You ever wonder why wine can be sold for as cheap as a couple dollars, and as much as thousands of dollars? Or how things get their prices at all? It’s kind of baffling if you try to think about how much goods and services are worth objectively.
The labor theory of value argues that the value of goods and services is more subjective than objective, and largely depends on the amount of labor required to make the good or do the service.
No, that doesn’t mean working slower will lead to increased prices for your goods, since someone else can work faster and sell the same good for cheaper. Rather, it’s the amount of labor that’s reasonable to produce whatever good...given the average production time and technology at the time. The more time and care that goes into making something, the more expensive it will be.
Both Adam Smith and Karl Marx cited the labor theory of value. Marx even went so far as to say that capital...the means of production...is just "accumulated labor," since all of the capital we have (think: buildings, equipment technology) is a result of past work.
Related or Semi-related Video
Econ: What is Specialization of Labor?21 Views
and finance Allah shmoop What is specialization of labour All
right people While some of us are simply better at
math than others some of us are more creatively inclined
than others And some of us enjoy the social aspect
of a job While others prefer to be left alone
Teo titrate their chemicals and be left in peace and
quiet Well specialization of labour takes advantage of these differences
creating more value and higher overall output Well then without
specialization classical economist Adam Smith the guy who made the
invisible hand a thing saw the specialization of labour as
the driving force for economic growth Think about it all
of the engineers designers and marketers who went into creating
the very device you're on right now because they're able
to buy what they need to survive rather than fending
for themselves in the woods Well they can focus on
specialising their skills providing more value to the economy Hey
maybe that's myth Guy was on something right to really
see how much the specialization of labour affects the world
let's imagine a world without it So first people would
all be fending for themselves making their own clothes farming
their own food cutting their cutlery making their own video
gaming consoles and stuff like that but with specialization of
labour Well it allows us to focus our individual attention
in a particular specific area because other people specialize in
other things taking care of those things for us We
can also specialized for the rest of the market right
Well we all become experts of some sort by doing
our jobs and that activity increases productivity This is how
specialization of labour gives us absolute advantage in the market
We'Ll absolute advantages when one group can create a good
or service using fewer resource is than another group Example
If sewing Sally can so close with much less time
than you can it benefits both you and sewing Sally
If if you just let her make the clothes and
then buy them from her she's just plain better It's
sowing than you are so it's best for both of
you this way on a global scale Specialization of labour
gives us this absolute advantage For example southeastern Asian countries
will always be better pineapple and mango producers than North
American countries Global trade combined with specialization Let's each of
us produce what we produce best and that benefits everyone
Okay Second say goodbye to your smartphone computer refrigerator water
heater air conditioners cars airplanes bikes and the Internet Without
specialization of labour nobody would have gone deep enough in
the technological stack to make let alone imagine the technology
we have today So yesterday's technology breathes could graze the
much more advanced technology which then breeds more human capital
or intellectual capital Right Think about labor in terms of
opportunity Cost Is your time more valuable doing your job
Or is it more valuable forging steel into the shape
of a fork Well this is the stuff of comparative
advantage When a group or person can make a product
or service at a lower opportunity cost then can another
group or person Well even if you figured out how
to whip up a crappy fork how many lost hours
is that that you could have spent doing your job
But you're actually good at like how much money did
you lose tryingto make a four We're not saying you
shouldn't go fork forging or fishing or whatever thing it
is that you might do for fun that you aren't
very good at But we are saying that the value
that specialization of labour creates can be easily seen Once
you think about it in terms of opportunity cost well
a chef can provide a ton of value at a
restaurant Well that same chef Yeah not very much value
Add at a technology firm A tech bro can provide
Aton of value with the tech firm like Keats are
us But those people well they don't add much value
at a construction site All right what about a lawyer
who can type faster than her secretary Should she just
do all that typing herself No because a lawyer's time
is better spent loitering than it is typing Which is
why she hired her secretary in the first place Typing
is just a bad use of her way more valuable
time right Even if the lawyer is better a typing
than her secretary that opportunity costs for her secretary Typing
is much lower than it is for her loitering Well
comparative advantage shows us how specialization can help us all
add value to the market even though each have different
skills and skill levels Well the more specialized we all
are at what we d .'Oh well them or others
are willing to pay for that specialization and the more
value we're providing to each other within the economy While
specialization of labour has created a lot of value not
everyone's a fan Critics have cited that a too high
a level of specialization can lead Toa unhappy workers and
burn out probably does In fact the forty hour work
week became a thing on Lee after factory worker burnout
at the Ford factory caused extremely high turnover rate As
benefits of specialization spread globalisation started to make more and
more economic sense because the specialization of labour provide so
much more value to the economy than well if we
were all a bunch of hermits you know forging her
hone forks it's profitable to make things in one country
and ship them halfway around the world to be sold
in another country Absolute and comparative advantage make global trading
like this oh so worth it So today we can
see that event Siri's in the extreme With giants like
Amazon Walmart and Ali expressed facilitating globalization spreading the economic
fruits of specialisation on the insanely useful and maybe scary
We've got machines learning algorithms and artificial intelligence in the
works On the of course that's a thing side While
we've got heated driveways monster energy sliced ham and eighty
five dollars rock in a bag a toothpaste squeezer and
other things you didn't need to know that existed All
right just moving right along here people Where's
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