Market Structures and the Theory of Value in Classical Economics
The first systematic attempt to define the conditions under which the cost of production theory of value was valid appeared in 1825 in Samuel Bailey’s Critical Dissertation on the Nature, Measure and Causes of Value. Bailey understood by the cost of production theory of value that, apart from temporary fluctuations, goods exchanged in proportion to their costs of production and that the latter were in no way affected by the demands for the goods or expressed in terms of prices — the natural price of a good was determined by its cost of production which was in no way affected by the demand for the good. (It will be convenient to call this version the pure cost of production theory to distinguish it from others whenever the context does not make it obvious.) Bailey’s investigations led him into problems of market structures and supply functions with which both Adam Smith and Ricardo had been concerned.
KeywordsMarket Structure Natural Agent Production Theory Monopoly Price Perfect Competition
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