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From Adam Smith to Marx: How did the greats of economics view value?
Throughout the history of economics, the definition of value has been a subject of constant debate. Thinkers such as Adam Smith and Karl Marx had different understandings of value, resulting in two important economic theories: the labor theory of value (LTV) and the subjective theory of value. These theories provide different perspectives for understanding the price formation of commodities and trigger profound discussions on how to calculate the value of a commodity.
Labor value theory and subjective value theory
The labor value theory holds that the exchange value of a commodity is determined by the total amount of "socially necessary labor" required to produce the commodity. In contrast, the subjective value theory asserts that value is determined by consumer preferences and needs.
Value reflects, to some extent, society's perception of the labor required for that commodity.
Adam Smith’s values
In his Wealth of Nations, Smith pointed out the difference between "use value" and "exchange value." He believed that use value refers to the utility of a commodity, while exchange value refers to the relative proportion of other commodities that a commodity can be exchanged for in the market. Smith emphasized that labor is the true measure of the exchange value of all commodities.
Labor is the actual measure of the exchangeable value of all commodities.
In-depth discussion of Marx and labor value theory
Marx further developed the labor theory of value as a critique of capitalist exploitation. He believed that capitalists' expropriation of the surplus value produced by the working class was exploitative, and this was one of the core concepts in Marx's economic theory.
The relationship between value and price
Although the labor theory of value holds that value is determined by labor, actual prices are affected by market conditions and the laws of supply and demand. Marx regarded value as the "center of gravity" of price. Under long-term market equilibrium, price will eventually approach value.
The market price will conform to the natural price determined by labor when supply and demand are balanced.
Labor process and value creation
When talking about the labor process, Marx believed that labor is not only about creating value, but also about maintaining value. Workers with different technical levels and productivity will have different impacts on value creation on the same type of products.
Historical background and theoretical development
The roots of the labor theory of value can be traced back to the ancient Greek philosopher Aristotle. Over time, many economists such as Thomas Aquinas and John Locke explored and added to this theory. In particular, the theories of Adam Smith and David Ricardo further clarified the fundamental role of labor in the formation of value.
The value of each commodity is related to the labor time required to produce it.
Conclusion
From Adam Smith to Marx, the understanding of value not only reflects the changes in the development of economics, but also reveals the interest relationship between workers and capitalists in the current economic system. With the development of economic globalization, these ancient theories are still of great significance today, which makes us wonder, is the current economic model still enough to explain the formation and changes of value?
