This term is the basis for economic thought and reason. A "value" theory is necessary to any and all economic analysis and discussion. Without agreement on the basic concept of value then no further communication or discussion is likely to produce any rational conclusion. And while it is understood that we value our mothers, families, and puppy dogs, these emotions are quite distant from "value" in an economic or political sense.

Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniences, and amusements of human life. But after the division of labour has thoroughly taken place, it is but a very small part of these with which a man's own labour can supply him. The far greater part of them he must derive from the labour of other people, and he must be rich or poor according to the quantity of that labour which he can command or which he can afford to purchase. The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchange value of all commodities.

The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose on other people. What is bought with money or goods is purchased with labour, as what we acquire by the toils of our own body. The money and goods indeed save us the toil. They contain the value of a certain quantity of labour which we will exchange for what is supposed at the same time to contain the value of an equal quantity. Labour is the first price, the original purchase-money that was paid for all things. It was not by gold or silver, but by labour, that all wealth of the world was originally purchased; and its value, to those who possess it, and who want to exchange it for some new productions, is precisely equal to the quantity of labor which it can enable them to purchase or command."

Marx seems to have interpreted Smith in such a way as to insist that an item is worth whatever labor was spent on its creation. This may be Marx's theory but it certainly does not derive from what Smith has said. One wonders how long it will take to stomp out the indictment and besmirching of classical economics by latter day "schools" of supposed "thought". The favorite trick they will employ is to promote an association of Smith with Marx. It may be that Marx claimed to be expanding on Smith or he may have lied outright and claimed to be expounding on Smith. But we can't find a buggy whip or a white elephant (things for which there is no market) anywhere in what Smith has to say.

The proper interpretation of Smith is that we each value goods or services based on the labor we are willing to trade for those goods or services. We will pay money to an auto shop to repair the brakes on our car with money we have accumulated from our own labors. We will do that because we realize that we can replace that money for less labor than we would expend doing the brake job ourselves. The brake repair service is valuable to us in exactly the amount of our labor we are willing to pay. And no, we did not mess this up. Absent coercion, what most of us would be giving the mechanic is our past accumulated labor, or, if we pay with plastic we are giving our future labor, i.e. " It was not by gold or silver, but by labour, that all wealth of the world was originally purchased". Those dollars (assuming an honest system without coercion or guile or monetary manipulation) are the accounting of our past productive labor or our future productive labor, and they are also a measure of all of the various non-coercive choices we have in commanding (purchasing) the labor of others. It matters not whether we decide to get the brakes fixed, or go to a dentist, or buy a new oven. In every case we are trading away an accumulated store of labor (accumulated bucksters) or a promised share of our earnings in the future. All exchange value that is of any interest or import in economics is based on labor in exactly the way that Smith has claimed.

We close this section on "value" by observing that exchange value is always current or forward looking. Value is not based on an appreciation for past labor "crystalized" in a commodity or in the value of any particular commodity such as gold.