Contrary to popular belief, the origin of the Labor Theory of Value (LTV), which states that the value of a commodity is proportional to the amount of labor consumed to produce it, is not attributable to Karl Marx. While this may be true, the LTV is most familiar to economists as the cornerstone of Marx’s argument against capitalism in Capital. In studying Marxism, it is important to understand the degree to which Marx expounded upon the preexisting LTV.
It is generally agreed that the primary theory of value was first put forth by Aristotle in Politics. He asserted that the value of a commodity is derived from its usefulness or utility. Being that Aristotle lived in a slave society, he observed labor itself as a commodity which could be owned and exchanged. This is why, Marx states, Aristotle had “no concept of value.” But Marx, who revered Aristotle, is careful to illustrate the reasoning behind Aristotle’s shortsightedness in the following passage:
There was, however, an important fact which prevented Aristotle from seeing that, to attribute value to commodities, is merely a mode of expressing all labour as equal human labour and consequently as labour of equal quality. Greek society was founded upon slavery, and had, therefore, for its natural basis, the inequality of men and their labour powers. The secret of the expression of value, namely, that all kinds of labour are equal and equivalent… cannot be deciphered, until the notion of human equality has already acquired the fixity of a popular prejudice… The peculiar conditions of the society in which he lived, alone prevented him from discovering what, “in truth,” was at the bottom of this equality. (Marx 69)
Regardless of Aristotle’s subjective theory of value standing in stark contrast to Marx’s labor theory, it is noteworthy that Aristotle makes a distinction between use value and exchange value.
Larger strides in LTV were made in the 18th century, when Marx would argue that “equality of labor” started to become actualized. This is when Adam Smith, the father of modern capitalism, and David Ricardo, a staple in Classical Economics, further developed the LTV.
Adam Smith mentioned the LTV when he analyzed the economic systems of primitive societies. This is the only case, he states, in which the exchange value of a commodity is determined by the amount of labor used to produce it. In more advanced capitalistic societies, in producing a commodity the laborer must compensate the owner of the means of production. Therefore, the entire value of the labor does not belong to the laborer, but some is owed to the employer. This means that the exchange value of a commodity, while not wholly determined by the labor embodied in it, is a function of labor, as in the exchange value is the value of the labor (wages) plus the payment to the owner of the capital (what Marx refers to as surplus value). As a result, Smith somewhat dismissed the LTV.
David Ricardo was the first economist to put...