Historically, the best-known proponent of such theories is probably
Adam Smith.
Piero Sraffa, in his introduction to the
first volume of the "Collected Works of David Ricardo", referred to Smith's "adding-up" theory. Smith contrasted
natural prices with
market price. In Smith’s model, market prices tend toward natural prices over time, as competition among producers pushes prices toward a long-run equilibrium. Smith theorized that the natural price reflects the simple sum of costs (wages, profit, and rent), whereas the market price may deviate in the short term due to fluctuations in demand or scarcity.(Smith is ambiguous about whether rent is price determining or price determined. The latter view is the consensus of later
classical economists, with the Ricardo-Malthus-West theory of rent.)
David Ricardo mixed this cost-of-production theory of prices with the
labor theory of value, as that latter theory was understood by
Eugen von Böhm-Bawerk and others. This is the theory that prices tend toward proportionality to the socially necessary labor embodied in a commodity. Ricardo sets this theory at the start of the first chapter of his
Principles of Political Economy and Taxation, but contextualizes it as only relating to commodities with elastic supply. Taknaga advances a new interpretation that Ricardo had cost-of-production theory of value from the start and presents a more coherent interpretation based on texts of
Principles of Political Economy and Taxation. This alleged refutation leads to what later became known as the
transformation problem.
Karl Marx later takes up that theory in the first volume of
Capital, while indicating that he is quite aware that the theory is untrue at lower levels of abstraction. This has led to all sorts of arguments over what both David Ricardo and Karl Marx "really meant". Nevertheless, it seems undeniable that all the major classical economics and Marx explicitly rejected the labor theory of price(A somewhat different theory of cost-determined prices is provided by the "
neo-Ricardian School" [https://web.archive.org/web/20120403031336/http://homepage.newschool.edu/~het/schools/neoric.htm of
Piero Sraffa and his followers. Yoshnori Shiozawa presented a modern interpretation of Ricardo's cost-of-production theory of value. The Polish economist
Michał Kalecki distinguished between sectors with "cost-determined prices" (such as manufacturing and services) and those with "demand-determined prices" (such as agriculture and raw material extraction). ==Market price==