rent of land

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Understanding Smith’s theory of distribution: the residual determination of the rent of land

The objective of this paper is to deepen the understanding of Adam Smith’s theory of distribution and by doing so to unveil his adherence to the hypothesis of a given social product and technique in use determined by labor productivity and past accumulation of capital when determining short term fluctuations of the distributive shares and when discussing taxation. The paper can be directly linked to Sraffa’s 1951 and 1960 proposition of the existence of a classical approach to value and distribution fundamentally different from posterior marginalist analysis. In the paper I refute the existence in “An Inquiry into the Nature and Causes of the Wealth of Nations” (henceforth “WN”) of an “additive theory of value”, a proposition clearly advanced by Marx and shared by many economists, including Sraffa.