Labor Theory of Value

The theory that the value of a commodity is created by undifferentiated human labor congealed in that commodity, i.e., abstract labor. The thought that value is created by labor was first put forth by the British economist William Petty. Adam Smith and David Ricardo also made significant contributions to the labor theory of value. But the classical school of labor theory of value did not solve the problem of what labor creates value and how it creates value. Moreover, they have not consistently carried through the labor value theory to the end. Marx made a revolutionary transformation of the bourgeois classical school’s labor theory of value and founded the scientific labor theory of value. The Marxist labor theory of value is the theoretical basis not only for the theory of surplus-value, but for the entire Marxist edifice.

Marx held that commodities, as products of labor used for exchange, are the unity of use-value and exchange-value. As use-values, commodities are, above all, of different qualities, but as exchange-values they are merely different quantities, and consequently do not contain an atom of use-value. Use-values constitute the material content of wealth, whatever their social form may be. The exchange-value manifests itself at first as the quantitative relation, the proportion, in which use-values of one sort are exchanged against use-values of another. One use-value can be exchanged for another, as long as it is present in the proper quantity. In the same way, it is our task to reduce the exchange-values of the commodities to a common substance of which they represent a greater or smaller amount. This common substance cannot be a geometrical, physical, chemical, or any other natural property in the commodities. The physical properties of commodities are only meaningful in so far as they make the commodities useful, i.e., turn them into use-values. What, then, is this common thing? If the use-value of a commodity is abstracted away, the commodity is left with the property of being a product of labor. Various kinds of labor no longer differ from each other, but are altogether reduced to equal human labor. This mere congelation of the same human labor forms the value of the commodity. Marx said: “Let us consider now what remains of the products of labor. Nothing has remained of them except the same ghostlike material, a mere congelation of undifferentiated human labor, i.e., of the expenditure labor-power without regard to the form of its expenditure. These things represent nothing but that in their production human labor-power has been expended, human labor has been accumulated. As crystals of this social substance which they have all in common they are values—commodity values.”

Marx further elaborated the principle of the twofold character of labor. The twofold character of labor refers to concrete and abstract labor. Labor bound up with a certain particular use-value in a certain concrete form is concrete labor, which creates the use-value of commodities. However, different concrete labors can only create different use-values, and cannot form the value of commodities, and the formation of value is again inseparable from human labor. This shows that human labor, apart from its different aspects in concrete forms, has the same aspect. All kinds of productive labor of different quality are nothing but the concrete forms of the wear and tear of human brain, muscles, nerves, bones, etc., i.e., they are expenditure of human labor-power. This undifferentiated human labor, which abstracts away its concrete forms, is abstract labor. “On the one hand, all labor is an expenditure, in the physiological sense, of human labor-power, and in this quality of being equal human labor or abstract human labor, it forms the value of commodities. On the other hand, all labor is an expenditure of human labor-power in a particular form and with a specific aim, and in this quality of being concrete useful labor, it produces use-values.”

Marx’s labor theory of value has overcome the major defects of the labor theory of value of the classical English political economy, scientifically proved the problem of what labor creates value and how it creates value, and laid a solid foundation for the founding of the theory of surplus-value.