Introduction

Origins of economic theory 

The origin of Economics as a science is linked to the development of a new form of social organisation, capitalism, a system that solves the organisation of production and distribution through the expanded functioning of the markets. Markets are therefore the epicentre of capitalism as they encompass the operation of the entire economy. 

Capitalism was established through a long and slow process that started in Western Europe in the 16th century and gained momentum with the advent of the industrial revolution in the mid to late 18th century. This is not to say that the capitalist regime would have replaced feudalism because a group of “inspired” individuals found the key to invent the automatic loom, the steam engine, and the smelting of iron. On the contrary, it was the junction of three novel phenomena: the universalization of exchange, a more pronounced division of labour, and the appearance of numerous and substantial technical advances that let capitalism begin to dominate. This was the argument of Adam Smith in his book the Wealth of Nations (1776), where he established the bases of the economic theoretical system for which he is known as the father of modern economy. 

In fact, it is the first of these three concurrent elements, exchange, that according to Smith is the central (natural) element present in the human DNA and becomes the engine that drives the entire process of social transformation; the other two appear as a consequence of its deepening. Considering exchange in the market as the main axis of economic activity, it became necessary to discover the source that determined the proportions of exchange and the circumstances that could provoke the apparently erratic evolution of the prices of goods. The answer was found in a fundamental concept, value, whose origin and measure, according to Smith, was in labour: 

“Labour, therefore, is the real measure of the exchange value of all kinds of goods” (Smith, 1958, p. 31).

The differences in the consideration of labour as a source of value, even in the readings of Smith or Ricardo and of course in that of Marx, all labelled under ‘the classics’, is the axis around which this paper organises its analysis of the schools of economic thought. If capitalism’s central virtue is to transform all productive resources into goods, those resources, such as capital, land and labour appeared, as well, organised in markets for the factors of production. This implied that labour, under the new wage-earning regime, was also transformed into a commodity. Thus, it was natural that questions about labour’s value and price, its use and the conditions under which better it could contribute to the creation of wealth as well as how to distribute it, began to appear. All these issues were not easy to conciliate, especially for the blossoming economic science that developed in a context of a new type of social conflict characterised both by its potential and by involving social classes objectively defined by their position in the production process. 

The analysis of labour as an entry point in the different schools of economic thought is presented as subsumed in that of the general historical contexts and conditions in which the different schools based and formulate their theories. After exploring the Classic School (Smith, Ricardo and Marx), we introduce the Neoclassical school of thought in which we deepen in the distinction between marginalist and Marshall. Then we follow the critics and new proposals of Keynes, and later on the New schools segment under which we explore the different lines that have derived from the main schools. In the end, we propose some conclusions on the current situation in terms of dominant schools and ideologies and how that affects today’s labour structures.