Labor theory of value

The labor theory of value (LTV) is a theory of value that argues that the economic value of a good or service is determined by the total amount of "socially necessary labor" required to produce it. The LTV is usually associated with Marxian economics, although it originally appeared in the theories of earlier classical economists such as Adam Smith and David Ricardo, and later in anarchist economics. Smith saw the price of a commodity in terms of the labor that the purchaser must expend to buy it, which embodies the concept of how much labor a commodity, a tool for example, can save the purchaser. The LTV is central to Marxist theory, which holds that the working class is exploited under capitalism, and dissociates price and value. However, Marx did not refer to his own theory of value as a "labour theory of value". Orthodox neoclassical economics rejects the LTV, using a theory of value based on subjective preferences. The revival in interpretation of Marx known as the Neue Marx-Lektüre also rejects Marxian economics and the LTV, calling them "substantialist". This reading claims that the LTV is a misinterpretation of the concept of fetishism in relation to value, and that this understanding never appears in Marx's work. The school heavily emphasizes works such as Capital as explicitly being a critique of political economy, instead of a "more correct" theory. When speaking in terms of a labor theory of value, "value", without any qualifying adjective should theoretically refer to the amount of labor necessary to produce a marketable commodity, including the labor necessary to develop any real capital used in the production. Both David Ricardo and Karl Marx tried to quantify and embody all labor components in order to develop a theory of the real price, or natural price of a commodity. The labor theory of value as presented by Adam Smith did not require the quantification of past labor, nor did it deal with the labor needed to create the tools (capital) that might be used in producing a commodity.

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