The labor theories of value were generated in response to the quest to determine what constitutes the price or value of a commodity, in other words, what renders value to a commodity? Classical theorists like Smith and Ricardo opine that a commodity derives its value from labor that goes into its production. In the labor theory of value, the amount of labor necessary to produce a given commodity was considered the 1"common denominator". And as an extension of the value theory, labor itself is essentially a commodity. Like all other things, labor is bought and sold (for wages) and has a natural and market price. The natural price of labor is that price which is necessary to enable the laborer, one with another, to subsist and to perpetuate their race without either increase or diminution (iron law of wages).

I will first present Smith's labor theory of value, followed by Ricardo's labor theory of value, in essence because it served as the basis of Ricardo's labor theory of value. In fact Ricardo's labor theory of value went hand in hand with his critique of Smith's labor theory.

The labor theory of value was a by-product of Adam Smith's attempt

Both economists agreed on the doctrine that a rise in wages will lead to a rise in prices and that will lower profits. However both had different reasons for this notion. 7For Smith rate of profit would fall because of growing competition among entrepreneur and he was optimist about this development. Ricardo on the other hand, attributed the rise of prices and fall of profit to the increasing difficulty of growing food for the expanding population. This somewhat pessimist idea was in line with Malthusian theory.

While Smith was concerned with absolute value, Ricardo realized that relative value was a more functional concept, and devoted himself more to relative value of commodities and labor.

Smith applied and restricted his labor theory of value to primitive societies, and proposed cost of production theory for an advanced economy. Ricardo on the other hand, did not make a distinction between primitive and advanced society. His labor theory of value was aimed more at advanced economies.

Smith proposed the cost and command labor theories for "early and rude state of societies" and cost of production for advanced economy. The labor theories entangle in a circular reasoning: labor is the measure of commodities but what is the measure of labor? According to Smith, commodities are the measure of labor (because Smith defines, natural price of labor as the amount "sufficient to maintain him during the time of labor". The market price of labor too is governed by the same vagaries of supply and demand.

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