its function as measure of value, money therefore serves only in an imaginary or ideal capacity. This circumstance has given rise to the wildest theories. But, although the money that performs the functions of a measure of value is only imaginary, the price depends entirely on the actual substance that is money. (190)
A relationship arises between the imaginary, ideal prices and the prices actually received in the marketplace. The received price should, “ideally,” indicate true value, but it is only going to be the appearance, a representation—and an imperfect one, at that—of value.
We would obviously prefer the quantitative representation of value to be a stable standard of measurement. Gold is a specific commodity, though; its value is given by the socially necessary labor-time embodied in it, and this is not, as we have seen, constant. Fluctuations in the concrete conditions of production affect the value of gold (or any other money commodity). Since, however, such changes affect “all commodities simultaneously,” then “other things being equal … the mutual relations between their values [are] unaltered, although those values are now all expressed in higher or lower gold-prices than before” (191–3, emphasis added).
Marx also introduces silver as a potential alternative money commodity in order to make a simple point: although gold seems to be a solid standard of value for comparing the relative values of all other commodities, it is insecure when it comes to establishing the absolute value (192–3). If, as in the gold rush of 1848, an influx of gold floods the market, then suddenly the value of gold—the representative measure of socially necessary labor-time—declines, and all the commodity prices have to adjust upward (hence the grand inflation in the sixteenth century when the Spaniards brought in gold from Latin America). We are always dealing with the money commodity as something that has a concrete use-value, and the conditions of its own production have an impact on the way value is represented. In recent years, gold prices have been yo-yoing all over the place (for reasons we will come to shortly). What Marx wants to emphasize here is that even though any money commodity makes for a shifting measure of value, its inconstancy makes no difference to the relative values of the commodities being exchanged in the marketplace (192–3, see also 146).
Marx goes on to observe that, “as measure of value, and as standard of price, money performs two quite different functions.” Here, a sub-duality within the theory of money emerges, not to be confused with the grand distinction between money as a measure of value and as a medium of circulation. The money commodity “is the measure of value as the social incarnation of human labour”—this is the “ideal” representation—but it is also “the standard of price as a quantity of metal with a fixed weight.” It is the latter aspect that allows us to say that this commodity is really “worth” so many ounces of gold. This quantity, the weight of gold, is what we have in mind before, and hopefully in hand after, the exchange of the commodity. “For various reasons,” though—and these turn out to be historical reasons—“the money-names of the metal weights are gradually separated from their original weight-names” (192–3).
Now, there is no explicit theory of the state in Capital, but if you trace its many appearances throughout the text, it becomes clear that the state performs essential functions within a capitalist system of production (we have already tacitly invoked this in imagining the institutions of private property and a properly functioning market in chapter 2). One of the state’s most important functions, as we will see, has to do with organizing the monetary system, regulating the money-names and keeping the monetary system effective and stable.
These historical processes have made the separation of the money-name from the weight-name into a fixed popular custom. Since the standard of money is on the one hand purely conventional, while on the other hand it must possess universal validity, it is in the end regulated by law. (194)
The money-name is, however, a fetish-construct. “The name of a thing is entirely external to its nature. I know nothing of a man if I merely know his name is Jacob. In the same way, every trace of the money-relation disappears in the money-names pound, thaler, franc, ducat, etc.” That is, the relationship to socially necessary labor-time is further disguised by these money-names. “Price,” Marx concludes, “is the money-name of the labour objectified in a commodity” (195). The money-name (pounds, ducats) is not the same as the money commodity (gold), and its relation to value as socially necessary labor-time becomes ever more opaque; but the definition of price as the money-name of the labor embodied in a commodity is important to remember.
Marx goes on to make two more important observations. The possibility exists, he writes, “of a quantitative incongruity between price and magnitude of value, i.e. the possibility that the price may diverge from the magnitude of value,” and this possibility belongs inherently to the price-form itself. “This is not a defect, but, on the contrary, it makes this form the adequate one for a mode of production whose laws can only assert themselves as blindly operating averages between constant irregularities” (196). What he is saying here is this: if I take my commodity to market and hang a price (a money-name or proposed representation of value) on it, you bring a similar commodity to market and hang your price on it, somebody brings another and hangs a different price on it, we will have a marketplace full of different prices for the same commodity. The average price that will actually be achieved on a particular day will depend on how many people want the commodity and how many people come to market wanting to sell it. So, the average realized price will jump around depending on fluctuations in supply and demand conditions.
It is through this mechanism that an equilibrium price emerges. This equilibrium price, or what the classical political economists called the “natural” price, is the price achieved when supply and demand have come into equilibrium. At this equilibrium point, Marx will later claim, supply and demand cease to explain anything. Supply and demand do not explain why a shirt, on average, costs less than a pair of shoes and what the average differential price is between shirts and shoes. It is Marx’s view that this average differential price is reflective of value, of the socially necessary labor-time congealed in the different commodities. On a given day, though, price fluctuations will tell you the state of demand and supply for shoes on that day and why it has gone up or down from yesterday. So the fact that we put money-names on commodities and convert the measure of value into this ideal form, the price-form, allows price fluctuations to equilibrate the market, and this brings us closer to identifying a proper representation of value as equilibrium or natural price. What the fluctuations in prices achieve is a convergence on the average social labor necessary to produce a commodity. Without this quantitative incongruity there would be no way of smoothing out demand and supply variations in the marketplace and converging on the social average price that represents value.
The second observation is even more difficult to absorb:
The price-form … is not only compatible with the possibility of a quantitative incongruity between magnitude of value and price, i.e. between the magnitude of value and its own expression in money, but it may also harbour a qualitative contradiction, with the result that price ceases altogether to express value, despite the fact that money is nothing but the value-form of commodities. Things which in and for themselves are not commodities, such as conscience, honour, etc., can be offered for sale by their holders and thus acquire the form of commodities through their price. Hence a thing can, formally speaking, have a price without having a value. The expression of price is in this case imaginary, like certain quantities in mathematics. On the other hand, the imaginary price-form may also conceal a real value-relation or one derived from it, as for instance the price of uncultivated land, which is without value because no human labour is objectified in it. (197)
Once you can hang a price tag on something, you can in principle put a price tag on anything, including conscience and honor, to say nothing of body parts and children. You can hang it on a natural resource, on the view of a waterfall; you can certainly put a price tag on land and speculate on shifts in land prices. The price system can operate in these other dimensions to produce qualitative as well as quantitative incongruities.
