the standard, like debasement.
• “As measure of Value, and as standard of price, money has two entirely distinct functions to perform. It is the measure of value inasmuch as it is the socially recognised incarnation of human labour; it is the standard of price inasmuch as it is a fixed weight of metal.”
• Circulation of Commodities vs. Circulation of Money as Capital: Marx outlines the two different circuits: C-M-C (Commodity-Money-Commodity, simple circulation for consumption) and M-C-M (Money-Commodity-More Money, the capitalist cycle of production).
• “The simple circulation of commodities begins with a sale and ends with a purchase, while the circulation of money as capital begins with a purchase and ends with a sale.”
• Labor-Power as a Commodity: Labor power becomes a commodity only when laborers are free to sell their labor for a wage, and are not landowners nor means of production owners.
• “By labour-power or capacity for labour is to be understood the aggregate of those mental and physical capabilities existing in a human being, which he exercises whenever he produces a use-value of any description.”
• Abstraction & Value: In the social exchange of commodities, the specific use value of things gets overlooked, and their abstract value becomes a social relation that exists between the commodities.
• “The notion of value contemplates the valuable article as a mere symbol ‒ the article counts not for what it is, but for what it is worth.”
• Price & Value: Price is a “money-name” for labor realized in a commodity and price can be an imaginary form and deviates from value, showing inconsistencies in the capitalist system.
• “Price is the money-name of the labour realised in a commodity. Hence the expression of the equivalence of a commodity with the sum of money constituting its price, is a tautology”
• Hoarding & Contradictions: The insatiable nature of money is shown by the hoarder, who has limitless demand for money, but is still limited by its practical means and exchange value. Money becomes private, and undermines social balance.
• “The desire after hoarding is in its very nature unsatiable. In its qualitative aspect, or formally considered, money has no bounds to its efficacy, i.e., it is the universal representative of material wealth, because it is directly convertible into any other commodity. But, at the same time, every actual sum of money is limited in amount, and, therefore, as a means of purchasing, has only a limited efficacy. “
• The Nature of Capitalism: Marx describes the nature of capital, in its essence, as value and not simply materials, and as being a self-expanding value that aims to increase itself, not to satisfy actual needs.
• “It is not matter which makes capital, but the value of that matter.”
• Abstract Labor: The notion of abstract labor emerges from the nature of exchange in capitalism, where labor is reduced to an average and is expressed in money.
• “The use-value of a commodity is realised by use or consumption. It may have utility to any or all, and in itself has nothing to do with its social form. But it acquires its use value only if socially needed. When the utility of an article is realised in exchange for another article, then its utility is realised socially, and that article assumes a double form. In one it manifests itself as a use-value for a single individual. In the other, it is exchange value for society. Exchange value is simply the form in which the useful aspect of a commodity is realised socially.”

B. Key Definitions:

• Use-Value: The utility of a good based on its practical use or consumption.
• Exchange-Value: The relative worth of a commodity compared to other commodities in an exchange; derived from the socially necessary labor time embedded in it.
• Labor-Power: A person’s capacity to work, which under capitalism is sold as a commodity.
• Circulation of Commodities (C-M-C): A circuit starting with a commodity, ending with a different commodity, where money is used as a medium of exchange to satisfy use value.
• Circulation of Capital (M-C-M): A circuit where money is invested into a commodity to be resold for a larger sum of money, focused on value creation and profit accumulation.
• Price: the money name given to a commodity in a social setting.
• Hoarding: Money held as means of value and as a social power.

III. Contrasting Perspectives:

• Smith: Focuses on the benefits of market forces, division of labor, and capital accumulation as drivers of economic prosperity and the wealth of nations.
• Marx: Critiques capitalism, emphasizing how value is derived from labor and exploring the contradictions and exploitative aspects of capitalism, particularly regarding the commodification of labor.

IV. Implications & Key Takeaways:

• Historical Context: Both authors provide insights into the economic transformations of their times. Smith reflects on early stages of industrialization, while Marx analyzes mature capitalism.
• Theories of Value: Smith and Marx have very different approaches to the subject. Smith understands money in a rather practical sense as a facilitator of trade and transactions, while Marx is primarily concerned with the underlying nature of value and how exchange and labor interact.
• Labor: Smith sees labor as one of many factors of production, but does not make it the sole source of all value. Marx sees labor as not just a factor of production but the sole origin of value.
• Capitalism: Smith sees capitalism as generally positive and beneficial. Marx sees it as exploitative and contradictory, leading to social inequality.

V. Conclusion:

These excerpts reveal different ways of understanding the dynamics of markets, value, labor and capital. While Smith emphasizes the productive potential of market systems, Marx focuses on the inherent contradictions and social relations of power, particularly the exploitation of labor under capitalism. This document highlights the importance of considering different theoretical frameworks when exploring the complexity of economic phenomena.

This briefing document should provide you with a strong understanding of the key ideas presented in the provided sources. Let me know if you have any more questions or need additional clarification.

1. What is the significance of the division of labor according to Adam Smith?

Smith argues that the division of labor is the primary driver of increased productivity and wealth. By specializing in specific tasks, individuals become more efficient, saving time and effort, and leading to greater output. This increased efficiency and output benefits society as a whole by making more goods available. He also notes that in societies where division of labor is limited, it is less necessary for stock to be accumulated because each individual provides for their own needs.

2. How does Marx differentiate between “use-value” and “exchange-value”?

Marx distinguishes between “use-value,” which is the utility of a thing that satisfies human needs or desires, and “exchange-value,” which is the quantitative proportion in which one use-value is exchanged for another. Use-value is inherent in a commodity’s physical properties, while exchange-value arises only within a system of exchange and has no chemical or material basis, and cannot be realized until an exchange occurs. He argues that commodities within a capitalist system are primarily driven by their exchange value rather than their use value.

3. What is the role of money, according to Marx?

Money, for Marx, is a commodity that has become a universal equivalent, representing the value of all other commodities in a general way. It is the “incarnation of all human labor” and a “social power” in itself. Money is not just a tool for trade, but it masks the social relations of production because all labor is transformed into one value. It also becomes a means of accumulating wealth and hoarding, and creates an antagonism between commodities and money, which is also a characteristic of capitalist production.

4. How does the concept of “capital” differ between Smith and Marx?

For Smith, capital is the stock that a person possesses and uses to maintain themselves or derive a revenue, whether through direct employment or lending. It includes both fixed and circulating forms and contributes to production and wealth creation. Marx sees capital as a social relation, which takes the form of money used to generate more money through exploitation of labor. Capital is not merely material things like stock or commodities, but a social power that allows owners to appropriate the surplus labor of others. Marx argues that under capitalism capital has become a form of value that is self-expanding rather than just a source of wealth.

5. What is the difference between “fixed capital” and “circulating capital,” according to Smith?

Smith defines “fixed capital” as assets that yield revenue or profit without changing hands, such as land, machinery, and instruments of trade, whereas “circulating capital” refers to assets that are constantly changing hands in the process of production and exchange, such as money, raw materials, and goods in process. The primary distinction is based on how frequently they turn over and in a different form, where fixed capital stays relatively stable for a long period of time.

6. What does Marx mean by “labor-power” and its significance in capitalism?

Marx defines “labor-power” as a worker’s capacity to perform labor, both physical and mental. Under capitalism, labor-power becomes a commodity that workers must sell to capitalists for a wage. This is how exploitation is generated within the capitalist system because the value of the wage doesn’t equal the total value of the labor produced by the worker. The capitalist purchases this power to produce surplus value, thus extracting more value than what they paid the worker, which is central to the accumulation of capital.

7. How do Smith and Marx address the concept of value differently?

Smith focuses on labor as the source of value but also notes that supply and demand are influences on price. Smith discusses relative prices and the idea that money can be used to compare various goods. Marx goes a step further and argues that value is determined by socially necessary labor time—the amount of labor time required to produce a commodity under the average conditions and productivity within a given society. He also stresses that while exchange value may take the form of price in a given market, it is determined by this hidden labor time. Additionally, Marx notes that the price of an item is not always equal to its value.

8. How do Marx and Smith understand the relationship between labor and the state?

Smith does not give an extended view of the state’s effect on labor. In relation to the state, Smith largely emphasizes the regulation of money in the state and argues for minimal interventions that disrupt the natural market process. He was more concerned about the free market and its natural development without government interference, but did recognize the need to punish theft and fraud. Marx considers the state to be a tool used by the ruling class to maintain and reproduce the capitalist system, which includes policies that suppress the working class and bolster the system of wage labor, noting that the law functions to ensure a smooth functioning capitalist system. Marx sees the state as the instrument of the capitalist class to perpetuate the exploitation of labor.

A Study Guide on Adam Smith’s The Wealth of Nations and Karl Marx’s Capital, Vol. 1

Short-Answer Quiz

1. How does Adam Smith describe the division of labor, and why does he believe it is important for economic growth?
2. In Smith’s view, what role do “fixed” and “circulating” capitals play in production, and how do they differ?
3. What does Smith identify as a major cause of the debasement of coinage throughout history?
4. According to Marx, what is the distinction between “use value” and “exchange value”?
5. How does Marx use the concept of “value” to critique the use of gold as currency?
6. What is the role of money as “a medium of circulation,” according to Marx?
7. How does the process of transforming money into capital (M-C-M) differ from the simple circulation of commodities (C-M-C) in Marx’s analysis?
8. What role does “labor power” play in the accumulation of capital, as described by Marx?
9. How does Marx explain the historical transformation from individualized handicraft to large-scale, factory production?
10. According to Marx, what conditions are necessary for the creation of a working class that sells its labor power as a commodity?

Answer Key

1. Smith describes the division of labor as the specialization of tasks, where workers focus on specific parts of production rather than producing whole goods individually; this increases efficiency, productivity, and overall wealth by enhancing dexterity, saving time, and encouraging technological innovation.
2. Fixed capital is used for assets like tools and machinery that generate revenue without being exchanged, while circulating capital is money or commodities bought to be resold or transformed for profit.
3. Smith argues that the avarice and injustice of rulers have historically led to the reduction of precious metal content in coins, diminishing their real value over time.
4. Marx defines use value as the utility of a commodity, its ability to satisfy a human need or desire, whereas exchange value is a commodity’s worth in relation to other commodities.
5. Marx argues that gold’s status as money hides the fact that all commodities, including gold itself, obtain value by embodying human labor, and he sees the use of precious metals as money as part of a system that masks social relations.
6. Marx sees money as a medium of circulation that facilitates the exchange of commodities by acting as an intermediary between purchases and sales, making the process more efficient and allowing for the smooth exchange of goods.
7. The circulation of commodities (C-M-C) involves selling a commodity for money to buy another commodity for use, whereas the circulation of capital (M-C-M) involves spending money to buy a commodity for the purpose of selling it for more money.
8. Labor power, or the ability to perform labor, is the key commodity that capitalists buy, according to Marx; it is the source of surplus value and the basis for capitalist accumulation.
9. Marx explains that historical shifts from handicraft to factory production happened because capitalists sought to increase profits by introducing machinery and reorganizing work to increase efficiency, turning laborers into cogs in a larger machine.
10. Marx argues that for labor power to become a commodity, laborers must be “free” in a double sense: they must be legally free to sell their labor and free from access to means of production, thus being compelled to work for wages in order to survive.

Essay Questions

1. Compare and contrast Adam Smith’s and Karl Marx’s views on the division of labor. How does each author see this process as shaping society and the economy?
2. Explore the concept of “value” as it is used in both Smith’s and Marx’s analyses. How does each author define value, and how does their definition inform their larger theoretical frameworks?
3. Analyze Marx’s critique of money and its role in capitalist society. In what ways does he see money as obscuring underlying social relations?
4. How does Marx’s analysis of the commodity M-C-M shed light on the nature and logic of capitalist accumulation? What are the driving forces of this process, according to Marx?
5. In what ways do Smith and Marx both contribute to our understanding of production, distribution, and class relations in capitalist society? What are the key points of divergence in their perspectives, and why do those differences matter?

Glossary of Key Terms

Accumulation of Capital (Smith): The process of reinvesting profits to increase the amount of capital available for future production. Circulating Capital (Smith): Capital that is used up in the production process or sold for profit, such as raw materials and goods for sale. Fixed Capital (Smith): Capital assets such as machinery or buildings that contribute to production without being consumed. Division of Labor (Smith): The specialization of work tasks that increases overall productivity by allowing workers to become more skilled. Labor Power (Marx): A worker’s ability to perform labor, which can be bought and sold as a commodity under capitalism. Use Value (Marx): The utility of a good, or its ability to satisfy human wants. Exchange Value (Marx): The worth of a good in relation to other goods, based on the socially necessary labor to produce them. Commodity (Marx): A good or service that is produced for exchange rather than direct use. Surplus Value (Marx): The difference between the value created by labor and the wages paid to workers, the source of profit. M-C-M (Marx): The circuit of capital where money is used to purchase commodities, which are then sold for more money. C-M-C (Marx): The simple circulation of commodities where a commodity is sold for money in order to buy another commodity for use. Money as a Medium of Circulation (Marx): Money that is an intermediary in the exchange of commodities, facilitating the flow of goods and services.

Generated with the assistance of NotebookLM