Karl Marx argued that all value in goods and services (commodities) came from the expenditure of labor in production. Profit, interest, and rent are therefore the results of appropriating the surplus...

Karl Marx argued that all value in goods and services (commodities) came from the
expenditure of labor in production. Profit, interest, and rent are therefore the results of
appropriating the surplus product of workers and hence constitute exploitation of the
working class. Many economists argue, to the contrary, that entrepreneurship is a factor
of production which adds value to the production process and therefore earns a legitimate
eturn to its exertion. How would you evaluate these two contrasting views, and what are
their implications for society?
Marx in his theory of capitalism and surplus value asks a question that how does
capitalism generate profit and then
ings out an answer to this in the exploitation of the
labor. He explains that the capitalist purchases the “labor power” of the worker, and pays
him wages as a reward for this. It must be noted that the capitalist does not own the
laborer but has property rights over the means of production, i.e. the worker’s labor
power or in other words, the capacity of the laborer to work in the production process.
This labor is then made to work in the production process where it adds value to the
commodity in production by the use of its labor power.
Then the price of this commodity is evaluated in terms of the socially necessary labor
power required to produce it. Also value of one day’s labor power is determined in terms
of the commodities required to keep the worker living for one day, if these much
commodities take “x” hours to be produced, then the first “x” hours of a laborers day are
called the necessary labor. The idea is that the laborer should first work atleast “x” hours
a day to produce that much which he will consume in that one day. But it must be
carefully noted that till now there is no new value generation in production process,
whatever is produced in “x” hours is consumed. So in the next step, the amount of labor
that the worker puts in over and above these “x” hours is called surplus labor. This
surplus labor is responsible for value addition in the production process. Here comes in
the issue of exploitation of workers. It has been argued by Marx that since this surplus
value is being produced by the laborers they must be paid the returns generated out of it.
But actually the capitalist pays wages to the laborers only equal to the value of necessary
labor, i.e. only the amount required to keep them alive. Rest of the revenues generated
from the sale of that commodity is appropriated by the capitalist in form of rewards for
land (rent), capital (interest) and entrepreneurship (profits). Marx argues that labor is one
thing that can produce value more than it is worth, so it is called the variable capital.
Other things in production process only transfer their...