labor theory of value

Updated on: 26 Jul 2017

Definition of labor theory of value

  1. :  a theory of value holding that the quantity of labor in a product regulates its value and utilized by Marx to claim for labor the sole rightful claim to production

There's more!

Love words? You must — there are over 200,000 words in our free online dictionary, but you are looking for one that’s only in the Merriam-Webster Unabridged Dictionary.

Start your free trial today and get unlimited access to America's largest dictionary, with:

  • More than 250,000 words that aren't in our free dictionary
  • Expanded definitions, etymologies, and usage notes
  • Advanced search features
  • Ad free!
Already a subscriber? Log in.

First Known Use of labor theory of value

1888


Financial Definition of LABOR THEORY OF VALUE

labor theory of value

What It Is

The labor theory of value says that the value of a finished good correlates solely with the number of labor hours required to produce it.

How It Works

Economist Adam Smith, the founder of the idea of modern capitalism, first conceived of the labor theory of value in the second half of the 18th century -- the time of the industrial revolution. By the mid-1800s, political economist Karl Marx, the founder of communism, suggested that the marked-up price of goods above and beyond their labor cost resulted in the exploitation of workers.

Marx touted the labor theory of value as the exclusive basis for determining the market price of goods. In other words, any two goods requiring an identical number of labor hours to produce them should have the same market price. For example, if an 18-karat gold filigree bracelet and an electronic toy car each require 10 hours to complete, both should have the same price.

Why It Matters

The labor theory of value is ineffective on a practical level because it fails to account for materials costs, workers' skill levels, or capital usage and depreciation costs. In addition, it ignores the effect of varying consumer demand for different types of goods.


Seen and Heard

What made you want to look up labor theory of value? Please tell us where you read or heard it (including the quote, if possible).

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!

WORD OF THE DAY

to state as an opinion

Get Word of the Day daily email!

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!