Economic philosophies of Adam smith & Karl Marx

This essay focuses on the similarities and differences of the economic philosophies of Adam Smith and Karl Marx.

In the first three chapters of the Wealth of Nations, Smith presents a simple, powerful model of the determinants of wealth creation. Smith explains the creation of wealth as an outcome of the interaction of the division of labor, human nature, and the growth of the market. Explain and critically examine his analysis.

Karl Marx also had a very strong impact on economics with his ideas on communism. Although Marx’s work was not fully realized during his lifetime, his writing influenced many future economists. In this essay, I will explain and compare both philosophers’ theories on economic development.

Both Smith and Marx believed that labor was the key to creating wealth. Smith saw the division of labor as the key to creating wealth. He believed that if workers were specialized in their jobs, they would be able to work more efficiently and produce more. Marx also believed that labor was the key to creating wealth. However, he believed that the workers were being exploited by the capitalists. The capitalists would pay the workers less than the value of their labor and then pocket the difference. This created a struggle between the two classes, which Marx believed would eventually lead to revolution and a socialist society.

While both Smith and Marx agreed that labor was important for creating wealth, they had different views on human nature. Smith believed that humans were selfish and competitive by nature. He thought that this was what drove people to work hard and create wealth. Marx, on the other hand, believed that humans were capable of cooperation and altruism. He thought that the capitalist system suppressed these natural tendencies and caused people to be selfish and competitive.

Lastly, both Smith and Marx had different views on the role of the government in the economy. Smith believed that the government should stay out of the economy as much as possible. He thought that the free market would regulate itself and produce the most efficient outcomes. Marx believed that the government should play a more active role in the economy. He thought that the government should nationalize industry and redistribute wealth to create a more equal society.

While Smith and Marx agreed on some things, they had different views on human nature, labor, and the role of the government. These differences led to different economic philosophies. Smith’s ideas led to capitalism, while Marx’s ideas led to socialism.

Which parts of Smith’s analysis do you think Marx would reject? Explain.

Marx would likely reject Smith's idea that human nature is primarily selfish and competitive. Marx believed that humans are naturally cooperative and altruistic and that it is the capitalist system that suppresses these tendencies. Marx would also argue that the division of labor does not lead to wealth creation, but instead leads to the exploitation of workers by capitalists. He would argue that the government should play a more active role in the economy in order to redistribute wealth and create a more equal society.