The classical theory of value is devoted to one of the most important elements of economic relations. Without it, it is difficult to imagine modern commodity and monetary relations of various producers and buyers.
Classical theory
The most famous theory of value is also called the labor theory of value. Its founder is the famous Scottish explorer Adam Smith. He created the English school of classical economics. The main thesis of the scientist was the idea that the well-being of the people can only grow by increasing the productivity of their labor. Therefore, Smith publicly advocated improving the working conditions of the entire English population. His theory of value states that the source of value is socially divided labor in all areas of production.
This thesis was developed by another prominent economist of the early 19th century, David Ricardo. The Englishman argued that the price of any commodity is determined by the labor necessary for its production. For Ricardo, Smith's theory of value was the foundation of the entire economy of capitalism.
Marxist theory
The labor theory of value was adopted by another well-known economist. Themwas Karl Marx. The German philosopher and ideologist studied the exchange of goods on the market and came to the conclusion that all products (even the most heterogeneous ones) have the same internal content. It was the cost. Therefore, all commodities are equated to each other in accordance with a certain proportion. Marx called this ability exchange value. This property is necessarily inherent in any product. At the heart of this phenomenon is social labor.
Marx developed Smith's ideas in his key. So, for example, he became the founder of the idea that labor has a dual nature - abstract and concrete. For many years, the German scientist systematized his knowledge in the field of political economy. This huge array of ideas and facts became the foundation for a new Marxist idea. This was the so-called theory of surplus value. It became one of the main arguments in the then criticism of the capitalist system.
Surplus Value
Marx's new theory of value was that the worker, by selling his own labor, becomes exploited by the bourgeoisie. There was a conflict between the proletarians and the capitalists, the cause of which was the costs of the European economic system. Owners' money multiplied only through the use of labor, and it was this order that Karl Marx criticized the most.
The cost of goods, which is set by the capitalist, always exceeds the cost of the labor of the hired proletarian. Thus the bourgeois profited by raising prices for their ownincome. For all that, the workers always received low wages, because of which they could not get out of their own exploited environment. They were dependent on the employer.
Absolute Surplus Value
The Marxist theory of the value of labor also includes the term "absolute surplus value". What does it come from? This is the surplus value that capitalists receive by lengthening the working hours of their subordinates.
There are certain time frames required for the production of goods. When the owners force the proletarians to work outside these limits, the exploitation of labor begins.
Marginal cost
The theory of marginal utility, or in other words - the theory of marginal cost, arose as a result of research by several famous economists of the 19th century: William Jevons, Carl Menger, Friedrich von Wieser, etc. She was the first to explain the relationship between price on the goods and the psychological attitudes of the buyer. According to its main theses, consumers acquire what can become a source of satisfaction or pleasure for them.
The theory of marginal utility has done some important things. First, thanks to her, a new approach to the study of the problem of production efficiency was formulated. Secondly, the limit rule was used for the first time. Later it will be adopted by many other economic theories. The theory of marginal cost made scientiststo shift their main research focus from costs to the end result of production. Finally, for the first time, consumer behavior has been at the center of the study.
Marginalism
The classical theory of value, whose adherents were Smith, Ricardo and Marx, believed that commodity value is an objective value, since it is determined by the amount of labor spent on production. The theory of marginal utility offered a completely opposite approach to the problem. It has also become known as marginalism. The new theory was that the value of a product is determined not by the amount of labor it costs to produce, but by the effect it can have on the customer.
The essence of marginalism can be formulated as follows. The consumer lives in a world full of various benefits. Due to their diversity, prices become subjective. They depend only on the mass behavior of buyers. If there is a demand for a product, then prices will rise. At the same time, it does not matter at all how much the manufacturer spent money on it before. The only thing that matters is whether the buyer wants to buy the product. This relationship can also be represented as a chain of consumer, need, utility of the good, its value and final price.
The Law of Value
The classical theory of value considers the law of value as one of the most important aspects of economic relations since the most ancient times. The exchange of goods took place in Egypt and Mesopotamia about five thousand years ago. This was pointed out by a German scientist andKarl Marx's closest associate, Friedrich Engels. Then the law of value arose. However, it found its greatest application precisely in the era of the heyday of capitalism. This is due to the fact that in a market economy, the production of goods becomes massive.
What is the essence of the law of value? What is its main message? This law states that the exchange of goods and their production are carried out according to the cost and necessary labor costs. This relationship operates in any society where there is an exchange. Also important is the working time that is spent on the creation and preparation of goods for sale. The larger it is, the higher the purchase price.
The law of value, like the main theories of value, boils down to the fact that individual working time must correspond to the socially necessary. Such costs become a certain standard, which manufacturers must meet. If they fail to do so, they will suffer losses.
Functions of the law of value
In the 19th century, economic theories of value attributed a large role to the law of value in shaping economic relations. The modern market at the international and national levels only confirms this thesis. The law provides factors due to which the economy is stimulated and production is developed. Its effectiveness directly depends on the relationship with other economic phenomena - competition, monopoly and money circulation.
An important function of the law of value is its distributionlabor between different industries. It regulates the use of resources necessary to create goods and their appearance on the market. An important aspect for this function is price dynamics. Along with the fluctuation of this market indicator, there is a distribution of labor and capital between different economic sectors.
Stimulation of production costs
The law of cost drives production costs. How does this rule work? If the producer of commodities makes his individual labor costs higher than the social ones, he will certainly suffer losses. This is an irresistible economic pattern. In order not to go broke, the manufacturer will have to reduce their own labor costs. It is the law of value that forces him to do this, which applies to any market, regardless of belonging to a particular industry.
If a commodity producer has a low individual cost of goods, he will receive certain economic advantages compared to his competitors. So the owner not only reimburses the cost of labor, but also receives a significant income. This pattern makes successful market players those manufacturers who invest their own funds in improving production based on scientific and technological progress.
Modern theory of value
As the market economy develops, so does the idea of it. Nevertheless, the modern theory of value in its entirety andis based entirely on the laws that were formulated by Adam Smith. One of her main statements is the thesis that social labor is divided into two parts - the scientific and technical sphere and the sphere of reproduction.
What are their differences? The scientific and technical sphere of social labor includes the production of new goods based on discoveries in science and technology. This is how use value is formed (also called absolute value in the New Economics).
In the sphere of reproduction are other factors of production. This is where relative or exchange value is formed. It is determined by the energy costs for the reproduction of services and goods. The modern theory of value made it possible to determine the regularities in determining the value of individual wages. First of all, it depends on the attitude of society to the effectiveness and usefulness of a particular speci alty.
