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Anythingnew's avatar

What does the phrase "Money is the product of labour" mean in economics?

Asked by Anythingnew (46 points ) October 21st, 2012

As you can get money from rent and many ways that dont involve doing work what does it mean?

Does it mean the only value money have is the amount of labour you can do with it?

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3 Answers

zenvelo's avatar

It means that human capital is necessary for the basic component of wealth creation. Sure, you get a return by renting something out, but some human capital went into creating whatever you’re renting out. You have to put some labor into making the investment decision. Monetary capital without labor doesn’t expand the economy.

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LostInParadise's avatar

Money comes from supply and demand. If we did not have money we would have to use barter. Price of x is twice as great as price of y means that you can trade x for twice as many y. If the value of something goes up due to increased demand, it has nothing to do with labor.

Labor is one way of increasing the value of something. Using automated equipment is another way. Sure, labor was involved in building the equipment, but it brings in revenue far beyond the cost of the labor that went into building it.

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