Labor theory of value

An economic theory that explains commodity value through the labor required to produce goods. Its formulations differ over how labor time, production conditions, and exchange determine value.

Socially necessary labor time: The labor time required to produce a commodity under normal conditions, with average skill and intensity. Marx uses this standard, rather than an individual producer’s hours, to measure commodity value.
William Petty: A seventeenth-century English political economist who sought to quantify wealth and value through labor and land. His early labor-based explanations helped establish a line of inquiry later developed by classical economists.
Marginal utility: The additional satisfaction or benefit gained from consuming one more unit of a good. Marginalist theories explain value through consumers’ assessments, not the labor embodied in production.
Exploitation: The appropriation of value or labor from one group by another within an economic or social relation. Marx uses labor-based value to explain how capitalists can profit from wage labor.
Abstract labor: Labor considered as undifferentiated human work, setting aside its particular skill or activity. It explains how unlike kinds of work can count as comparable labor in Marx’s account of value.
Adam Smith: A Scottish philosopher and economist whose 1776 book The Wealth of Nations helped found classical political economy. Smith gave labor a central role in explaining exchange and the measure of value.
Subjective theory of value: The view that economic value depends on individuals’ preferences and circumstances. It directly challenges the claim that labor requirements ground commodity value.
Labor power: The capacity to work that workers sell to employers for a wage under capitalism. Marx distinguishes this commodity from labor itself to explain surplus value and profit.
Concrete labor: Purposeful work of a particular kind that produces a specific use-value. Marx distinguishes useful, specific work from the abstract labor associated with commodity value.
David Ricardo: A British classical economist whose theory of distribution and relative prices drew heavily on labor requirements. Ricardo developed the classical labor theory while addressing its complications, including differing capital structures.

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