Adam Smith’s Theory of Value and Distribution: Economics as a Moral Science Once Again
Jeffrey T. Young
New York: Routledge, 2024 (232 Pages)

An impartial spectator observing me read this book would surely sympathize with my passions of frustration and annoyance. I admit this is a harsh way to begin a review, so I will attempt to justify it below; but first I will try to say something unbiased about the volume. Jeffrey T. Young has written a study of Adam Smith’s theory of value and distribution—as developed mainly in Book I of The Wealth of Nations—grounded firmly in Smith’s moral philosophy. By doing so, Young hopes both to present a truer account of Smith and to resolve longstanding controversies over such questions as whether Smith accepted a labor theory of value and whether his ideas prefigure those of later traditions—if Smith was a proto-Ricardian, proto-Marxist, proto-Sraffian, et al.

Young’s answer is that Smith was none of these things, and that if his theory of value and distribution is viewed in the correct light, it is rather a foreshadowing of modern, general equilibrium, supply-and-demand economics. In taking this stance, Young follows economists like Samuel Hollander, whose influence he acknowledges (pp. xvii, 14n2, 122). Young’s contribution to the established literature consists of drawing on Smith’s The Theory of Moral Sentiments to support his interpretation of The Wealth of Nations, and to argue that we need the former to properly understand the ideas on value and distribution in the latter.

The first three chapters (Part I) survey the philosophical foundations of Smith’s work, including problems of nature and natural rights, spontaneous order, and the proper understanding of utilitarianism in his writings. Appropriately for a book about Smith, Young begins with a kind of digression, namely, a few pages contrasting Smith and Marx on the meaning of “real value”: a more specific topic that in my opinion would have fit better later in the book. The bulk of the early pages though are devoted to showing that Smith was not a utilitarian as such. Part II (chapters 4-8) gets to the heart of the argument, and of Young’s attempt to extricate Smith from competing interpretations and absolve him of various errors that have been attributed to his work. Much of the material here involves attacking the claim that Smith embraced a labor theory of value of one form or another. Part III (chapters 9-12) moves from value to distribution, and includes discussions of wages, rent, and profit, as well as some final salvos at Marxist and Sraffian readings of Smith as a “surplus theorist.” Throughout, Smith’s moral philosophy, especially the sympathy of the impartial spectator, is used to make sense of each topic; hence, the book’s subtitle. And in general, the chapters follow a logical and tonal order. A partial exception is chapter 9, which considers elements of distributive justice in Smith’s theory of wages rather than analyzing that theory as such (the different emphasis results because this chapter is a revision of a previously published essay).

Whether readers will consider Young’s effort a success will likely depend on what they think of this type of research: Young is engaging in a “rational reconstruction” of Smith, an interpretation of his work through the lens of what Young considers modern textbook economic theory. Those who like this approach will enjoy the book, and those who do not, will not. Unfortunately, I find myself in the second camp. To be clear, I do not object to arguing for consistency between Smith’s two books, or to finding their areas of overlap. I do object to ahistorical and anachronistic readings.

Essentially, in an effort to shy away from Marxist, Sraffian, and other unconvincing readings of Smith, Young goes too far in the opposite, also unjustified direction, arguing that Smith is basically a neoclassical general equilibrium theorist. Importantly, this was not, as Young sometimes implies, the conventional view of Smith in the classical or neoclassical periods (pp. xvi, 3, 71), and it is likewise questionable whether, in the absence of Marx-Sraffa interpretations, we would all find our way to Young’s view (pp. 5, 70-71). Rather, this idea of Smith was the result of Samuel Hollander and others rationally reconstructing Smith’s economics in the later twentieth century to make him seem modern, a project that has been met with much criticism. Mark Blaug described research like this as an exercise in “exhausting circumlocution” (ETiR, 5th ed., p. 141).

Curiously, Young appears conflicted about how best to interpret Smith, that is, whether Smith’s ideas should be read in historical context, from his own perspective, or in modern context, from our twenty-first century perspective. Young initially supports the first view (p. xvi), but at other points suggests the second, even implying that anachronism is appropriate (pp. 71; also, 5, 122), before changing course again and praising “the wisdom of going back to the original and trying to understand Smith in his own terms” (p. 71; emphasis added; also, p. 82). What should we make of this seemingly contradictory advice? Should we understand Smith looking forwards or backwards?

Anticipating criticism, Young adds in a note: “I recognize that this [approach to studying Smith] potentially opens me up to the charge of anachronism, reading modern ideas into an older text. My response is simply that I think when I do this Smith is really dealing with the same idea that we have in modern economics, and that he is part of the reason why we have the idea” (p. 87n2; emphasis in original). In other words, Young is not being anachronistic because he has hit upon the correct interpretation of Smith, which just happens to be consistent with modern economics. This looks like question begging.

The situation is not much improved by Young’s claim that Smith is one of the moderns because he was a source of their ideas: How could this be true, if, as Young often complains, generation after generation of economists have misunderstood Smith? In fact, an underlying theme of the book is that basically all Smith interpreters of the past 250 years or so have gotten him wrong. The literature on Smith’s value theory, for example, is said to be filled with “rampant confusion, misunderstanding, and misinterpretation” (p. 90). Similarly, “all historians of economics” (p. 95) have misunderstood Smith’s famous deer and beaver example—all until Young, that is. The result is an almost Straussian reading of Smith in which he is alleged to have provided a consistent, logically satisfactory, and proto-neoclassical account of value and distribution that rebukes most of his past and present interpreters—but that Smith never made explicit, and in fact, would basically have had to take pains to hide.

Oddly, the book says little about how it is that so many economists separated by time, space, theoretical foundations, and political dispositions have been so consistently led astray about Smith’s ideas. In the case of Marxists or Sraffians, their ideological bias would be an easy explanation, but what about writers with no such baggage? This also raises the question of Smith’s clarity. There is a tension between Young’s claims about Smith’s carefulness as a writer (pp. 80, 87, 91-92, 168-169) and the fact that Smith does not clearly or explicitly state the ideas Young attributes to him, which are apparently so subtle as to have baffled economists since 1776. If the ideas are as simple as Young thinks, why did Smith not explain any of them himself, in any of the editions of The Wealth of Nations published in his lifetime? If it is necessary for the reader to adopt the perspective of the impartial spectator to understand Smith’s economic theory, surely this would have been worth mentioning? If, for instance, we need this perspective to fully grasp Smith’s discussion of labor (p. 82), why did he shroud this fact in mystery?

Even odder is that, by his own admission, Young’s account of Smith often falls short. He sometimes concedes that the textual evidence only weakly supports or possibly even contradicts his thesis. These troublesome cases are dealt with using a variety of means: sometimes they are brushed aside as unimportant, while at other times an awkward claim is alleged to be merely a simplifying assumption, or to be outweighed by a different claim of Smith’s, or to be a misleading interpretation fostered by Marxists, et al. (e.g., pp. 103n6, 110-111, 114, 117, 135n2, 121, 185; and summing up, pp. 206-209).

Perhaps the greatest disappointment of the book, though, is that the promise of its subtitle is not realized. Instead of offering a positive vision of what “economics as a moral science once again” might look like in the twenty-first century, or what Smith might have to offer contemporary social science, or how his ideas could help reshape current economic thinking, we are left retreading decades- if not centuries-old debates.

Matthew McCaffrey
Masood Entrepreneurship Centre, The University of Manchester, UK