Labor theory of value is the foundation of classical political economy. This theory has consistently evolved W. Petty, L. Smith, David Ricardo, and their numerous followers and popularizers. Logically harmonious concept labor theory of value was created by Karl Marx.
According to the theory of labor value only source of value of the goods is labor. As the price of money is a form of value, then it follows that the price basis is spent on the production of the commodity labor.
To understand the cost and the price is extremely important to the theory of the dual character of labor. Marx attached great importance to the doctrine of the dual character of labor, placing its development on a par with the discovery of the law of surplus value.
Since the product has a use-value and value, and then work, it creates also has a dual character. On this point, Marx observed: "The attention of all the economists without exception escaped the simple thing is that if the product is something twofold, namely: use value and exchange value, then the labor embodied in the goods should have a dual nature."
Work at the same time acts as a concrete and abstract forms.
Concrete labor as an economic category is not difficult to understand. Its beneficial effects are evident, they appear on the surface of events. Concrete labor performed qualitatively assessing value - bread, suit, boots, bike, etc.
The development of the social division of labor leads to the emergence of a growing number of diverse kinds of high quality work. These types of work are different from each other in a variety of useful products for humans, the use of the means of production, the nature of labor operations. Concrete labor exists in any socio-economic system as a result of the social division of labor and the need to meet the economic needs of individuals in those conditions.
Specific types of work, there were many millions. But at the same time they all have one thing in common - the cost of human labor in general: energy, muscles, nerves, mind. This is an abstract work, which allows to tailor different in their use-specific utility of the results of labor.
The work of producers, considered as expenditure of human labor in general, regardless of its outcome-called abstract labor. Synonymous with the word "abstract" is the word "abstract". In the market of the exchange is a distraction from the specific form in which goods are clothed each of the many types of concrete labor. Products are compared with each other as homogeneous crystals of abstract labor.
Abstract labor creates the value of the goods. The cost is manifested in the exchange of goods in the form of exchange value. The exchange value of the goods, the proportions in which they exchange their exchange relation is the form in which the value of commodities is expressed.
Under private ownership of the means of production, labor expended on the production of goods, as particular, at the same time, the social division of labor accounts for its public character. Consequently, abstract labor, which forms the cost of goods and cost of express itself public relations.
The cost "is only an expression in things corporeal expression of human relations, public relations, - the relation of people to their mutual production activities."
Thus, the cost - the economic category that expresses the relationship between economic agents about the equivalence of time spent on production of abstract labor.
Finding the category of value of goods, devoid of differences abstract labor, which is inherently difficult social, Marx overcame typical of his predecessors mix of individual and social costs of goods and was able to solve the problem of the magnitude of value of goods.
As the cost of goods created by labor, the value of value of goods measured by the amount of labor contained in it.
A natural measure of labor is work time: hour, day, week, etc. In the manufacture of not only different but also similar goods manufacturers can spend different amounts of time. It depends on the tools, skill laborers, their professional skills and other conditions.
The time that is spent on individual workers to manufacture a product, called personal or individual working time labor costs.
But the magnitude of the value of goods is determined not by the individual, and socially necessary expenditure of labor or work time. Marx gives the following definition of the term "socially necessary labor time is a time that is required to make any use value in cash socially normal conditions of production, and with the average level in the society skillful and intensity of labor."
Socially normal (or typical) conditions of production are those which created the vast majority of products for this villa. It is generally average conditions. Only under these conditions, the manufacturer, with a medium and working skillfully with the average intensity per hour of labor creates value equal to one hour of socially necessary. If the work environment does not correspond to the normal public (better or worse than they are), or if skilled employees and the intensity of his work above or below the established mean value in society, in this case, he created an hour labor cost value will be correspondingly more or less.
In other words, more productive work in a given time always creates more value than less productive.
Socially necessary labor costs act as a kind of social norm, which manifests itself in the market and in which producers should be laid. The extra costs of individual work is not recognized by society, they are cut off, therefore, do not create value. In the market, no one will pay the actual cost of labor in excess of those to which the production costs of primary products of this type.
The essence of the law of value is the exchange of goods takes place in accordance with the amount of socially necessary labor expended in their production. In other words, the law of value means that the goods are exchanged for value, containing the same amount of socially necessary labor. Sale of goods on such acts as the equivalent of the law.
The price of goods on the market determine the socially necessary labor to produce it. In practice, under the influence of the price competition of supply and demand may be higher or lower value. The less product on the market, the greater the demand for it is greater than the supply, so the price of this product will be higher, and vice versa.
Everyone tends to produce more goods than its competitor. But no one knows the real needs of society in a particular product, the offer is almost never the same