Labor theory of value,
Definition of Labor theory of value:
A theory proposed by Karl Marx that states that the value of a product is solely determined by the labor that produced it. According to Marx, capitalists enrich themselves by underpaying workers and overcharging customers.
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 times. For instance, if it takes 10 hours to hunt a deer and 20 hours to trap a beaver, then the exchange ratio would be two beavers for one deer.
The labor theory of value (LTV) was an early attempt by economists to explain why goods were exchanged for certain relative prices on the market. It suggested that the value of a commodity was determined by and could be measured objectively by the average number of labor hours necessary to produce it. In the labor theory of value, the amount of labor that goes into producing an economic good is the source of that good's value. The best-known advocates of the labor theory were Adam Smith, David Ricardo, and Karl Marx. Since the 19th century, the labor theory of value has fallen out of favor among most mainstream economists.
How to use Labor theory of value in a sentence?
- In economics, the labor theory of value became dominant over the subjective theory of value during the 18th to 19th centuries but was then replaced by it during the Subjectivist Revolution.
- The labor theory of value (LTV) states that the value of economic goods derives from the amount of labor necessary to produce them.
- In the labor theory of value, relative prices between goods are explained by and expected to tend toward a "natural price," which reflects the relative amount of labor that goes into producing them.
Meaning of Labor theory of value & Labor theory of value Definition