IS THERE ANOTHER, QUITE DIFFERENT, "ADAM SMITH PROBLEM"?

In: Journal of the history of economic thought, Band 36, Heft 4, S. 401-420

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.