The labor theory of value is something that often trips people up and it’s a concept that’s usually attributed to Marx though he didn’t come up with it most of the classical economists from Adam Smith to David Ricardo talked about the labor theory of value in some form or fashion, value, as it’s measured in a capitalist society, is a very specific thing, and it’s not about how valuable or useful something is to humans, and if that was the case then water and bread would be more valuable than diamonds.
So, what Marx did was he split the concept into two, and he said a commodity’s use value is what you use it for, and a commodity exchange value is what it exchanges for relative to other commodities. So, the use value of a chair is that you need to sit in it, and an exchange value of a chair is roughly how it exchanges with other commodities, and what determines that exchange value is how much labor time has gone into producing it including all its inputs so for a chair you know including the wood and the bolts and the actual process of putting it together.
If it takes about a thousand times longer to produce a car than it does a chair, then a car is roughly a thousand times more valuable than a chair Of course, actual real prices are more complicated than that and we’ll talk about that in a future article, but the important point here is that value isn’t something that is naturally imbued in a commodity, like diamonds aren’t just so shiny and pretty that they’re just naturally very valuable Value is socially determined by how much labor time is necessary to produce it and that’s why something like computers for instance in the 1970s, there were these huge clunky, not that powerful machines that cost thousands of dollars because the technology just wasn’t there to produce them more efficiently, but now we have the technology in place where we can make much more powerful computers much more quickly and you can buy them for 300 bucks. for 300 bucks.