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Comment by legitster | Hacker News Reader

> Smith wasn't right on everything, but he was right to criticize Mercantilism.

I don't know why there's a need to hedge. Smith's observations were incredibly objective and insightful and have aged extremely well.

There were areas where his observations were incomplete or refined later (absolute vs relative advantage, paradox of value, efficiency of corporations).

Even Karl Marx found little in Smith's work that was disagreeable.

The Wealth of Nations is a seminal piece of Western civilization and deserves all the respect we can bestow such works.

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Adam Smith mostly has a lousy reputation these days because of the work of the Adam Smith Institute, which does not accurately reflect his thinking.

Yes, it seems that a lot (most?) of contemporary proponents of capitalism have cherry picked from 'The Wealth of Nations' and completely ignored 'The Theory of Moral Sentiments'.

Mark Blyth has some interesting critique of Adam Smith in https://youtu.be/JQuHSQXxsjM

Yes, it was a very important book and set of ideas. But it also had some shortcomings. For example, he has a theory of value based on labor/work (and David Ricardo continued with that approach, and then Karl Marx as well). That is greatly improved by Carl Menger's marginal theory of value.

While I agree that labor theory of value is wrong, I believe that theory of value based on utility is even less descriptive of the real world (and in that sense a regress).

People are not utility calculating machines. I would say these utility theories (I would call them theories of subjective value) have several flaws:

1. There are some things that all sane humans objectively (universally) value (things like survival, not being harmed, time and energy expenditure).

2. Sometimes humans simply value things that other humans value, as a shortcut to expending energy in figuring out what to value.

3. Any reasonably good theory value has to incorporate incomplete information that people have, and thus might value something that is not valuable and vice versa due to lack of information.

Some of these lead to nonlinear behavior which is really not well captured by an additive theory such as marginal theory of value.

Don't worry, economists surely have their calculation of the day.

Previously it was ordinary differential equations. Now attempting to solve these is intractable for such a big and complex system so far, and worse if you misrepresented the model or approximated ot too much.

So essentially all the theories with an equation are a guess.

Doubly so for theories without an equation that are not tied to experimental data... (Hello Austrians)

I don't think you understand the marginal theory of value at all. Like, at all. Obviously the marginal theory of value does incorporate all your concerns.

First, because Menger, creator of the Austrian school of economics, uses methodological individualism. That means it includes the fact people have incomplete information and subjective value (for example based on what others value). These are points 2,3.

About point 1, you clearly don't understand marginalism. You value more water over gold, but a glass of water is cheaper than the same weight of gold. If you were thirsty and about to die in the middle of the desert, you'd pay up to infinite money for a glass of water and 0 for gold. But you value just the next marginal unit of water, not the first one, so you know you can have as many glasses of water as you want just by opening the tap. I'm sure in your lifetime you'll spend way more money on water/beverages than on gold, but a single glass of water is cheaper.

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