Perspectives on capitalism by school of thought

Throughout modern history, a variety of perspectives on capitalism have evolved based on different schools of thought. Adam Smith was one of the first influential writers on the topic with his book The Wealth of Nations, which is generally considered to be the start of classical economics which emerged in the 18th century. To the contrary, Karl Marx considered capitalism to be a historically specific mode of production and considered capitalism a phase of economic development that would pass and be replaced by communism. In conjunction with his criticism of capitalism was Marx's belief that exploited labor would be the driving force behind a social revolution to a socialist-style economy. For Marx, this cycle of the extraction of the surplus value by the owners of capital or the bourgeoisie becomes the basis of class struggle. This argument is intertwined with Marx's version of the labor theory of value asserting that labor is the source of all value and thus of profit. Max Weber considered market exchange rather than production as the defining feature of capitalism. In contrast to their counterparts in prior modes of economic activity, capitalist enterprises was their rationalization of production, directed toward maximizing efficiency and productivity; a tendency leading to a sociological process of enveloping rationalization. According to Weber, workers in pre-capitalist economic institutions understood work in terms of a personal relationship between master and journeyman in a guild, or between lord and peasant in a manor. Meanwhile institutional economics, once the main school of economic thought in the United States, holds that capitalism cannot be separated from the political and social system within which it is embedded. In the late 19th century, the German Historical School of economics diverged with the emerging Austrian School of economics, led at the time by Carl Menger. Later generations of followers of the Austrian School continued to be influential in Western economic thought through much of the 20th century.