The labor theory of value (LTV) is an economic theory that argues that the economic value of a good or service is determined by the total amount of socially necessary labor required to produce it. The LTV is usually associated with Marxian economics, although it also appears in the theories of earlier classical economists such as Adam Smith and David Ricardo.
Smith saw the price of a commodity in terms of the labor that the purchaser must expend to buy it, which embodies the concept of labor commanded. Ricardo, building on Smith, developed a more consistent labor theory of value, arguing that the value of commodities is determined by the quantity of labor embodied in their production. Karl Marx's theory, which is the most elaborate and influential, holds that value is a social relation specific to commodity-producing societies. Marx distinguished between concrete useful labor, which creates use value, and abstract labor, the substance of exchange value. He argued that the magnitude of value is determined by the average labor-time required for production under normal conditions.