The Myth of Adam Smith

“Adam Smith is the founder of Free Market Capitalism” says the establishment economists so they can cite Smith’s anti free market writings to justify their policies.

Whenever you’re taking a high school government/economics class the meme of Adam Smith being the founder of free market economics is always, for some reason, pushed. It’s taken for granted that Smith pushed a system of free markets before anyone else. But Smith work is really vague and ambivalent. You have people who claim Smith promoted free market economics and then people who use smith to justify government intervention. Such as this article.

But Smith had many problems himself that economists before hand did not have. An example being that Smith supported the idea of an objective theory of value, rather than a subjective theory of value that the Spanish Scholastics,  had long discovered. The objective theory of value says that the value of an item that people buy is inherent in that object. Rather than the subjectivists who say that the value of an item is subjective based off the utility people can get from that object.

For instance, an piece of bread isn’t valuable because of the labor it took to make it, it’s valuable because at lease one person finds utility in it. Be it to fill them up or to hit their brother in the face with. They get some utility from it.

The problem with the objective theory of value is that is what Marxists use to justify their economic beliefs through their labor theory of value which is a subset of the objective theory of value. The Marxists say that items have value because (to somewhat simplify) the labor that was put into the object. So in many ways the alleged founder of free market capitalism laid the ground work for Marxism.


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