The Distinction between Relative and Positive Profit: Sir James Steuart after Adam Smith and the Classics

The distinction between relative and positive profit was put forward by Sir James Steuart in the shortest chapter of his book An Inquiry into the Principles of Political Economy (1767). This distinction has been scarcely noticed in the literature to follow except for some comments made by Marx especially in the initial chapter of his Theories of Surplus Value. The purpose of this paper is to investigate, in an attempt to keep words apart from concepts, whether and to what extent Steuart’s distinction, which is never mentioned in Smith’s Wealth of Nations (in spite of his familiarity with Steuart’s work), is an essential part of Adam Smith’s system of thought. The point of departure for tracing this distinction is, first, Smith’s elementary example of dwelling-houses and profitable buildings; and, then, his more advanced discussion (to be developed by later scholars and in particular by Marx) between the process of circulation (from one individual to another) and the process of producti...