“Adam Smith’s statement that the trade between dealers and dealers must be equal to the trade between dealers and consumers (by which he means direct, not industrial, consumers, since he himself includes industrial consumers among dealers) is therefore wrong. It is based on his false assertion that the whole product consists of revenue, and in fact only means that the part of the exchange of commodities which is equal to the exchange between capital and revenue is equal to the total exchange of commodities. As the assertion is wrong, the practical applications Tooke made of it for the circulation of money are also wrong (especially the relation between the quantity of money circulating between dealers and the quantity of money circulating between dealers and consumers).” (p 251)
Similarly, all of the analysis of neoclassical, marginalist and Keynesian economics, which rests upon this false assertion that the value of commodities resolves entirely into revenues, is wrong.
The assumptions used by neoclassical, marginalist and Keynesian theories flow from Smith's absurd dogma, and from his slipping from his labour theory of value into a cost of production theory of value. Marx deals with this in Capital III, Chapter 48, where he examines Smith's and others account of revenues and their sources. He also examines that in Theories of Surplus Value, Addenda. In other words, it becomes each factor of production that is the source of these revenues, be it land-rent, capital-interest, labour-wages, or entrepreneurship-profit. Starting from this end, Smith argues that each of these factors have their natural price, below which the owner will not bring it to market, so that supply would drop, causing the factor price to rise.
From this perspective, the price of any commodity is made up solely of the sum of these factor prices, required for its production. This is the starting point for the neoclassical school, and Keynes made clear that he did not demur from its assumptions and model, in that regard. As Marx pointed out this amounts to determining the price of commodities by the price of commodities, because what determines the price of the factors of production themselves, other than the prices of the commodities their owners must consume? What is required is then a model within which all of these natural prices are simultaneously determined, and are self-regulating. That is the basic postulate of the General Equilibrium Theory.
The obvious basis for a school that equates value with utility/use value, is that the value added by any factor should be equal to the price of that factor. That is the inevitable consequence of Say's Law that the value created by the production of any commodity, a value created by these various factors, finds its equivalent in the revenue received by those factors, which then forms the demand for that supply. In this way, the requirement of Smith's absurd dogma that the value of commodities resolves entirely into revenues is met, along with the requirements of Say's Law, developed from it that supply creates its own demand. In other words, the total value of output now equals the total value of revenues, and so these revenues form an adequate demand for the supply.
But, how was the utility/use value to be quantified? Things that appear to have the most utility frequently have low prices, and things with little utility very high prices. That had already occurred to Smith. He understood, for example, that, on the basis of his labour theory of value, it is labour that creates all new value, and yet he could see that labour was not even paid a revenue equal to this new value it created, a large part of it being appropriated by land and capital as rent and profit. Smith's answer was that labour was plentiful and so its price was below its value, and capital was scarce so its price was higher than its value. He thought, therefore, that the supply of capital would rise relative to labour, and so profits would fall over time.
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