labour theory of value

labour theory of value
The theory that the value of goods or services is determined by the amount of direct and indirect labour inputs needed to produce them. This view ignores the role of scarce natural resources in production, and the fact that the cost of using capital goods depends not only on the labour used to produce them but also on the interest rate. It also takes no account of the fact that labour is nowhere near uniform in quality, as is shown by the vast variations in the wage rates paid for labour with different skills. While labour is probably the most important single factor of production, it is not the only one, and basing value upon one factor alone is an oversimplification.

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