Labor theory of value

Theory in classical and Marxian economics

The labor theory of value (LTV) posits that the economic value of a good or service is determined by the total amount of socially necessary labor required to produce it. The theory is usually associated with Marxism, although versions of it were originally used by classical economists like Adam Smith and David Ricardo to explain the long-run "natural price" of commodities. For Karl Marx, the LTV was not primarily a theory of relative prices but a tool to explain the social dynamics of capitalism.

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