Labour theory of value
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- “The things which have the greatest value in use have frequently little or no value in exchange; and, on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.”
- Adam Smith —The Wealth of Nations, Book 1, chapter IV.
The labour theory of value (“LTV”) argues that the economic value of a good or service is determined by the total amount of “socially necessary labour” required to produce it. A staple of Marxist theory, it stands in contrast to the neoclassical model of value — typically ascribed to by capitalists — that the economic value of a good or service is whatever someone else is prepared to pay for it.
Cue a long-winded diatribes, from either side, about men who know the price of everything, the value of nothing, and so forth. But it seems to me that price — an identifiable fact: the number at which you both arrived — and value: your respective personal opinions about the thing you have just priced — cannot be the same thing, and that indeed the commercial world revolves around their very difference. The overall rationale for a transaction between rational merchants must be that one values the property below its price, and the other above it. Hence, the first will sell to the second, and both will consider it a bargain.
In any case, reg tech providers are wont to unexpectedly invoke the labour theory of value on prospective clients by way of justifying the outrageous rent they propose to extract: “this desultry code, which I commissioned from some java programmer in the Balkans I found on UpWork and which he knocked together over a weekend, will save you a million dollars a year in legal fees. Therefore you will be thrilled to hear that your licence is only $500,000 per annum, for up to 100 documents per quarter.”