Question

Explain Richard Cantillion and Adam Smith theory of value in economic history. And can you say, what is the similarity between adam smith theory of value and richard cantillion theory of value?

Answer 1

Adam Smith’s & Richard Cantillon’s theories of value
Adam Smith’s theory of value places the importance of labor in the production process. According to the labor theory of value by Adam Smith, the value of a particular commodity or good is determined by the amount of labor used in the production process. The LTV and other broader expansions of the theory consider the price or the value of inputs of production as the determinant facto of the price of output. Smith considered the value of the factor labor as the only input factor determining the price of the good.
Richard Cantillon’s theory of value suggested the idea of intrinsic theory of value that is considering the factor inputs labor and land, he explains that the market price of a commodity is determined by the supply and demand of the commodity. Comparing the supply, the quantity of the good demanded in the market, the money brought to exchange the good will all determines the price of the good in the market. The market price is not immediately determined by the intrinsic value but of the supply and demand, he believed the market price will tends towards the intrinsic value of a good.
While Smith determined the value of good with the factor labor alone, Richard suggest that it has a relation with the factor land also with relating that with a common intrinsic value of the good.