What factors of production would Adam Smith be most likely to identify as the source of a nations wealth?
bunny asked:
What factors of production would Adam Smith be most likely to identify as the source of a nations wealth?
Kansieo.com
What factors of production would Adam Smith be most likely to identify as the source of a nations wealth?
Kansieo.com
Wealth
I think this is sort of a trick question, because a lot of people who read Smith lightly think that he believed in a ‘labor theory of value’ - that is that prices are determined by the ratios of labor time. So, you might say, ah! Labor is the source of a nations wealth. And, if you read the textbooks, you could add, and not gold.
But of course no economist ever seriously thought that labor hours could determine prices, except maybe in a primitive society with no capital. So labor is important, but so is capital. Without capital, you can’t really have significant specialization, which was Smith’s big point. One might also argue that land was unimportant, since without land you could produce industry, as long as your people were intelligent crafty Scotts like Smith was. But I digress.