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IS THERE ANOTHER, QUITE DIFFERENT, “ADAM SMITH PROBLEM”?

Published online by Cambridge University Press:  04 November 2014

A. M. C. Waterman
A. M. C. Waterman*
Affiliation:
Fellow of St John’s College, Winnipeg, and Professor Emeritus of Economics, University of Manitoba; e-mail: [email protected].
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Abstract

Division of labor is thought to imply increasing returns to scale, which in turn implies that wages rise continually with economic growth. Yet the price theory of Wealth of Nations rests upon the assumption that the “natural” price of labor (and capital) is determined at any steady-state rate of balanced growth. There would seem, therefore, to be an irreconcilable contradiction between Smith’s exposition of the division of labor in Book I, chapters 1 to 3, and his price theory as set out in Book I, chapters 6 to 9.

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Articles
Information
Journal of the History of Economic Thought , Volume 36 , Issue 4 , December 2014 , pp. 401 - 420
Copyright
Copyright © The History of Economics Society 2014 

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