Classical economists like Adam Smith, David Ricardo, and later Marx maintained that a commodity’s intrinsic value is primarily determined by the labour input—the “labour theory of value.” In their view, while market prices can fluctuate due to supply and demand or short-term imbalances, over the long term, prices tend to reflect the socially necessary labour time required for production.

Keynes, however, argued that such an intrinsic measure is insufficient for explaining modern market behavior. He emphasized that market prices are determined by a broader set of dynamic factors—demand, consumer expectations, capital investment, and uncertainty—which can cause prices to deviate considerably from any notion of “intrinsic” or labour-determined value. For Keynes, value becomes a more fluid and subjective concept, intimately tied to aggregate market conditions and investor sentiment rather than a fixed amount of labour.

In essence, while classical economists see value as an almost objective outcome of production costs (with labour as the primary input), Keynes views price formation in a modern economy as a complex interplay of real and psychological factors that can cause prices to stray significantly from any inherent value measured solely by labour input.