What is the Labor Theory of Value (LTV)?
The LTV is the theory that market prices are attracted by prices proportional to the labor time embodied in commodities. In other words, relative prices tend towards relative labor values. The LTV is restricted to the analysis of reproducable commodities that have a use value in a capitalist society. Although the LTV is commonly associated with Classical economics, arguably neither Marx nor any first tier Classical economist accepted the LTV as a valid theory for capitalist economies. Much of the controversy about the LTV deals with associated doctrines, particularly the doctrine that exploitation of the worker is the ultimate source of profits in a capitalist economy. David Ricardo, one of the greatest Classical economists, and Karl Marx thought that their analyses had greater applicability than the special cases in which the LTV is valid as a theory of price. Terry Peach argues that Ricardo accepted the LTV when writing the first edition of The Principles of Political Economy and Tax
