Blackwell Reference Online

Extract

In the eighteenth and early nineteenth centuries, economic theory distinguished ‘value-in-exchange’ from ‘value-in-use’, and attempted to use the former in order to explain exchange ratios, or relative prices, in the Market. That commodities all did have value-in-exchange was ascribed to the value-creating substance common to them all, and this in turn was attributed to them all being products of labour. That commodities typically had different values-in-exchange was explained by the relative ease or difficulty of their production, which determined how much labour was required. Hence all value-in-exchange was determined both qualitatively and quantitatively by labour, whether directly employed in production or indirectly employed in producing the raw materials and the tools of production with which labour worked. This labour theory of value reached its apogee in the work of David Ricardo in the years after 1815 (see Ricardo, 1817).However, the theory had a logical difficulty (recognized but unresolved by Ricardo himself). Consider two commodities produced with equal amounts, but a different temporal structure of embodiment, of labour. If equal amounts of labour are embodied, the two commodities must sell at the same price. But with a different temporal structure of labour embodied, the two commodities must each earn a different rate of profit according to how long the labour is ... log in or subscribe to read full text