Question

provide a brief (2-sentence) statement of why the concept was important to Smith or Marx.

- The division of labour

-Surplus value

-The invisible hand

-Principle of laissez-faire

-Theory of exploitation

Answer 1

"The Division of Labor"

Division of Labor combines specialisation and the partition of a complex production task into several, or many, sub-tasks. Its importance lies in the fact that a given number of workers can produce far more output using division of labor compared to the same number of workers each working alone. According to Adam Smith, these include increased dexterity from learning, innovations in tool design and use as the steps are defined more clearly, and savings in wasted motion changing from one task to another. Smithdescribed how decentralised market exchange fosters division of labor among cities or across political units, rather than just within them as previous thinkers had done. Smith had two key insights: First, division of labor would be powerful even if all the human beings were identical, because differnces in productive capacity are learned.Second, the division of labor gives rise to market institutions and expands the extent of the market. The benefit of the individual is that first dozens, then hundreds, and ultimately millions, of other people stand ready to work for each of us, in ways that are constantly being expanded into new activities and new products.

"Surplus Value"

Surplus Value refers to the financial profits that a capitalist earns by underpaying his workers. The idea of Surplus Value was proposed by German Philosopher "Karl Marx" in his various works, including Das Kapital. Marx believed that labor is fundemental to all value created in any economy and that underpaid labour is the source of all profits that accumlate to capitalists.

Different ways of viewing Surplus value

• It is viewed as an element of the new value product which is defined by Karl Marx as equal to the total labor costs and surplus value.
• It is viewed as the source of investment fund or accumlation fund of the soceity. Some part of it is used for re-investment and the other part is considered as personal income and consumed by the owners.
• Viewed as the monetary valuation of surplus labor or social relation of production.
• Surplus value can be viewed as a net income flow which is put to appropriation by the owners of capital for asset ownership which comprises of distributed persobal income as well as undistributed buisness income.
• In developed and capitalist economy, it can be viewed as a poinnter of social productivity's level which is reached by working poplation.

"The Invisible Hand"

The Invisible hand is a metaphor for the unseen forces that move the free market economy. Adam Smith introduced the concept in his book "An Inquiry into the Nature and Causes of the Wealth of Nations published in 1776. Each free exchange creates signals about which goods and services are valuable and how difficult they are to bring to market. These signals, captured in the price system, spontaneously direct competing consumers, producers, distributors, and intermediaries- each pursuing their individual plans- to fulfill the needs and dersires of others. Interaction of buyers and sellers- motivated by self-interest are regulated by competition, is phenomenon called " the Invisibile Hans of the market place" As a self-regulating system, a free market economy is efficient. Because competition encourages innovation, free markets encourage growth.

" Principle of Laissez-faire"

Laissez-faire is an economic theory from 18th century that opposed any government intervention in business affairs.The driving intervention behind laissez-faire, a french term that translates as "leave alone", is that the less the government is involved in the economy, the better off business will be - and by extension, soceity as a whole. The fundementals of laissez-faire include, first and foremost, economic competition constitutes a "natural order" that rules the world. The term originated in the 18th century during the Industrial Revolution. French industrialists used the term in response to the French government's voluntary aid to promote business. The phrase is traditionally attributed to French businessman M.Le Gendre from when he responded to a Mercantilist minister,Jean-Baptiste Colbert. The laissez-faire theory mainly advocates government non-intervention. Economic theorist Adam Smith believed that the optimal functionung of markets needed minimal government intervention.

Basic Principles of a Laissez-faire Economy

• The individual is the basic unit of soceity, i.e, the standard of measurement in social calculus.
• The individual enjoys a natural right to freedom.
• The physical oder of nature is a harmonious and self-regulating system.

"Theory of Exploitation"

Exploitation occurs when one social group is able to take for itself what is produced by another group. The concept is central to the idea of social oppression, especially from a Marxist perspective, and can also include non-economic forms, such as the sexual exploitation of women by men under patriarchy. Marxism posits that the struggle between social classes, specifically beyween bourgeoise, or capitalists, and the proletariat, or workers, defines economic relations in a capitalist economy and will inevitably lead to revolutionary communism. Marxism believes that capitalism can only thrive on the exploitation of the working class.Marxism belives that there was areal contradiction between human nature and the way that we must work in a capitalist soceity. Marxism has a dialectic approach to life in that everything has two sides. Marx set principles that were to govern the distribution of welfare under socialism and communism- these principles saw distribution to each person according to their work and needs. Exploitation is when these two principles are not met, when the agents are not receiving according to their work and needs. This process of expolitation is a part of the redistribution of labour, ocurring due to the process of separate agents exchanging current productive labour for social labour set in goods received.