Capital and labour in economic theory: historical conflicts and conceptual shifts

Abstract

This project examines the evolution of conceptualisations of labour and capital within economic theory, tracing their development from classical political economy through neoclassical economics to post-Keynesian perspectives. Classical economists such as Adam Smith, David Ricardo, and Karl Marx viewed labour and capital as interdependent elements within a historical and social context, with a particular emphasis on the dynamics of accumulation, the distribution of income, and class relations. In contrast, the neoclassical school redefined these concepts within an abstract, ahistorical framework, focusing on individual choice and marginal productivity, which led to the treatment of capital as a homogeneous and measurable factor of production, abstracted from its historical and qualitative characteristics. The Cambridge Capital Controversy challenged this aggregation, highlighting the incommensurability of heterogeneous capital goods and questioning the validity of marginalist theories in explaining income distribution. Post-Keynesian economists, drawing on both classical insights and Cambridge critiques, emphasized the importance of historical specificity, institutional context, and the role of power and conflict in shaping economic outcomes. This paper argues that the revival of classical themes offers a more historically grounded and analytically robust perspective on the labour-capital relationship, thereby enriching the discourse within heterodox economics.