labour

In economics, labour is one of the four factors of production, alongside capital, land (or natural resources) and enterprise, which is to say, it is one of the four general types of input or resource required for economic production. In orthodox economics, labour includes the number of people actually employed in, or who are available for, production, or a little more abstractly, the capacity to produce (understood in terms of intellectual and manual skills, and the exertion). In Marxist economics, labour is the source of all economic value, (hence the labour theory of value). In addition, the proletariat (the subordinate class within capitalism) are characterised by having to exchange their capacity to labour (or labour-power) for the commodities that they require in order to live. [AE]

The labour theory of value is an attempt to explain the value of goods and services in terms of the costs of their production, as opposed to their usefulness (or use-value). Elements of the labour theory can be traced back, at least to the seventeenth-century political philosopher John Locke, who analysed the appropriation of private property in terms of a person’s ability to ‘mix’ their labour with natural resources (1980). The British economist David Ricardo (1772-1823) gave the first coherent account of the theory (Ricardo 1951), in part in response to the ‘paradox of value’. It was argued that the usefulness of a good could not determine its value, as very useful entities, such as air and water, are generally free or very inexpensive. In contrast, apparently useless luxury goods (gold and diamonds, say) can be very expensive. The labour theory explains this in terms of the amount of labour (or labour-time) that went into their production, either directly, or indirectly through having being stored up by having been expended in the production of machinery and other capital goods. Water is easily found and conveyed to consumers, in contrast to the great amount of time needed to find and extract diamonds. In practice, the actual amount of labour expended in production is of less relevance than a social average labour-time (for otherwise the theory would imply that the products of the lazy would be worth more than those of the efficient). While the theory is fundamental to Marxist economics, in orthodox economics, since the late nineteenth century, it has been replaced by more sophisticated explanations of value grounded in usefulness (beginning with Marshall’s account of marginal utility). (See also surplus-value.) [AE] Further reading: Meek 1973.