Smith, Adam (1723–1790)

Scottish philosopher and social scientist Adam Smith is usually considered as the founder of modern economics. His most famous work, An Inquiry into the Nature and Causes of the Wealth of Nations (1776), has been misrepresented by conservative economic and political thinkers as a critique of any state intervention into the market. His most important economic theory, however, was that the value of commodities is based on the amount of work required for their production (labor theory of value). This was the foundation of Karl Marx's theory of capitalist exploitation (surplus value). The division of labor increases productivity, lowering the prices of commodities, and increases wealth. It requires exchange in the market given that governments do not restrict market operations by undue taxation and protective ...