Labour Theory of Value

In a country, double the labour might be required to produce food and necessaries now than in the distant past.

• Yet the labourer’s reward might be very little reduced.

If the labourer’s wages in the distant past were a certain quantity of food and necessaries, he probably could not have subsisted if that quantity had been reduced.

Food and necessaries in this case will have risen 100%.

If estimated by the quantity of labour necessary to their production, while they will scarcely have increased in value, if measured by the quantity of labour for which they will exchange.

In America and Poland, a year’s labour will produce much more corn than in England.

If all other necessaries are equally cheap in those 3 countries, it a great mistake to conclude that the quantity of corn awarded to the labourer would be proportional to the facility of production in each country.

If the labourer’s shoes and clothing could be produced by 1/4 of the labour due to improvements in machinery, they would probably fall 75%.

But he would not be able to permanently buy 4 coats, or 4 pair of shoes, instead of one.

This is because his wages would also be reduced by competition from the population increase.

If these improvements extended to all the objects of the labourer’s consumption, at the end of a few years he would have only a small addition to his enjoyments even if the exchangeable value of those commodities were very much reduced through mechanization.

Adam Smith is therefore wrong:

Adam Smith

“that as labour may sometimes purchase more, and sometimes fewer goods. It is their value which varies, not that of the labour which purchases them; that labour alone never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared.”

But it is correct to say, as Adam Smith had said:

Adam Smith

that the proportion between the quantities of labour necessary for acquiring different objects, seems to be the only circumstance which can afford any rule for exchanging them for one another

The relative value of commodities is based on the comparative quantity produced.

• It is not based on the comparative quantities of commodities GIVEN to the labourer in exchange for his labour.

A commodity would have an unvarying value if it were produced at all times by the same quantity of labour.

• It would be a standard to measure the variations of the value of other things.*

What are the essential qualities of this standard?

This standard of all value is labour.

The relative quantity of labour determines the relative value of commodities.

These include:

• the different qualities of labour
• the difficulty of comparing an hour’s, or a day’s labour in one employment with the same duration of labour in another

The estimation in which

The different qualities of labour are adjusted in the market.

It depends on:

• the comparative skill of the labourer [quality]
• intensity of the labour performed [quantity]

The scale, when once formed, is liable to little variation.

In comparing the value of the same commodity, at different periods of time, the consideration of the comparative skill and intensity of labour required for that commodity needs scarcely to be attended to, as it operates equally at both periods.

One description of labour at one time is compared with the same description of labour at another. If 1/10, 1/5, or 1/4 has been changed, a proportional effect will be produced on the relative value of the commodity.

If a piece of cloth be now of the value of 2 pieces of linen, and if, in 10 years hence, the ordinary value of a piece of cloth should be four pieces of linen, we may safely conclude, that either more labour is required to make the cloth, or less to make the linen, or that both causes have operated.

My inquiry is on the effect of the variations in the relative value of commodities, and not in their absolute value.

Whatever inequality there was originally in them, whatever the ingenuity, skill, or time necessary for the acquirement of one species of manual dexterity more than another, it continues nearly the same from one generation to another.

Or at least, that the variation is very inconsiderable from year to year, and therefore, can have little effect for short periods on the relative value of commodities.

Adam Smith

The proportion between the different rates both of wages and profit in the different employments of labour and stock, seems not to be much affected, as has already been observed, by the riches or poverty, the advancing, stationary, or declining state of the society. Such revolutions in the public welfare, though they affect the general rates both of wages and profit, must in the end affect them equally in all different employments. The proportion between them therefore must remain the same, and cannot well be altered, at least for any considerable time, by any such revolutions.

Adam Smith fully recognized the principle that the proportion between the quantities of labour necessary for acquiring different objects, is the only rule for our exchanging them for one another.

Yet he limits its application to “that early and rude state of society, which precedes both the accumulation of stock and the appropriation of land.

As if, when profits and rent were to be paid, they would have some influence on the relative value of commodities, independent of the mere quantity of labour that was necessary to their production.

Adam Smith, however, has not analyzed how relative value is affected by:

• the accumulation of capital
• the appropriation of land

How far are the effects produced on the exchangeable value of commodities, by the comparative quantity of labour bestowed on their production, are modified or altered by the accumulation of capital and the payment of rent?

1. The accumulation of capital

Even in that early state to which Adam Smith refers, some capital, though possibly made and accumulated by the hunter himself would be necessary to enable him to kill his game.

Without some weapon, neither the beaver nor the deer could be destroyed, and therefore the value of these animals would be regulated, not solely by the time and labour necessary to their destruction, but also by the time and labour necessary for providing the hunter’s capital, the weapon, by the aid of which their destruction was effected.

Suppose that is is harder to come close to a beaver to kill it than to a deer.

• A beaver-killing weapon will need a longer killing range.
• This range would need more labour to produce.

This would give the beaver more value than 2 deer.

This is why more labour would on the whole be necessary to its destruction.

There can be differences in the availability of capital versus the avaialability of labour.

Those who invested capital for labour-intesive products might have less produce than those who invested for capital-intensive products.

Yet this division could not affect the relative value of those products which would always have the same ratios.

Assume that fishing and agriculture were mechanized.

The same principle would hold true: the exchangeable value of the fish would have the same ratio to crops.

In improved societies where arts and commerce flourish, commodities vary in value conformably with this principle.

The comparative exchangeable value of stockings depends on the labour for manufacturing them and bringing them to market.

1. There is the labour necessary to cultivate the land on which the raw cotton is grown

2. The labour of conveying the cotton to the country where the stockings are to be manufactured, which includes a portion of the labour bestowed in building the ship in which it is conveyed, and which is charged in the freight of the goods.

3. The labour of the spinner and weaver

4. A portion of the labour of the engineer, smith, and carpenter, who erected the buildings and machinery, by the help of which they are made

5. The labour of the retail dealer, and of many others, whom it is unnecessary further to particularize.

The aggregate sum of these various kinds of labour, determines the quantity of other things for which these stockings will exchange, while the same consideration of the various quantities of labour which have been bestowed on those other things, will equally govern the portion of them which will be given for the stockings.