Competition

We begin examination of Smith’s treatment of value and distribution by considering his use of the concept of competition. Skinner has demonstrated that ‘Smith had … attained a sophisticated grasp of the interdependence of economic phenomena prior to his departure for France in 1764’ (Skinner, 1976, p. 114). Yet it was only in the Wealth of Nations that he presented a complete statement of the implications of the interdependence of a system of markets. Chapter vii of Book I, ‘Of the Natural and Market Price of Commodities’, outlines the implications that competition has for prices and the rate of profit. In this chapter I identify the major features of this aspect of Smith’s contribution to the development of economic science.