Smith's Theory of Value

Smith's Theory of Value, primarily presented by Adam Smith in "The Wealth of Nations," differentiates between "use value" and "exchange value." Use value refers to the practical utility of a good, while exchange value indicates what it can be traded for in the market. Smith argued that the value of goods is determined by the labor required to produce them. Thus, a product is valuable not just for its use but also for the effort put into making it, leading to a deeper understanding of how markets value goods based on scarcity, demand, and production costs.