Political Economist

1. The concept of productive labor and unproductive labor

The concept of productive labor and its distinction from unproductive labor had been a central issue among classical political economists, such as Smith, Ricardo and even Marx. Even thought Ricardo did not use this term, he also distinguished productive labor from unproductive labor, especially when he dealt with the distribution of incomes into social classes. Moreover, it is well known that Marx too tried to reconstruct productive labor concept in his major works.

The distinction between productive labor and unproductive labor is derived from Smith’s argument. According to Ronald Meek’s explanation, like other contemporary economists, Smith regarded accumulation of capital as a basic motive and cause of the increase of the wealth of nation. In order to reveal the nature and cause of the increase of the wealth of nations, it was necessary for Smith to analyze the process of modern economy, and the source of value. That is a reason why Smith introduced the concept of productive labor and its differentiation from unproductive labor. While doing so, Smith was able to criticize certain political institutions which hindered the accumulation of capital, and attack particular social attitudes which discouraged the increase of wealth.

According to Smith, the productive labor is related to direct material production. Unlike unproductive labor, this always adds to value. On the contrary, unproductive labor has nothing to do with value-added labor. For example, the labor or activity of the sovereign and his officer of justice and war, the labor of menial servants, even though their labor deserves to be rewarded, do not increase the value. The labor of those who are engaged in protection, security of the commonwealth also does not add to the value. Their activities, the products of their labor always perish ‘in the very instant of their performance.’

With this distinction, Adam Smith was able to draw a sharp line between those who were engaged in material production and those who were maintained by the industry of other peoples. Even though this concept did not have any moral, ethical connotation, and even though there are many ‘unproductive labor’ which produce ‘social utilities,’ this concept and distinction between productive labor and unproductive labor seemed to provide useful parameter with which political economist could estimate and measure the significance of productive activity. With this distinction, Smith attacked soci0-political obstacles or hindrance laid in front of increasing accumulation of capital, and thus increase of the wealth of nation.

Finally, there is an issue whether this notion can be applied to modern society. Regarding this question, I would like to address theoretical antinomy or problems which arise from both Smith’s theory and complicated real world. As Karl Marx already put it, particular labor which is not directly engaged in material production, but is closely related to the production of material goods can also be regarded as productive labor. For example, boxing or delivery is not necessary for particular production. Therefore, according to Smith’s explanation, these labors are unproductive labor. However, boxing labor also can be regarded as value-added activity, thus productive labor.

Smith did not provide enough explanation of this kind of concrete estimation. So I think it is impossible to apply this concept to much more complicated society than Smith’s age. In other words, because Smith did not elucidate his notion in every detail, whether particular labor can be called productive labor or not seems to be remained controversial. Moreover, if we consider the modern world characterized by high level of division of labor and complexity, trial to apply Smith’s concept of (un-)productive labor does not seem to be plausible.

2. The role of the “rude and early state” in the classical theory of value (B)

The labor theory of value, which can be summarized as the notion that the relative value of products and commodities is determined by the relative quantity of labor which was required to obtain them, is one of the most significant contributions of classical political economists such as Adam Smith and David Ricardo.

In order to grasp underlying principles which regulate the relationship between value and price, determine commodities’ relative exchangeable value, Smith invited us to his imaginary state of society, the “rude and early state of society.”

In this state, there was no accumulation of stock, no appropriation of land. There are some production sectors which are mainly composed of direct productive labor. Smith provided us with beaver production and the case of deer production for examples.

If the market price of beaver lowered below its natural price, and thus the relative value of deer become rise, every producer would invest their labor in the latter sector. Then to competition among deer producers cause to fall in the price of deer until the relative price of beaver production become rise.

With this description, Smith asserted that in rude and early state of society the relative value of products was proportional to the quantity of labor required for their production. In addition, Smith also pointed out that the competition among producers is a driving force of equilibrium allocation of resources.

However, Smith claimed that in more developed economy, this basic rule would no longer hold. With the effect of accumulation of capital stock, with the effect of appropriation of land in the hands of individuals, according to Smith, the rule – the relative value of commodity is proportional to the quantity of labor requisite for its production – should be modified.

In contrast to Smith, Ricardo pointed out, in his The Principles of Political Economy and Taxation (chapter 1 “on Value”), that even considering the effect of accumulation of capital, we don’t have to give up the labor theory of value.

All in all, the thought-experimental ‘rude and early state’ of society was utilized as a theoretical basis upon which Smith and Ricardo developed their original contribution to the labor value theory.