I came across two interesting quotes from two famous economists of the 18th and 19th centuries:
We see then that that which determines the magnitude of the value of any article is the amount of labour socially necessary, or the labour time socially necessary for its production. Each individual commodity, in this connexion, is to be considered as an average sample of its class.
Labour alone, therefore, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. It is their real price; money is their nominal price only.
There seems to be a certain degree of agreement that it is labour that gives value to goods.
Who am I quoting? The first is Karl Marx, in Das Kapital. The second is Adam Smith in The Wealth of Nations.
Edited for clarity 20/11/09
I have finally got round to reading the latter.
Reading something so close to Marx’s labour theory of value surprised me. It is certainly very different from anything one would find in a contemporary economics text book. Labour is an important and distinct cost in any economic theory, but making it the measure of value goes beyond that.
Of course the moral of this may be how little I know of economics or the history of economic thought!
Smith does deserve his reputation. His analysis is perceptive, and (unlike Marx!) his writing is a pleasure to read. I am sure he has many more insights and surprises for me. I am particularly interested in how his views differ from those of neo-liberals who claim his as their own.