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labor theory of value
The economic theory that value in things is produced
or is a result of the amount of human work, effort, or
labor in them. In other words, the worth of a piece of
property (land, house, car, shoes, etc.) is determined
by how much labor went into creating it. This labor
includes both physical, mental, and mechanical work,
so the labor in a car includes not just the auto workers
on the assembly line, but also the miners who
extracted the iron for the steel, the chemists, manufac-
ture of the engine, the artists who drew the design of
the car, and the advertisers who marketed the built
automobiles. Thus, in this labor theory of value,
almost everyone is a worker, except the CAPITALIST
owners who do no work but collect dividends or prof-
its—an idle, landed ARISTOCRACY.
The labor theory of value appears in several
thinkers, including JOHN OF PARIS, John LOCKE, David
RICARDO, and Karl MARX. Each used it to justify a cer-
tain kind of political/economic system (capitalism or
SOCIALISM) and to attack certain economic classes.
Locke emphasized title ownership to private property
as coming from the labor mixed with common nature,
giving the example of a field that earns value and
owner entitlement through its human cultivation. He
then admitted wage labor, or someone selling their
labor to another for payment in a free contract; then
the product of the labor becomes the property not of
the worker, but of his employer. Karl Marx’s COMMU-
NISTtheory used this idea to claim that wage labor
robbed the working class through economic EXPLOITA-
TION. In MARXISM, the cost or price of labor itself
becomes a commodity (as in the labor market) and is
reduced to the subsistence level of producing workers:
their food, clothing, housing, education, and so on.
Because those worker’s wages are less than the value of
product they produce with their labor, the employer or
capitalist steals value from the laborers in the form of
profit. This is not simply unjust, in Marx’s view; it
causes the crises of economic overproduction and the
economic collapse of capitalism, ushering in socialism.
This radical conclusion of the labor theory of value
prompted worker’s revolutions in Russia, China, and
other communist countries.
Contrasting theories of value include the utility
theory that says that the value of a thing is its per-
ceived usefulness by the consumer. Other challenges
to the labor theory of value include its ignoring the
value of capital (from deferred consumption); its
overemphasis on physical, manual labor (as opposed
to intellectual or managerial); its determinism; and its
HISTORICISM. Because the capitalist economy continued177