1.1 Labor theory cost
The founder of the labor theory of value is Adam Smith (1723-1790). The Scottish economist occupies a special place in the history of economic thought. The main idea of Adam Smith and other representatives of the “English school of classical political economy” was that the wealth of the people is created only by productive labor, and therefore the source of the wealth of the people is the creation of conditions for increasing labor productivity. The merit of Adam Smith is that he pointed out that the source of value is socially divided labor in all spheres of social production. Smith concluded that income and rent are a deduction from the product of the worker and are the income of the capitalist and landowner.
An outstanding representative of bourgeois classical economic theory is David Ricardo. He argued that the value of a product is determined by the necessary labor expended in its production. Ricardo's merit lies in the fact that he considered the law of value as the starting point for the analysis of the entire system of capitalist economy and reduced all other categories of economic theory to this basis. David Ricardo separated wages and profits as two parts of the value created by labor.
Adam Smith was the founder of a direction in economic science called the “political economy of labor,” within which the doctrine of the labor theory of value, the division of society into classes with conflicting interests, and the exploitative origin of profit under capitalism developed. The same direction was developed in the works of Karl Marx (1818-1883). The main difference between Marx's economic theory was that he viewed the capitalist system from the class positions of the proletariat. Marx’s doctrine of the internal laws of development of capitalism turned into a doctrine of its death under the weight of internal contradictions and a justification for the inevitability of a revolutionary transition to a new social order- socialism.
The foundation of Marxist political economy is the so-called labor theory of value. Its essence lies in the fact that the exchange of goods in society occurs in accordance with the amount of human labor that is spent on their production. Heterogeneous products of market exchange have the same internal content - value. Therefore, on the market they are equated to each other in a certain exchange proportion. The ability of a commodity to be exchanged for other commodities in certain proportions is called exchange value. Exchange value is a property necessarily inherent in a product. The basis of the exchange value of goods is social labor. It is embodied in the cost of the product.
And if Adam Smith laid the foundations of this theory, then Marx introduced a fundamentally new element - the idea of the dual nature of labor. Labor in his theory is both concrete and abstract at the same time.
Any work is recognized as specific work work activity. The specific form of labor is due to the fact that it is always aimed at creating very specific use values. Use value is the property of a product to satisfy the production, social, personal or other needs of people. Therefore, use value is a natural property of a good.
Labor that is impersonal or taken outside of its concrete form and embodied in a product is called abstract labor. In other words, abstract labor is the expenditure of human labor power in general, contained in all goods and making them homogeneous and commensurate. Therefore, the criterion for equalizing various use values in the exchange process is abstract labor. Abstract labor creates value.
Thus, labor has a dual character and determines two properties of the product. On the one hand, it appears in the form of concrete labor aimed at creating use value, and on the other hand, it appears in the form of abstract labor that creates the value of a commodity.
In conclusion, we can conclude that despite the fact that concrete and abstract labor have different results (use value and value, respectively), nevertheless, as two opposites at the level of synthesis, they transform into each other. Concrete labor and use value act as a value-forming basis, which finds its manifestation in the qualitative characteristics of abstract labor (super complex, complex, less complex, simple labor) and, accordingly, in larger or smaller amounts of created value. The division of labor into concrete and abstract is a specific phenomenon of commodity production.
Abstract labor has two sides: social and natural. The natural side involves the expenditure of human energy, muscles, nerves, etc. The natural side does not determine the abstract nature of labor. The essence of abstract labor is determined by the social side.
The value of goods is created by the social labor of producers. This labor occurs because the manufacturer of the market product creates it for others. Therefore, value is social labor embodied in a commodity. If the cost of different goods is the same, this means that the same amount of labor was spent on their production. The labor that creates value varies in its complexity and quality.
Highlight:
q simple work (not requiring any training);
q complex labor (skilled).
Simple labor is unskilled labor that any healthy person can perform without first obtaining any specialty.
Complex work is skilled work, the performance of which requires obtaining some kind of specialty. Goods produced by complex labor have a higher value than goods containing the same amount of simple labor.
In the market exchange of goods, 1 hour of complex labor can correspond to several hours of simple, unskilled labor. Complex labor is simple labor multiplied or raised to a power. This reduction of complex labor to simple is called labor reduction, and is carried out through the mechanism of market exchange. Labor itself is usually measured using working time. If the work is of the same quality (for example, complex), then it is quantitatively measured in hours.
It should also be noted that different workers spend different amounts of time producing the same type of product. This time is called individual working time. Workers have different conditions labor, have different levels preparation. Therefore, goods of the same quality may have different individual values. The individual cost of a product is formed from the labor costs of each individual manufacturer to produce a particular product. The best, better-equipped enterprises will have lower individual costs, while the worst ones will have higher individual costs.
However, goods cannot be sold on the market at the individual value of their owners. Therefore, a social value is established on the market for identical goods. The market price will be based on the cost or labor costs that will be recognized by buyers as necessary for society, i.e. recognized by society through a deed of sale. Such labor costs are called socially necessary labor costs. In order to determine which labor costs will be recognized as socially necessary labor costs, consider next example.
Let us assume that the same product is supplied to the market by three groups of producers. The first group produces goods in worse conditions and, therefore, at high costs, the second group - in average conditions, the third - in best conditions and at minimal cost. Socially necessary costs labor will approach the individual costs of those producers who supply the market with the largest portion of a given product. As a rule, social value corresponds to the average conditions of production at a given level of development of technology or technology, productivity and labor intensity.
Individual and social value do not coincide in magnitude. This is determined by the following reasons:
Proponents of the labor theory of value (these include A. Smith, D. Ricardo, J. S. Mill, K. Marx, although these economists have certain differences in their approach to determining the value of a product) believed that the basis of exchange is what is embodied in the product labor is the substance of value, its fundamental principle.
A. Smith explores various types labor as a general basis - the value of goods, using the generalized concept of labor. According to V. Petty, the relationship between the amounts of labor required to acquire various items is the only basis for developing rules governing the exchange of one product for another. D. Ricardo believes that if 1 thousand pounds sterling worth of labor is spent on one product, and 2 thousand pounds sterling on another, then the values of these goods will be in a ratio of 1:2 and in this proportion they will be exchanged. The relative values of goods are thus determined by the relative quantities of labor expended in their production.
So, the value of a product is determined by labor costs, but not specific labor, but labor in general: as energy costs common to all types of activity. According to the theory of K. Marx, the measure of labor that creates value is working hours. In this case, value is created not by the individual expenditure of working time of individual commodity producers, but by the expenditure of socially necessary labor time.
Socially necessary, from the point of view of the labor theory of value, is the time required to produce any use value under the existing normal conditions of production and at the average level of skill and intensity of labor in a given society. In this case, relatively complex labor appears in value as simple labor multiplied and raised to a power, therefore, a larger amount of simple labor is equal to a smaller amount of complex labor.
The law of value, according to which the exchange of goods is carried out in accordance with socially necessary labor costs, is recognized as the fundamental law of commodity production. Socially necessary labor costs act as a kind of standard, the effect of which is revealed in the market. The law of value regulates prices, forming the initial basis of price proportions, and through the mechanism of fluctuations in market prices around value, this law affects the movement of factors of production from industry to industry and thereby regulates the relationship between the output of various goods. Ensuring the distribution of masses of labor and capital between various areas national economy, the law of value determines the correspondence of the volume and structure of production to social needs. Thus, it is a regulator of social reproduction and proportionality.
Since the law of value presupposes the establishment of socially necessary labor costs as the basis for price, there is an incentive to reduce the individual labor costs of the commodity producer. Let us assume that the same product is created by three producers, whose individual costs are, respectively, 4, 6 and 8 hours of labor time per unit of product. The consumer recognizes (of course, indirectly, through purchase and sale on the market at a certain price) a cost level of six as socially necessary and, accordingly, subject to reimbursement. In this case, a producer whose individual costs reach 8 units, exceeding socially necessary ones, will not receive the equivalent of two hours of labor. And the manufacturer who managed to achieve lower costs will receive the equivalent of 6 hours for 4 hours of work. Enterprises in such conditions strive to improve and increase production efficiency, become receptive to scientific and technological progress, and the economy as a whole benefits. After all, reducing individual costs provides real economic benefits: high income, acceleration of sales, opportunities for production development.
Since the individual costs of commodity producers are not the same, the operation of the law of value means the inevitable differentiation of income. Those producers whose costs are less than socially necessary receive additional income and a source for the development and improvement of their production. Those of them whose individual costs are higher than socially necessary ones are doomed to losses or bankruptcy,
Thus, the functions of the law of value are:
® regulation reproducing; ® incentives for producers; ® differentiation of commodity producers.
According to the labor theory of value, only in the market during exchange is the socially necessary level of labor costs revealed. Value receives its form of expression in the form of exchange value in relation to the seller and the buyer. Therefore, value is a relation. The labor theory of value emphasizes the socio-economic nature of this category, while at the same time recognizing its objectivity. Since value is created in the sphere of production and only appears in the sphere of circulation, it is objective, that is, it exists regardless of a person’s feelings, of how he evaluates the usefulness of a thing.
In contrast to this theory, at the end of the 19th century. a different approach arose that moved the problem of value into the sphere of subjective individual assessments of the utility of the goods exchanged. Representatives of the theory of marginal utility (W. Jevons, K. Menger, E. Böhm-Bawerk, F. Wieser, L. Walras, etc.) argued that the basis of exchange is not labor value, but utility.
If a product is purchased, it is because the product has a certain value for the buyer. Value is formed in the market and simply does not exist outside the sphere of exchange. It is no coincidence that the term “value” itself was used in the late 19th and early 20th centuries. translated into Russian precisely as “value”. And value is a subjective category.
According to E. Condillac (1715-1780), value (cost) is not something inherent in a certain thing. It reflects our perception of its usefulness and suitability to our needs. Value increases or decreases according to how our needs expand or decrease. The consumer's assessment is thus the determining factor of value.
Subjective value is associated with the rarity of a good, i.e., the size of its supply. As one of the representatives of the Austrian school, E. Boehm-Bawerk, noted, value presupposes a limited number of things, the absence of value. their excess. As the need is satisfied, the degree of saturation increases and utility decreases. This. means that each subsequent unit of a good that satisfies a certain need has less utility than the previous one, and with a limited supply there is a limiting instance of a good of a given kind that satisfies an urgent need. For example, the only bag of grain for Robinson on desert island can become a means of survival, unlike the tenth in a row, delivered by him from a sinking ship. The utility of the last unit of each good is called marginal utility. This is what determines value. Thus, objective exchange proportions or prices of goods depend on the subjective assessments of the consumer, and the subjective assessment of each good is directly determined by the marginal utility of this good.
The determination of price by marginal utility has made it possible to explain many mysteries of economic life. For example, the famous paradox of A. Smith: why is water, so useful for humans, cheaper than diamond, the need for which is not so great? By relating value to the rarity of a good, i.e., the size of its supply, and the degree of intensity or saturation of the need for it, the theory of marginal utility allows us to answer this question.
Nevertheless, the outstanding English economist A. Marshall, who developed the principles of the theory of neoclassical synthesis, saw one-sidedness in explaining value (cost) and prices only by utility. From his point of view, arguing about whether value is regulated by utility or production costs is tantamount to discussing which blade of scissors - upper or lower - is used to cut a piece of paper.
It is with the works of A. Marshall that the departure from attempts to create a monistic theory of value and price is associated. The principle of monism presupposes the search for a single source (substance) of value, a single basis for price. So, in the theory of K. Marx
living labor is recognized as such a source. For theorists of the Austrian school, this is the ultimate utility.
In A. Marshall's theory, determining value and price comes down to clarifying the interaction of market forces lying both on the demand side (marginal utility) and supply side (production costs). The value of a product is determined equally by utility and production costs.
Value thus acts as a relationship: the relationship between seller and buyer. The interaction of the forces of supply and demand leads to the formation of a market price. Therefore, supply and demand factors are of interest.
Market demand is related to individual demand. The theory of consumer behavior and subjective utility allows us to understand its changes. Supply is ultimately determined by the behavior of the firm. Therefore, to study it, the theory of production and the theory of costs are certainly necessary. To answer the question about the cost and price of a product, it is important to pay attention to people’s attitude to two fundamental economic phenomena - needs and resources - in their relationship and interaction, not limited only to the sphere of production or only to the sphere of consumption.
Value as a relationship between the producer and consumer of a product is usually established with the help of money, and therefore in the form of the price of the product. Both the seller and the buyer participate in determining the price. Each of them is guided by their own ideas about an acceptable price level, so the supply price and the demand price appear first, in other words, the seller’s price and the buyer’s price. However, the interaction of the forces of supply and demand leads to the formation of the “price of agreement” - the market price at which the purchase and sale of goods is actually carried out.
Labor theory of value (LTV) - economic theory, according to which goods are exchanged among themselves in such quantities as to ensure equality of labor costs, that is, the amount of working time required for their production (or reproduction) in given socio-economic conditions. These proportions of exchange determine the value of goods, which is manifested in price through comparison with an equivalent product. The logical consequence of the labor theory of value is the recognition of labor as the only source of wealth.
Various versions of the labor theory of value were put forward by the founders of classical political economy: William Petty, Adam Smith, David Ricardo. This theory received its completed form in the works of Karl Marx and therefore it is usually associated with Marxism.
The views that labor underlies value (price) originated in Ancient Greece. Aristotle already pointed out that “just equality is established in such a way that the farmer relates to the shoemaker, as the work of the shoemaker relates to the work of the farmer.” These ideas were developed by many other thinkers, including John Locke and William Petty. However, they inextricably linked the exchange of goods with its usefulness for the consumer.
Adam Smith took a significant step forward in explaining the nature of value. He separated “use value” (value for the consumer, utility) from “exchange value” (value that regulates exchange relations). Adam Smith showed the enormous role that increasing labor productivity plays for the economy and national wealth, in particular through the division of labor and through the use of machines. Thanks to this, the skills of workers are improved and savings in working time per unit of goods are achieved. Adam Smith determined value not by the labor costs of a particular person, but average duration productive labor necessary for a given level of development of society. Adam Smith's labor theory of value contradicted practical observations. For example, prices often not only deviate from the theoretical value (which was taken to be the sum of wages, profit on invested capital and rent per unit of goods), but are also grouped around a certain value.
David Ricardo was the first to show why perfect competition the theory of labor costs cannot fully explain the relationship between prices of goods, nevertheless, he adhered to the labor theory of value because it, being a rough approximation to reality, was convenient for presenting his model, main task for him it was not an explanation of relative prices, but the establishment of laws governing the distribution of production among the main classes. Ricardo more decisively distinguished between exchange value and value to the consumer (use value). He drew attention to the miscalculation of A. Smith, who considered the newly created value as the sum of personal income, and showed that part of the created value does not take the form of income, but should go to replace fixed capital.
The theory of value was further developed by Karl Marx. Engels, in the preface to the second volume of Capital, noted that Adam Smith already knew where the capitalist’s surplus value comes from. However, Smith did not separate surplus value as a special category from the special forms that it takes in land rent and profit.
In his main work “Capital. Critique of Political Economy,” examining labor power as a specific commodity, Marx identified it as a special category and analyzed surplus value, which forms profit, but is not it, as in previous theories. He established that “value in general is nothing more than labor embodied in a commodity.”
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The labor theory of value was shared by such famous economists as A. Smith, W. Pretty, K. Marx, D. Ricardo and others. Grew up on their beliefs and mistakes modern science, which determines the importance of labor in the formation of value. It was the works of predecessors who laid the foundation for modern theory, it is worth considering in more detail.
Founders of the labor theory of value. William Pretty
The basic tenets of the labor theory of value were developed in the 17th century by the first professional economist, William Pretty. It was he who first touched upon such issues as cost, wages, division of labor, profitability, etc. The theories of the English economist were presented in a large work entitled “Treatise on Taxes and Fees.”
As a working example, the founder of the labor theory of value cited an analogy of economic relationships in agriculture. A peasant who cultivates fields with the help of a horse must save part of the income received to buy a new horse. In addition, the income received is divided into at least three parts: one - for the purchase of new seeds for the harvest, the second part - for maintaining vitality the plowman himself. The remaining piece of income is defined by Pretty as surplus.
In economics, William Pretty is rightfully considered a pioneer who discovered the importance of labor in determining the price of a product. Of course, many aspects remained unseen and unexplained to them. But the labor theory of value was born precisely in his “Treatise”; many specific problems of economics were explained precisely thanks to the works of this English economist.
Advantages and disadvantages of Smith's theory
The Scottish economist A. Smith, in his work “The Wealth of Nations,” published in 1776, distinguished and correctly defined the meaning of the consumer and exchange value of a product.
His works recognize the importance of productive labor as the final equivalent of price. Smith noted that such value should be reflected in exchange relations, and later, with more developed production, in money. But Smith did not consider labor as a substance of value.
This value, according to A. Smith, is determined not by the actual labor costs in each specific production, but by certain average costs characteristic of a given state of production. Skilled worker can create more goods per unit of time than an unskilled person. Thus, A. Smith introduced the concept of labor reduction into the foundations of the labor theory of value.
Product price differentiation
Smith also distinguished between the market price and the natural price of a product. He interpreted the natural price as the monetary equivalent of labor expended in production. The natural price represented the "center of gravity" of various market prices, which could be less or more than the natural value. Thus, the enterprising Scot indicated the meaning market factors influencing the formation of the market price of the product, which was important for studying the demand of the end consumer.
On the issue of defining the concept of “value,” Smith could not settle on a single definition of this term. This concept, as Marx rightly wrote, is explained by Smith in four definitions that sharply contradict each other.
Definitions of value according to Smith
Smith gave the first definition by considering the cost natural production as the equivalent of labor invested in the production of goods. His second definition stated that value is the amount of labor for which a given product can be purchased. In a subsistence economy, both concepts are equivalent. If a weaver exchanges a piece of cloth for a pair of boots, it can be argued that the cloth is worth the boot, or that the weaver's labor is equivalent to the labor of the shoemaker. But this definition can only be applied relatively; the cost of one product is only an equivalent to the cost of another.
Controversies in Smith's theory
When Smith tried to apply his definitions to the capitalist system, his system began to slip. His labor theory of value failed to explain the fact that the labor power paid by the capitalist costs less than the final product itself. Thus, it became necessary to introduce a third concept of value for capitalist conditions of production.
Smith's conclusions state that the nominal definition of value is true only for the primitive state of society, and under the capitalist system, the value of a product is the sum of all the costs of its production, including the capitalist's profit and wage labor. Proponents of the theory labor cost appreciated this definition, "cost theory" was widespread among economists for a long time.
Works of Ricardo
The bulk of David Ricardo's economic works is devoted to reasoned criticism of the theories of his predecessors. Among the assumptions criticized was Smith's notorious second definition.
Ricardo's labor theory of value states that the labor with which a product is “bought” is not at all equivalent to its price. As an example, the economist cited a skilled worker who, if he fulfills the norm twice, does not receive double pay at all.
Ricardo explained that a worker’s wages practically do not depend on the quantity of products produced. This definition value seems to contradict reality. But in defending his view of the problem, Ricardo relied on two components.
First, actual wages are based on the labor input required to produce the “labor equivalent”—the good. From this point of view, performance does not matter.
Secondly, D. Ricardo’s labor theory of value does not consider secondary laws wages, taking into account the amount of wages, depending on the quantity and quality of manufactured products. The definition of the value of a product as the cost of labor time for its production in the works of Ricardo became a law.
Another important achievement of Ricardo was raising the question of the significance of socially necessary labor. Thus, he approached the division of social and individual value of goods. Considering this issue, the economist came to the conclusion that value is created not by the labor that went directly into the production of a given product, but by the labor that is spent on the production of this product under averaged, socially normal conditions of production.
Results of Ricardo's work
In the person of Ricardo, economics received a new development in the direction that later became known as the “labor theory of value.” Briefly, the achievements of this scientist were as follows:
- detailed study of economic relations and patterns;
- development of a method for studying complex essential relationships in the economy of a capitalist society.
The work of D. Ricardo was subsequently successfully used by K. Marx.
K. Marx's theory of value
The undoubted merit of K. Marx is that, having carefully studied the works of his predecessors, he turned the theory of labor value into a complete logical construction. He resolved the contradiction in explaining the exchange between worker and capitalist. The labor of a worker forms the value of a commodity, but for his labor the worker receives less remuneration than the value of the commodity he produces. If the equality “labor = value” were observed, the capitalist would not make a profit.
K. Marx's labor theory of value says that the capitalist does not buy the labor itself, but the direct process, the expenditure of human energy. When paying these costs, the capitalist is not tied to the price of the product, but proceeds from what the worker needs to live. Thus, the exchange between worker and capitalist occurs in accordance with the laws of value and does not exclude the exploitation of the worker.
The dual nature of the product
In order for a product to acquire value, it must be transferred to someone to whom this product can serve as an exchange. A useless product has no value, no matter how much work is put into it. Based on this premise, K. Marx’s labor theory of value considers a commodity as something that has both consumer and exchange value.
The consumer value is determined by the “usefulness” of a given thing and does not depend on how much labor is put into this product. Exchange value is determined by the proportion according to which the consumer value of a commodity of one type can be exchanged for the similar value of a commodity of another type. If use value is not taken into account, then goods have only one common denominator: that they are products of labor.
The labor theory of the value of goods states that each individual commodity is a carrier of averaged, abstract labor, therefore miscellaneous goods, produced for the same unit of working time, have the same value. Here Marx introduces the concept of productive force as the quintessence of the skills of workers and the general state of technical progress. The greater the productive force, the less labor time is spent on the production of goods. Thus, Marx generalized the law of value and derived the rule that the value of value is directly dependent on the amount of working time, and inversely dependent on the level of productive force.
This law later became known as the law of value.
Conclusion
Currently, the labor theory of value still occupies an important place in all economic teachings. Together with the latest theory of marginal utility, it covers almost all modern aspects of the production, consumption and marketing of goods and services. The synthesis of the two theories is a promising beginning of a general theory of value, which is still awaiting its discoverers.
The result of the functioning of commodity production is product. Product- is a product of labor that satisfies any human need by means of exchange. → a product has two properties: use value and value.
Use value- the ability of a thing to satisfy any human needs. Its features:
1) represents the natural material form of the product and phenomenon. mater. an expression of the country's wealth;
2) its form is determined by the raw material, material, and qualifications of the worker;
3) acts as a general consumer value; because it is designed for others, and beneficial properties the product has an individual character.
However, use value cannot fully explain the basis of exchange. Exchange is based on value. It should be noted that there are labor and non-labor theories of value.
Labor theory of value. Its founders were A. Smith, D. Ricardo and K. Marx. Basic provisions of the labor theory of value:
1. Cost is the cost of total labor for the production of goods. Cost is the internal content of the product. It is the labor costs for goods that create the common basis for exchange, because as values goods are qualitatively homogeneous and quantitatively commensurate. Value expresses the same or unequal amount of labor embodied in the goods exchanged. Use value and value are organically united.
When creating something, a person always expends muscular and mental energy, and by expending energy, he always creates some use value.
However, these properties of a product also express its internal inconsistency: as use values, goods are qualitatively heterogeneous and quantitatively incommensurable, but as values, they are qualitatively homogeneous and quantitatively commensurable.
In the process of exchange, these properties are isolated: the fact is that for a given producer, his product is used not as a use value, but as a value for the acquisition of another use value.
2. Special role in the labor theory of value it is given to the characteristics of the labor spent on a product. On the one hand, labor appears in a specific form, i.e. as labor that creates a certain thing, use value. Specific work- this is work in a specific form; it forms the natural material form of the product, since it uses certain types means of production, raw materials and worker qualifications. On the other hand, a person, expending specific labor, at the same time expends physical and mental energy, i.e. labor not in a concrete, but in a physiological form - abstract labor. Labor determines the value of a product. His distinctive features yavl. homogeneity and universality.
But since there is a contradiction between value and use value, there is also a contradiction between concrete and abstract labor, appearing in the exchange process as a contradiction between private and general labor. Concrete labor appears in production and exchange as private labor, i.e. This is the work of the owner of the means of production and his product, this is labor that is expended at his own discretion, often without knowledge of the absolute value of the total need for a given product (commodity).
However, due to the general division of labor and the specialization of producers, each commodity producer produces its own product for sale, for others, i.e. for the community By purchasing, the community recognizes the general usefulness of this type of labor, i.e. at the same time, labor has a general character.
However, the general nature of labor manifests itself only on the market, only during purchase and sale. In this regard, every company today plans to sell as many goods as possible. But, as noted, there is industry and inter-industry competition in the market. And the desire of everyone to increase their share in satisfying a given need with a given product, as a rule, is not realized, i.e. not everyone is able to achieve a reduction in individual costs compared to the generally necessary ones. As a result, part of private labor is not realized and is not recognized by the public as common. This is the essence of the contradiction between private and general labor - the main contradiction of simple commodity production.
3. According to the theory of labor value, the value of a product is determined by the costs of abstract labor. Since this type Since a product is produced by many producers, the time of each individual producer acts as individual working time. However, in a market where all producers of a given product meet, an average, generally necessary time is formed, according to which the price is formed. Generally necessary labor time is the time required to produce goods at average this society production conditions, with an average degree of intensity and skill of labor.
Generally normal, or average, production conditions are those conditions that determine the production of the bulk of a given type of product entering the market.
If the general need is greater than the quantity of a given product on the market, then society will recognize not only average, but also worse conditions of production as normal conditions. And vice versa, if supply is greater than demand, then the conditions under which goods are produced at the lowest cost will be considered normal.
The value of the product is affected by various factors. The main ones are: productivity and labor intensity.
Labor productivity affects inversely proportional to the value of goods.
Labor productivity- is the number of products produced per unit of time.
Labor intensity- this is the amount of labor spent per unit of time. Labor intensity affects directly proportionally the total cost, but the unit cost of production does not change.
The main condition for reducing the cost of goods is. growth in labor productivity.
The level of complexity of labor also influences the value of a product. There is a distinction between complex and simple work,
Difficult work- This is work that requires preliminary special training.
Simple labor- this is work that does not require special training (digger).
Complex labor creates a higher value per unit of time than simple labor.
However, in practice, in exchange, all goods are reduced to simple labor.