The Labor Theory of Value

The Labor Theory of Value suggests that the value of a good or service is determined by the amount of labor required to produce it. In simple terms, the more effort and time workers put into creating something, the more valuable it is considered. This theory, associated with economists like Adam Smith and Karl Marx, argues that labor is the key factor in establishing economic value, rather than just supply and demand or raw materials. It emphasizes the importance of workers' contributions in determining what things should cost in an economy.