The labour theory of value can be traced back to writings in 1662, Treatise of Taxes written by Sir William Petty. However it seems to be Karl Marx who has expanded these ideas and made it a well-known theory. Marx argues that labour equals power (<http//enwikipedia.org/wiki/Labour_theory_of_value>, March 2012). A commodity gains its value from labour power. This value is the ‘socially necessary labour time needed to produce it’. The value on top of this is known as ‘surplus value’ also known as the capitalist’s profit (Marx, 1906).
A commodity is something that has value and can be exchanged for another commodity. Marx’s theory suggests that a commodity gains it’s value through labour power. For example, water in a lake, which is free and available for all to get, is not a commodity. If the lake dries up and a man goes and digs a spring for himself, this water then becomes a commodity. The labour value added to the water is the manual labour of digging. This water now has a value and can be exchanged for another commodity such as bread. The value of a commodity is the ‘socially necessary labour time needed to produce it’. This is the quantity of labour required by an average skilled worker to complete a task. If this concept wasn’t considered then it could be perceived that a product produced by a lazy unskilled worker would have a higher value (Strickland, 2007). This then leads us onto surplus value.
Marx’s describes the surplus value as ‘unpaid labour time’ (Marx, 1906). This is the capitalist profit and occurs due to exploitation. Surplus value is ‘the value of commodities (measured in labour time) minus the amount of labour time needed to reproduce the means of subsistence for the workers’ (Marx, 1906) .The wage paid to a sufficiently productive labourer does not reflect the value of the commodity they are producing (<http//en.wikipedia.org/wiki/Surplus_value>, March 2012). In Marx’s theory the rate of profit is equal to constant capital...
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