labour theory of value


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labour theory of value

a doctrine developed by the classical economists (particularly Adam SMITH and David RICARDO) that states that the value of a GOOD is determined by the amount of LABOUR input needed to produce that good. Thus, the ratio of the equilibrium prices of two commodities is directly proportional to the ratio of labour required to produce them.

Smith was the first to tentatively suggest a labour theory of value, although he acknowledged that the value of a good must be determined by a number of input costs: RENT, WAGES and PROFIT, even if labour did constitute the greatest part of final value. Ricardo accepted that profits and rent may have to be taken into account but that it did not detract from his main argument of relative values between two goods being fundamentally determined by labour cost. Karl MARX developed Ricardo's ideas, decomposing labour value into three constituent parts. The three parts are ‘constant capital’ (the capital used up in production),‘variable capital’ (human labour input), and ‘surplus value’ (the excess value over and above labour and capital used in the production process). Where surplus value exists, there is exploitation of the labour input insomuch as they are being paid less than their full input value.

The labour theory of value was replaced towards the end of the 19th century by the MARGINAL PRODUCTIVITY THEORY OF DISTRIBUTION, which took into account the contribution of all factor inputs into the production process, not just labour. See CLASSICAL ECONOMICS.

References in periodicals archive ?
Whereas pre-modern metallic currencies served as a basis for the labour theory of value - whereby goods and services are worth the amount of human labour put into them - blockchain technology assigns value to a combination of computing power and stored energy, none of it human.
Prior to Marx's time, the rise of neoclassical economics, classical political economy's labour theory of value had more purchase amongst intellectuals concerned with the nature and innerworkings of the capitalist system.
Smith is considered the father of the labour theory of value developed by David Ricardo and Karl Marx and simultaneously of the cost-of-production theory of value developed by John Stuart Mill and Alfred Marshall.
Some of the ideas of Marx that underpin this overall analysis and which I discuss briefly here include the concept of the ruling class as a band of hostile brothers, the relative autonomy of the State, surplus value and how it is created, the labour theory of value, the tendency towards average profit rates, prices of production and the conversion of surplus value into profits.
Channelling Karl Marx and his labour theory of value, Roberts asked "Why don't we have the owners play half the games?
Throughout the last century, economists have expressed a wide range of views about Locke's possible sympathies: some claim that he held a labour theory of value, others a form of exploitation-of-labour theory, others that he was inconsistent or otherwise partially supportive, and still others that his theory of property had nothing to do with the labour theory of value.
Cleaver has also maintained that "the labour theory of value is the indispensable core of [Marx's] theory" (p.
In another essay, Harcourt states that the labour theory of value 'is still of central relevance for an understanding of the modern world' and finds its use in analysing the surplus whose 'creation, extraction, distribution and use, is the core concept of classical analysis'.
It then discusses how the classical labour theory of value was eventually displaced by a political economy in which the very concept of labour became analytically superfluous.
One stated aim of the book is to show how 'the readymade brings into view the crucial categorical distinctions of the labour theory of value as a matter of aesthetic debate and cultural engagement'.
Instead of representing a carnivalesque alternative to work, there are close parallels between Sleary's horse-riding and Bounderby's factory, united as they are through the labour theory of value.

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