Essay --

This paper discusses Adam Smith's and David Ricardo's view on the labor theory of value. It includes a discussion of the validity of the arguments they present in relation to social and Economic contexts. To the pursuance of this objective, the paper has explored five published articles available both in the internet and as hand copies. The labor theory of trade supposes that the value of commodity comprises of the labor used in its production. Goods that consume equal amount of time should have the same cost. Adam smith stipulates that the amount of labor used in production of a commodity determines its exchange value in primitive society; however, this change in an advanced society since the exchange value includes the profit for the owner of capital. Ricardo argued that the value of a commodity is proportional to the amount of manual and mechanized labor used to produce it. Labor theory of value stipulates that the amount of labor needed and used in production of such commodity determines the value of a commodity. Other factors of production do not determine the value of a commodity except those factors that have labor elements. Adam Smith and David Ricardo are associated with the labor theory of trade. The Value in this regards refers to the amount of labor required in production of commodities. The Adam Smith theory of value asserts that a commodity worth is equal to the amount of labor it commands in others. This includes value in trade and value in use. Value in use refers to the utility of a commodity while the value in trade refers to the price in exchange of another commodity. Smith established that labor is the real measure of the price of all commodities. Some opponents of the labor theory of ... ...th little fixed capital, short life capital or with raw materials that have high turnover. Adam smith argues that the amount of labor used in production of a commodity determines its exchange value in a primitive society; however, this changes in an advanced society where the exchange value now includes the profit for the owner of capital. Ricardo’s theory is different from Smith's theory by excluding rent from the costs of production. Ricardo argues against Smith's theory because it only applies when wage is proportional to the amount of production equivalent to the amount of labor commanded and embodied. However, prices of commodities changes over time due to application of new production techniques; this leads to the increase of commodity prices over time. Ricardo points out that the value of a commodity is only equal to its cost of production in the long run.