User:UTAGrad/Labor theory of value

Karl Marx[edit]

Contrary to popular belief Marx never used the term "Labor theory of value" in any of his works but used the term Law of value, Marx opposed "ascribing a supernatural creative power to labor", arguing as such:

Labor is not the source of all wealth. Nature is just as much a source of use values (and it is surely of such that material wealth consists!) as labor, which is itself only the manifestation of a force of nature, human labor power.

Here, Marx was distinguishing between exchange value (the subject of the LTV) and use value. Marx used the concept of "socially necessary labor time" to introduce a social perspective distinct from his predecessors and neoclassical economics. Whereas most economists start with the individual's perspective, Marx started with the perspective of society as a whole. "Social production" involves a complicated and interconnected division of labor of a wide variety of people who depend on each other for their survival and prosperity. "Abstract" labor refers to a characteristic of commodity-producing labor that is shared by all different kinds of heterogeneous (concrete) types of labor. That is, the concept abstracts from the particular characteristics of all of the labor and is akin to average labor. "Socially necessary" labor refers to the quantity required to produce a commodity "in a given state of society, under certain social average conditions or production, with a given social average intensity, and average skill of the labor employed." That is, the value of a product is determined more by societal standards than by individual conditions. This explains why technological breakthroughs lower the price of commodities and put less advanced producers out of business. Finally, it is not labor per se that creates value, but labor power sold by free wage workers to capitalists. Another distinction is between productive and unproductive labor. Only wage workers of productive sectors of the economy produce value. According to Marx an increase in productiveness of the laborer does not affect the value of a commodity, but rather, increases the surplus value realized by the capitalist. Therefore, decreasing the cost of production does not decrease the value of a commodity, but allows the capitalist to produce more and increases the opportunity to earn a greater profit or surplus value, as long as there is demand for the additional units of production.