Marxian Theory Of Value

s “Labour is the real measure of the exchange value of all commodities”.

This is the famous labour theory of value, as an extension of this theory Adam Smith he went to explain price as Natural Price and Market Price. Natural price is the price that covers rent, wages and profit expended in production and marketing of the product. The increase or decrease in the natural price depending on “effectual demand” (demand of those who are willing to pay natural price) is called market price, when this happens there will be an exceeding production of this product so as to meet the demand and thus the price will be brought down to its natural level. Thus Adam smith explains the natural price is always the central price around which the prices of all

a) exchange value b) value in use. Use value as such lies outside the sphere of investigation of political economy. Another point we have to remember is, by labour Marx referred to simple average labour. Skilled work is counted as multiple of unskilled average labour. According to Marx, the value of a product is measured in units of simple average labour. Though Marxian theory of value is based on the Ricardian theory of value, there is one main difference. Ricardo believed that the relative values of different commodities were proportional to the amount of labour expended on them, Marx argued that amount of time invested in labour determines the absolute value of goods. Thus labour is what defines the value of a product and Marx suggested that the whole fruit of labour must be received by the labourers as there is no thing that has any value devoid of human labour involved in its acquisition. This was the foundation of thought which lead to Surplus Value that capitalists extract out of exploitation of the labourers. Thus the Marxian theory of exploitation was developed on the basis of Labour theory of

For example: If a worker working for 8 hours per day can produce value worth 80 rupees and his wages is for 8 hours. Now if the worker is forced to work for 16 hours per day without increasing his wages then the extra 80 rupees worth created during the second 8 hours is the surplus value.

To explain further Marx differentiates between simple commodity production and capitalist commodity production. In simple commodity production (C-M-C) a producer sells his products in order to buy other products as per his requirement. But in Capitalist Commodity Production (M-C-M*) the producer starts with money where he buys labour and materials for his production using money and then he sells his product for more money, thus generating a profit. The profit made by the capitalist is equal to M* - M. Marx called this profit as the Surplus Value

II. Write notes on any Four of the following

1. Division of Labour a