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A. Statement of the Classical Labor Theory of Value
Either the labor theory of value, or, secondarily, some other form of cost theory of value,1 was
common to the classical school of political economy in England.
It was stated by Adam Smith in ambiguous form: "The real price of everything, what everything really costs
to the man who wants to acquire it, is the toil and trouble of acquiring it.... Labour was the first price, the original purchase-money
that was paid for all things."2 In the same passage, though, he spoke of the value of a commodity in one's
possession as consisting of "the quantity of the labour which he can command...." And at other times, he seemed to
make the market price of labor the source of its effect on exchange value.
The most clear-cut and effective statement of the labor theory was by David Ricardo, in Principles of Political
Economy and Taxation: "The value of a commodity, or the quantity of any other commodity for which it will exchange,
depends on the relative quantity of labour which is necessary for its production, and not as the greater or less compensation
which is paid for that labour."3 In so defining the doctrine, Ricardo eliminated the confusion between labor
as the source of exchange-value and wages as a component of price.
From this principle, it followed that income accruing to the owners of land and capital was a deduction from
this exchange-value created by labor, and that wages varied inversely with profit: "If the corn is to be divided between
the farmer and the labourer, the larger the proportion that is given to the latter, the less will remain for the former. So
if cloth or cotton goods be divided between the workman and his employer, the larger the proportion given to the former, the
less remains for the latter."4
It was only natural that the emerging socialist movement should seize on the political implications of this
conclusion. The school of so-called "Ricardian socialists" in England took just such an inspiration. The greatest of them,
Thomas Hodgskin, wrote in Labour Defended Against the Claims of Capital, "Wages vary inversely as profits, or wages
rise when profits fall, and profits rise when wages fall; and it is therefore profits, or the capitalist's share of the national
produce, which is opposed to wages, or the share of the labourer."5
Marx, in turn, was inspired by the Ricardian socialist interpretation of classical political economy, as well
as by Proudhon. According to Engels, modern socialism was a direct outgrowth of the insights of "bourgeois political economy"
on the nature of wages, rent, and profit.
Insofar as modern socialism, no matter of what tendency, starts out from bourgeois political economy, it almost
without exception takes up the Ricardian theory of value. The two propositions which Ricardo proclaimed in 1817 right at the
beginning of his Principles, 1) that the value of any commodity is purely and solely determined by the quantity of
labour required for its production, and 2) that the product of the entire social labor is divided among the three classes:
landowners (rent), capitalists (profit), and workers (wages)--these two propositions had ever since 1821 been utilized in
England for socialist conclusions, and in part with such pointedness and resolution that this literature, which had then almost
been forgotten and was to a large extent only rediscovered by Marx, remained surpassed until the appearance of Capital.6
The actual extent to which Marx's theory of value is a straightforward outgrowth of Ricardo's, and to which
it was a preexisting Hegelian philosophy with Ricardian elements grafted on, is an issue in dispute.7 But for the
present purpose, we will treat Marx's theory of value as relevant to our study to the extent that it is amenable to a Ricardian
approach.
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