Socially necessary labour time in Marx's critique of political economy is what regulates the exchange value of commodities in trade.
Marx did not define this concept in computationally rigorous terms, allowing for flexibility in using it in specific instances to relate average levels of labour productivity to social needs manifesting themselves as monetarily effective market demand for commodities.
This is a complex process, in which enterprises operating at varying levels of productivity and unit-costs compete with each other in responding to the expansion and contraction of total market demand for their output.
In the third volume of Das Kapital, Marx discusses how the market value (or "regulating price") of a commodity may be determined under different conditions of demand and productivity.
If the market for a commodity is oversupplied, then labour-time has been expended in excess of what was socially necessary, and exchange value falls.
If the market for a commodity is undersupplied, then the labour-time expended on its production has been less than what is socially necessary, and exchange value rises.
However, by "socially necessary labour" Marx refers specifically to the total labour-time which on average is currently required to produce an output.
So in a developed market Marx's exchange value refers to the average quantity of living labour which must be performed under currently prevailing conditions to produce a commodity.
[4] One debate in Marxian economics concerns the question of whether the product-values formed and traded include both direct and indirect labour, or whether these product-values refer only to current average production costs (or the value of current average replacement costs).
[citation needed] The concept of socially necessary labour time is discussed on the OPE-L list (Outline of Political Economy) [1]