the value of labour summary
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Understanding the Labor Theory Of Value. The labor theory of value suggested that two commodities will trade for the same price if they embody the same amount of labor time, or else they will exchange at a ratio fixed by the relative differences in the two labor.
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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 also appears in the theories of earlier classical economics 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.
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