Tag / commodity fetish

by doctormcgrail

Economics and the Value of Nations: Why Adam Smith Still Matters

Why, in the 21st century, should we still read Adam Smith? Often hailed as the “father of modern economics,” Smith is just as often dismissed as outdated—an 18th century thinker writing before industrialisation, automation, and the complex global economy we know today. Yet, as a closer reading of The Wealth of Nations (1776) reveals, Smith’s ideas remain deeply relevant—not because they offer final answers, but because they expose enduring questions about labour, value, and the structure of modern society.

This blog post offers a concise exploration of Smith’s place in economic thought, drawing on the evolution of economic theory in his time, his intellectual influences, and a critical evaluation of both his insights and his limitations. My blog is a shorter version of a longer (6,000 word) article which can be read here: Economics & the Value of Nations: A Snapshot on Smithian Scholarship.

The Modern Relevance of Adam Smith
At first glance, Smith’s world seems distant from ours. But on closer inspection, the society he described—what he termed “commercial society”—is the same one we inhabit today. Its defining feature is waged labour: people earning a living by selling their capacity to work. While earlier societies relied primarily on slaves, serfs, or domestic servants, Smith observed the rise of wage labour as the dominant social relationship—a condition that continues today.

Importantly, Smith wrote at a moment of transition. The social structure of modern capitalism had already emerged, even if the technological form—industrial machinery—had not yet fully developed. This gave him a unique vantage point. Without the distraction of machines, Smith could focus more clearly on the social relationships underpinning economic life, particularly how wages, profit, and rent are distributed across social classes.

Later economists, captivated by mechanisation, often misread these relationships. Thinkers such as Jean-Baptiste Say even treated machines as independent “factors of production” deserving income in their own right—an idea foreign to Smith. By contrast, Smith’s emphasis remained firmly on human labour and its organisation.

Competing Economic Theories in Smith’s Time
To understand Smith’s contribution, we need to situate him within the intellectual context of the late 18th century. Two dominant schools of thought shaped economic debate:


• Mercantilism
• Physiocracy


Smith’s work engages critically with both.

Mercantilism: Wealth Through Trade
Mercantilism argued that national wealth comes from maintaining a positive balance of trade—exporting more than you import. Rooted in the practical experience of merchants, it framed economic life as a process of buying cheap and selling dear.
However, mercantilist policies required heavy government intervention. States enforced monopolies, controlled trade routes, imposed tariffs, and maintained colonial systems to ensure profits. Colonies were restricted to trading with their “mother country,” creating protected markets that enriched merchants and, by extension, state revenues.

While this system could generate wealth for the metropole (e.g. Britain), it did so at a cost: higher prices, reduced competition, and greater inequality. Workers, in particular, bore the burden of inflated costs and heavy taxation. Despite Smith’s powerful critique, mercantilist policies persisted well into the 19th century, only gradually giving way to freer trade principles.

Physiocracy: Wealth from Nature
In contrast, the French Physiocrats located the source of wealth in nature, especially agriculture. Observing that agricultural production yields a surplus—planting one seed produces many—they concluded that only agriculture (and extractive industries like mining or fishing) truly created new wealth.

Urban industries, by comparison, were deemed “sterile.” A jeweller might reshape silver into necklaces, but the total quantity of silver remains unchanged. Physiocracy also introduced a powerful methodological innovation: systematic data collection. By tracking agricultural output, population, and economic activity, the Physiocrats could analyse economic growth empirically. They also advocated laissez-faire policies, arguing that government interference—such as price controls on bread—often made economic problems worse.

Smith’s Synthesis and Breakthrough
Adam Smith absorbed ideas from both traditions, particularly during his time in France, where he engaged directly with leading Physiocrats. Yet his contribution lies in transcending their limitations. Smith agreed that production is central to wealth, but he rejected the idea that only agriculture is productive. Instead, he identified human labour, across all sectors, as the true source of value.

His famous example of the pin factory illustrates this point. By dividing labour into specialised tasks, productivity increases dramatically—even without new machinery. This increase is not natural but social, arising from the organisation of work.
Smith also challenged the Physiocratic dismissal of trade. For him, exchange is not sterile; it motivates production. People produce not just for subsistence but for markets, responding to demand shaped by social needs.

Class Structure and Economic Insight
One of Smith’s enduring contributions is his clear articulation of a three-class system:

• Workers (earning wages)
• Capitalists (taking profit)
• Landowners (taking rent)

This framework remains influential today. Unlike earlier thinkers, Smith recognised the shared characteristics within each class. Workers across sectors are united by their dependence on wages, while business owners share a profit motive.

The Importance of Smith’s Library
Modern scholarship has deepened our understanding of Smith through the study of his personal library. This “hermeneutic” approach—interpreting Smith through the texts he read—reveals the intellectual world that shaped his thinking. Smith’s library contained works in multiple languages, travel accounts, and early economic texts like Richard Cantillon’s (1755 [1720s]) Essai sur la nature du commerce en général. By tracing Smith’s references back to these sources, we see how he adapted and reinterpreted earlier ideas.

For instance, from Cantillon, Smith draws insights about wages needing to cover not just workers’ survival but also population reproduction. This reflects a deep awareness of the relationship between labour, subsistence, and demographic growth.
Smith was also aware (from Cantillon’s work) that workers are perfectly capable of producing double what they require to survive.

The Labour Theory of Value: Insight and Problem
At the heart of Smith’s economics lies a powerful but problematic idea: that labour is the measure of value. In principle, this means that the value of goods reflects the (generic) labour time required to produce them.

However, Smith also recognises an apparent contradiction: workers do not receive the full value of what they produce. Instead, part of this value becomes profit for employers (and rent for landowners; interest for bankers; taxes for politicians).
This creates a theoretical tension. If goods exchange at their labour values, how can workers consistently receive less than the value of their labour?

Smith never fully resolves this issue. Later economists attempted to “correct” him, often abandoning the labour theory of value altogether. But another interpretation suggests that Smith was uncovering a real feature of capitalist society: a mismatch between value as a universal measure (of human effort) and the labour time of wage labourers (and how it can be the ‘measure’ of itself).

My longer article (link above) outlines this contradiction using the analogy of Kilograms as a measure of weight (which cannot then appear on the scales as a ‘Kilogram of Kilograms’). Marx resolved the ‘problem’ by noting that wage labourers are not paid for their ‘labour time’ (but for the product of their ‘recreation’ time, namely. their labour power.

Wealth vs. Value: A Crucial Distinction

Another key issue in Smith’s work is his use of the term “wealth.” He famously argues that labour is the source of all wealth, but this is only partly correct. Nature clearly provides wealth—sunlight, minerals, natural resources. What nature does not provide is value, which is a social construct arising from exchange. Smith’s failure to clearly distinguish between wealth and value leads to confusion. A more accurate title for his book might have been The Value of Nations, emphasising the social processes that determine economic outcomes.

Conclusion: A Thinker Worth Revisiting
Adam Smith’s Wealth of Nations remains a foundational text not because it offers flawless theory, but because it grapples with fundamental questions that are still unresolved in “mainstream” economic theory:

• What creates value?
• Why is value distributed in the way it is? [What is role of violence / exploitation?]
• What role do labour, nature, and exchange play in economic life?


Consequently, Smith’s insights into labour, class, and productivity continue to shape economic thought. At the same time, his unresolved contradictions—particularly around value and wages—highlight the complexity of the system he sought to understand. Far from being outdated, Smith’s work invites us to think more critically about the modern economy. His legacy lies not in providing final answers, but in opening a field of inquiry that remains in dispute.

by doctormcgrail

Exploiting “low science capital”

The university access programme I teach on (for several years now) is currently being expanded to cover (natural) science, technology, engineering and mathematics (STEM) courses. Previously it only covered arts, humanities and social sciences. The expansion is to be welcomed since there should be routes into the ‘natural sciences’ for adult returners at any university and not just the ‘cultural’ realm. Plus, it would be good to have more interplay between natural and social scientists (and, of course, sciences).

The inaccurate ‘adoption’ of natural scientific ideas within social science and theory (or discourse) has been widely and famously criticised, via well-known examples which now include late-19th century ‘Social Darwinism’ (or evolution understood as ‘survival of the richest’) and the late-20th century Alan Sokal ‘hoax’, involving Sokal’s submission of a tongue-in-cheek paper to the postmodern journal Social Text (https://www.theatlantic.com/ideas/archive/2018/10/new-sokal-hoax/572212/). Whilst media coverage of the latter focused on the journal’s editors not being able to tell genuine from false ‘social science’ (or ‘sociology’), Sokal’s subsequent work made it clear that, as a physicist, what most upset or concerned him was inaccurate appropriation of natural scientific concepts by those who didn’t understand (nor desire to understand) them and, instead, turned such concepts into mere “jargon”, or as The Atlantic magazine put it, in 2018, “jabber”.

The argument of the physical or natural scientists is that their concepts are based in a reality which human ‘thinking’ can reflect (correspond to) but not construct, and hence it is folly to claim that concepts rooted in properties external to human will – the properties of the physical world, such as the presence of oxygen in the atmosphere – are somehow ‘socially constructed’. In this fashion Sokal did contemporary social sciences a service by simply reminding us of Thomas Reid’s aim in developing Scottish Common Sense philosophy, which was to save philosophy from becoming “ridiculous” (Broadie in The Cambridge Companion to Thomas Reid).

Of course, what is good for the goose must be good for the gander!  Hence, it is always interesting to see natural scientists adopt what are socially-constructed languages, concepts and belief-systems!

As part of my department’s expansion of access routes into natural degrees, new staff with natural ‘science’ qualifications (I’ll drop the pretence that social sciences are treated as ‘science’ from this point on) had to be recruited, along with a new Head of Educational Transitions. So far, so good. On completion of the recruitment process the candidates were introduced to the wider department – a procedure that involved presentation of personal statements about what the new staff hoped to achieve. There should be nothing surprising in this induction process, but what caught my eye was reference, by one presentation, to how the target audience of prospective students was to be understood or, if you prefer, framed; this was as individuals with “low science capital”.

If the phrases “low science knowledge” or “little scientific understanding (and/or awareness)” had been used then I would not have perceived a problem. But the word “capital” in the phrase indicated the adoption of societal “jargon” (or ‘jabber’) by a natural scientist who doesn’t know what the word means, other than what it means to ‘laypersons’ (not social scientists) around them in everyday general use, no doubt where the term has been ‘picked up’. But capital is not, you (will) see, within Sokal’s definition of ‘science’, that is, pertaining to:

“an external world, whose properties are independent of any individual human being and indeed of humanity as a whole; that these properties are encoded in “eternal” physical laws”.

(Sokal)

What my colleague intended, at heart, was that there are students or potential students with little (maybe ‘no’) understanding of science, and that their role (our department’s role) is to build such knowledge and awareness through education. These students would, no doubt, also lack skills and ‘academic literacies’, or general attributes and capacities (mental and physical) which can be built upon, via practice and repetition (say, in doing lab work and writing reports), in an effort to turn them into ‘scientists’. This is all well and good.

However, usage of the word ‘capital’ managed to sneak in, like a Trojan Horse, a whole set of other connotations. On gaining their new attributes, capacities and skills, our trained up students will go forth (with these additional elements and extensions to self) to exploit them (and themselves) as ‘capital’. After all, what does it mean to have ‘low capital’, whether of the scientific or any other variety (social; financial; industrial; cultural)? That is, we won’t be turning students into scientists per se, but scientists for sale! They will be employable scientists, scientists on the market, and scientists with a ‘load of’ or ‘lots of’ capital.

This usage of the term ‘capital’ is not surprising, nor should it be. It is typical of early 21st century Scotland where the sociological terminology of sociologists like Pierre Bourdieu has been broadly adopted and spread into popular culture, including mainstream mass research events like the BBC’s ‘class calculator’: a website where you fill in your details and the computer informs you which (of 7) social classes you ‘belong to’, based on your self-reported accumulation of capitals – social, cultural and financial.

Where ‘scientific capital’ fits into this realm of capitals I am uncertain, but it probably sits somewhere between cultural and financial. The cultural bit is that you can ‘talk’ science and therein impress potential employers, who also happen to ‘talk’ science and see themselves (well, a younger version of themselves) in the ‘candidate’ (i.e. you) – ‘cultural capital’, by the way, never gets beyond thinking in terms of hierarchical systems as the candidate is always flogging themselves to someone or something, like ‘the market’. The financial bit is that once you’ve landed a job in ‘science’ you are more highly valued than you were before. Neither quite explain ‘science capital’ since there is an aspect of just enjoying the knowledge, which somehow has to be treated or recognised as ‘capital’! Nevertheless, no matter which ‘type’ of capital we are considering or thinking of they all share one thing in common, namely, that all forms of capital are possessions. The student who studies ‘science’ will end up possessing science and move from having “low” to “high” science capital.

But the cultural context to this usage of the term ‘capital’ merely indicates the folly of the culture.

Capital as a Social Relation, and not a ‘Thing’

The whole of Chapter 1 of Marx’s opus Capital (1867) can be thought of in terms of making one core point: capital is a human relationship and not a ‘thing’ (to be possessed), but the social process (relation) which produces capital also entails commodity fetish whereby relations between people appear (or take the form) of relations between things.  Marx makes the joke about never having seen a coat walk into a shop and exchange itself for a roll of linen.  What is actually taking place is the exchange of labour (effort) of the tailor in return for that of the weaver (a la Adam Smith’s labour theory of value, presented at the start of the Wealth of Nations). It might look as if the tailor ‘possesses’ coats for sale, but it is really the tailor who is possessed by the need to continuously produce coats, which they have no personal need for, just in order to ‘exist’.

The duality (relation-appearing-as-thing, and vice versa, thing-appearing-as-relation) does not exist purely ‘in the mind’. Hence, Smith provided two definitions of ‘capital’. First, he defines capital as all the ‘things’ in society, produced by humans (i.e. not natural products like metals in the ground or wild fish), covering buildings, bridges, machines, existing stock (raw materials), etc. As Isaac Rubin notes, this is the ‘wrong’ definition – it describes the appearance of ‘things’. Basically, capital has to, at some point in its reproductive cycle, take the form of useful (wanted) ‘things’, though these can include intangibles such as insurance, a story, a song, a poem, or an idea (a patent). But this ‘form’ taking is always momentary and passing to what capital is – a relationship. Second, Smith defines capital as a ‘fund’ which produces a ‘return’. For Rubin this is the ‘correct’ definition and reveals the fundamentals about what capital is – a human relationship where, to use Smith’s phrasing, one person ‘shares in’ the effort of another.

A Quick and Easy Example

Let’s say you go out with a friend for a drink and they end up in such a state that they need to stay the night with you (sleeping on your sofa). In this instance your sofa is nothing but a useful object. The next day the two of you go out again and the same thing happens. You enjoy your new routine and before long you have a new housemate.

At this point you decide that you don’t mind your friend staying with you, but they are going to have to give you something for the use of your sofa, namely, ‘rent’ in the form of money (say £10 per night – the amount does not matter). At this point your sofa goes through a magical transformation into a piece of capital. It is no longer a merely useful object – having a use value – but has taken on the means of raising or making a ‘return’ (in the monetary form) in the form of ‘rent’ (which meets Smith’s second definition). The sofa, despite being owned by you with no change to its material form, now has an exchange value attached to it. The sofa is now a piece of ‘capital’ – or part of a social relationship of monetary exchange – which ‘earns’ you £10 a night. Of course, it is your friend who has to ‘earn’ the £10 each day to pay you the ‘rent’. It is the changing form of your relationship with your ‘friend’ (now in inverted commas) which has translated the sofa from simple useful object to piece of capital. The sofa’s definition as capital rests on a particular and peculiar kind of social relationship and not on its material form. It has to be noted, since this is very significant, that your ‘friend’ is no longer your friend (or just your friend) because your relationship is now one of landlord to tenant!

Thus, capital is a social relationship and not a ‘thing’. Students, or anyone, with ‘low science capital’ do not lack possession of a ‘thing’ but stand ‘low’ in a social relationship where they can get very little (or nothing at all) in exchange for their skills (their labour power). Subsequently, aiming to raise or enhance such a person’s ‘science capital’ (make them a saleable commodity) is a different goal or purpose than wanting to advance their socially-useful knowledge in a ‘universalist’ sense (to the betterment of ‘humanity’ or society as whole, or even to their own emancipated sense of self). Rather, the goal in discussing ‘low science capital’ is to feed the market with what the market (a peculiar form of social relationship) wants and, of course, raise the ‘return’ that can be had on any ‘investment’ made in such science education and science students (even when they themselves are to be one of the many ‘beneficiaries’ of their own exploitation).

Moral of the Tale

As Sokal notes, inaccurate appropriation of scientific concepts compounds human ignorance. This point backs up Adam Smith’s reflection on the negative influences of the division of labour, which are apt to make us all stupid and ignorant. It is also a reminder of the need for a broad-based ‘generalist’ education as one means of overcoming the social problems of the (social) division of labour.