Labor Theory Of Value

You ever wonder why wine can be sold for as cheap as a couple dollars, and as much as thousands of dollars? Or how things get their prices at all? It’s kind of baffling if you try to think about how much goods and services are worth objectively.

The labor theory of value argues that the value of goods and services is more subjective than objective, and largely depends on the amount of labor required to make the good or do the service.

No, that doesn’t mean working slower will lead to increased prices for your goods, since someone else can work faster and sell the same good for cheaper. Rather, it’s the amount of labor that’s reasonable to produce whatever good...given the average production time and technology at the time. The more time and care that goes into making something, the more expensive it will be.

Both Adam Smith and Karl Marx cited the labor theory of value. Marx even went so far as to say that capital...the means of production...is just "accumulated labor," since all of the capital we have (think: buildings, equipment technology) is a result of past work.