Labor Theory of Value Essay Example | Topics and Well Written Essays - 1000 words

Labor Theory of Value - Essay Exampleffort to transform the proceeds from start to completion. Ricardo here was very concerned about the possible difference between the natural scathe of comprehend and the commercialize price of labor. He believed that in a food market economy, level(p) if natural price, for example, exceeds the market price, then the equilibrium will move due to the change in demand and supply market forces and therefore the natural and market price will be equal eventually. Ricardo believed that this system is a discipline of the mistakes done by Adam Smith while determining the mensurate of fruits. Adam Smith believed that the set of a commodity is determined by the total of the essential and necessary payments to labor, jacket crown and land. Smith had the whim that it was necessary to take all of the factors into account and and then will the total costs per social unit can be calculated which will determine the foster of the product. Contrary to Adam Smiths theory, Ricardo believed that the confirming costs of labor should also be accounted in the determination process of value. By indirect costs, Ricardo meant that even the labor costs of production or extraction of raw materials and machinery should be accounted for in this process. Similarly, even the labor costs of development of land to make it suitable for use should be considered if the true value of a product is to be determined. David Ricardo believed that labor is the sole source of value adjoinition to a product or service, and therefore all new(prenominal) factors and costs are either not necessary to add or are themselves dependent upon the value of the product to be calculated. His emphasis on the labor to be the sole and prominent input can also be realized on the fact that his theory of competitive advantage is based on the assumption that only labor exists as the factor of production. Since the plan of this theory from David Ricardo, several economists ache passed on their opinions over the credibility of the labor theory of value. Some economists have proposed slight adjustments to this theory by adding up some new elements in the determination of the true value which were ignored by Ricardo, but they have regarded this theory as a decent theory. On the other hand, several economists have heavily criticized the labor value of theory believing that the theory fails to address the issues of the contemporary world and hence it is in no way a practical theory. Limitations Some economists have argued that only the involvement of labor costs as the determinant of value of products and services is not good becoming and that several dynamic aspects have been ignored. The first argument presented by the economists and critics is that some production methods are capital intensive and therefore a majority of costs and value is added by the work done by the machinery. These costs cannot be left out and therefore this proves to be ignoranc e on part of Ricardo. Even if the labor costs of manufacturing that machinery are taken into account, even then the value of the firm can