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Adam Smith and David Ricardos labor Theory of Value The labor theories of value were generated in response to the quest to determine what constitutes the price or value of a commodity in other words what renders value to a commodity Classical theorists like Smith and Ricardo opine that a commodity derives its value from labor that goes into its production In the labor theory of value the amount of labor necessary to produce a given commodity was considered the 1common denominator And as an extension of the value theory labor itself is essentially a commodity Like all other things labor is bought and sold for wages and has a natural and market price The natural price of labor is that price which is necessary to enable the laborer one with another to subsist and to perpetuate their race without either increase or diminution iron law of wages I will first present Smiths labor theory of value followed by Ricardos labor theory of value in essence because it served as the basis of Ricardos labor theory of value In fact Ricardos labor theory of value went hand in hand with his critique of Smiths labor theory Smith Labor Theory of Value The labor theory of value was a by-product of Adam Smiths attempt to explain and theorize the accumulation of capital He began his study of political economy by examining simple concept such as labor division of labor demand supply etc In his analysis of society Smith observed that in a civilized society each laborer works for and is dependent upon the labor of others in other words division of labor regulates socio-economic relations It is from this analysis that his discussion of value springs A commodity acquires exchange value because of the prevalent division of labor Smith observed the fact the price of many commodities although varied in accordance with the fluctuations of supply and demand seemed to revolve around a sort of
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