# A Contribution to the Critique of Political Economy/Chapter 2/Section 1

1. THE MEASURE OF VALUE.
The first process of circulation constitutes, so to say, the theoretical preparatory process to actual circulation. To begin with, commodities which are use-values by nature, acquire a form in which they appear in idea to each other as exchange values, as definite quantities of incorporated universal' labor-time. The first necessary step in this process is, as we have seen, the setting apart by the commodities of a specific commodity, say gold, as the direct incarnation of universal labor-time, or the universal equivalent. Let us go back for a moment to the form in which commodities turn gold into money.
In the above series of equations iron, wheat, coffee, potash, etc. appear to each other as embodiments of homogeneous labor, namely, as labor materialized in money, from which all the peculiarities of the different kinds of concrete labor represented in the different use-values are completely eliminated. As value they are all ​identical, they are the incarnation of the same labor, or the same incarnation of labor, viz., gold. As uniform embodiments of the same labor they display only one difference, a quantitative one, by appearing as different quantities of value, because unequal quantities of labor-time are contained in their use-values. The mutual relation of these separate commodities is that of embodiments of universal labor-time, since they are related to universal labor-time as to an excluded commodity, viz., gold. The same relation the development of which causes commodities to appear to each other as exchange values, causes the labor time contained in gold to appear as universal labor-time, a given quantity of which is expressed in different quantities of iron, wheat, coffee, etc,—in short, in the use-values of all commodities, or is directly unfolded in the endless series of commodity-equivalents. While all commodities express their exchange values in gold, gold expresses its exchange value directly in all commodities. While commodities assume the form of exchange value in relation to each other, they lend to gold the form of the universal equivalent, or of money.
Gold becomes the measure of value, because all commodities measure their exchange values in gold, in proportion as a certain quantity of gold and a certain quantity of the commodity contain the same amount of labor-time; and it is only by virtue of this function of being a measure of value, in which capacity its own value is measured directly in the entire series of commodity equivalents, that gold becomes a universal equivalent or money. On the other hand, the exchange ​value of all commodities is expressed in gold. In this expression, the qualitative aspect is to be distinguished from the quantitative: there is the exchange value of the commodity as the embodiment of the same uniform labor-time; while the magnitude of value is exhaustively expressed, since in the same proportion in which commodities are equated to gold they are equated to one another. On the one hand the universal character of the labor-time contained in them is revealed; on the other, its quantity is expressed in its golden equivalent. The exchange value of commodities thus expressed in the form of a universal equivalent and, moreover, as a numerical proportion of this equivalent, in terms of one specific commodity, or represented in the form of a series of commodities equated to one specific commodity, is price. Price is the form into which the exchange value of commodities is converted when it appears within the sphere of circulation.
By the same process by which commodities express their values in gold prices, they turn gold into a measure of value i. e. into money. If all of them were to measure their values in silver, wheat, or copper, and therefore express them in the form of silver, wheat or copper prices, then silver, wheat or copper would be measures of value and consequently universal equivalents. In order to appear as prices in circulation, commodities must be exchange values before they enter circulation. Gold becomes the measure of value only because all commodities estimate their exchange value in it.
The universality of this relation which is the result of evolution and from which alone springs the function of ​gold as the measure of value, implies however, that every single commodity is measured in gold, in proportion to the labor-time contained in both; that the actual common measure of the commodity and of gold is labor; or that commodity and gold are passed for each other in direct barter as equal exchange values. How this equalization actually takes place, can not be discussed here when treating of simple circulation. So much, however, is clear, that in countries producing gold and silver, certain quantities of labor-time are directly embodied in definite quantities of gold and silver, while in countries which do not produce gold and silver the same result is reached in a round-about way, by direct or indirect exchange of the commodities of those countries; i. e. a definite portion of average national labor is given for a definite quantity of labor-time, embodied in the gold and silver of the mine-owning countries. In order to be able to serve as a measure of value, gold must be as far as possible a variable value, because it can become the equivalent of other commodities only as an incarnation of labor-time, and the same labor-time is realized in unequal volumes of use-values with the change in the productive power of concrete labor. In estimating all commodities in gold it is only assumed that gold represents a given quantity of labor at a given moment, as was done when the exchange value of any commodity was expressed in terms of the use-value of any other commodity. As for the variations of the value of gold, the law of exchange value formulated above holds good in its case as well. If the exchange value of commodities remains unchanged, then a general rise in their gold ​prices is possible only in the case of a fall in the exchange value of gold. If the exchange value of gold remains unchanged, a general rise of gold prices is possible only when the exchange value of all commodities rises. The reverse is true in case of a general fall in the prices of commodities. If the value of an ounce of gold falls or rises in consequence of a change in the labor-time required for its production, then the values of all other commodities fall or rise to an equal extent. Thus, the ounce of gold represents after the change, as it did before, a given quantity of labor-time with regard to all commodities. The same exchange values are now estimated in greater or smaller quantities of gold than before, but they are estimated in proportion to the magnitude of their values, and consequently retain the same proportion to each other. The ratio 2 ÷ 4 ÷ 8 remains the same when expressed as 1 ÷ 2 ÷ 4 or as 4 ÷ 8 ÷ 16. The change in the quantity of gold in which exchange values are estimated with a variation in the value of gold, interferes as little with the function of gold as a measure of value, as the fifteen times smaller value of silver as compared with that of gold interferes with the performance of that function by the latter. Since labor-time is the common measure of gold and commodities, and since gold figures as the measure of value only in so far as all commodities are measured by it, the idea that money makes commodities commensurable, is therefore a mere fiction of the process of circulation. It is rather the commensurability of ​commodities as incorporated labor-time, that turns gold into money.
Commodities enter the process of exchange in the concrete form of use-values. They are yet to be turned into the real universal equivalent through their alienation. The determination of their prices merely amounts to their ideal transformation into the universal equivalent, a process of equation to gold which is yet to be realized. But since commodities are, in their prices, transformed into gold only in imagination, or are converted only into imaginary gold, and since their money form is not differentiated as yet from their concrete selves, it follows that gold has also been turned into money only in imagination; it appears so far but as a measure of value, and in fact definite quantities of gold serve merely as names for certain quantities of labor-time. The form in which gold is crystallized in money ​always depends upon the way in which commodities express their own exchange value to each other.
Commodities now confront one another in a double capacity: actually as use- values, ideally as exchange values. The twofold aspect of labor contained in them is reflected in their mutual relations; the special concrete labor being virtually present as their use-value, while universal abstract labor-time is ideally represented in their price in which commodities appear as commensurable embodiments of the same value—substance differing merely in quantity.
The difference between exchange value and price appears to be merely nominal or, as Adam Smith says, labor is the real price, and money the nominal price of commodities. Instead of estimating the value of one quarter of wheat in thirty days of labor, it is estimated in one ounce of gold if one ounce of gold is the product of thirty days' labor. However, far from this difference being merely nominal, all the storms which threaten commodities in the actual process of circulation center about it. Thirty days of labor are contained in a quarter ​of wheat and it need not, therefore be expressed in terms of labor-time. But gold is a commodity distinct from wheat, and only in circulation it can be ascertained, whether the quarter of wheat can be actually turned into an ounce of gold as is anticipated in its price. That will depend on whether or not it proves to be a use-value, whether or not the quantity of labor-time contained in it is the quantity necessarily required by society for the production of a quarter of wheat. The commodity as such is an exchange value, it has a price. In this difference between exchange value and price lies the demonstration of the fact that the particular individual labor contained in a commodity has first to be expressed through the process of alienation in terms of its counterpart, i. e. as impersonal, abstract, universal and, only in that form, social labor, viz. money. Whether it can be so expressed seems to be a matter of chance. Thus, although the exchange value of a commodity finds only ideally a distinct expression in price, and the twofold character of labor contained in the commodity exists as yet merely as two distinct forms of expression, and, although in consequence thereof, the embodiment of universal labor-time, gold, confronts actual commodities only as an imaginary measure of value, yet the fact that exchange value exists as price, or that gold exists as a measure of value implies the necessity of the alienation of commodities for hard cash and the possibility of their non-alienation. In short, here lies latent the entire contradiction which is inherent in the fact that products are commodities or that the particular work of a private individual can be of no account in society ​until it has taken the very opposite form of abstract universal labor. For that reason, the utopians, who want to have commodities but not money, who want a system of production based on private exchange without the necessary conditions underlying such a system, are consistent when they "destroy" money not in its tangible form but in its nebulous illusory form of a measure of value. Under the invisible measure of value there lurks the hard cash.
The process by which gold has become the measure of value and exchange value has been turned into price, being once assumed, all commodities express in their prices but imagined quantities of gold of various magnitudes. As such various quantities of the same thing, gold, they are equated, compared and measured with each other, and thus arises the technical necessity of referring them to a definite quantity of gold as a unit of measure, a unit which develops into a standard measure by virtue of its divisibility into aliquot parts, which in their turn can be sub-divided into aliquot parts. But quantities of gold as such are measured by weight. ​The standard of measure is thus found ready in the general measures of weight of metals and, therefore, whereever metallic circulation is in vogue, these measures serve originally as standards of price. Since commodities no more relate to each other as exchange values to be measured by labor-time, but as magnitudes of the same denomination measured in gold, the latter is transformed from a measure of value into a standard of price. The comparison of prices with each other as different quantities of gold is thus crystallized in figures which correspond to an assumed quantity of gold and represent it as a standard of aliquot parts. Gold as measure of value and as standard of price has entirely different forms of manifestation and the confusing of the two has resulted in the wildest of theories. Gold is a measure of value as incorporated labor-time; it is the standard of price as a certain weight of metal. Gold becomes the measure of value by virtue of its relation as exchange value to commodities as exchange values; as standard of price, a definite quantity of gold serves as a unit for other quantities of gold. Gold is the measure of value, because its value is variable; it is the standard of price, because it is fixed as a constant unit of weight. In this case, as in all cases of measuring quantities of the same denomination, the establishment of a definite and unvarying unit of measure is all-important. The necessity of settling upon a quantity of gold as a unit of measure and upon its aliquot parts as subdivisions of that unit, has given rise to the notion that a certain quantity of gold which has naturally a variable value had been assigned a fixed ratio of value ​to the exchange values of all commodities; the fact is overlooked that exchange values of commodities are transformed into prices, i. e. into quantities of gold, before gold develops as a standard of price. No matter how the value of gold may vary, the ratios between the values of different quantities of gold remain constant. Let the fall in the value of gold amount to 1000 per cent., still twelve ounces of gold will have a twelve times greater value than one ounce of gold; and in prices the only thing considered is the ratio between different quantities of gold. Since, on the other hand, no rise or fall in the value of an ounce of gold can alter its weight, no alteration can take place in the weight of its aliquot parts. Thus gold always renders the same service as an invariable standard of price, no matter how much its value may vary.
An historical process which, as we shall explain later, was determined by the nature of metallic circulation, led to the result that the same denomination of weight was ​retained for a constantly changing and decreasing weight of precious metals in their function of a standard of price. Thus the English pound sterling denotes less than one-third of its original weight; the pound Scot, before the Union, only 1-36; the French livre, 1-74; the Spanish Maravedi, less than 1-1000; the Portuguese Rei, a still smaller fraction. Such was the historical origin of the discrepancy between the current money names of various weights of metals and their weight denominations. Since the determination of the unit of measure, of its aliquot parts, and of their names is purely conventional, and since they should possess within the sphere of circulation the character of universality and compulsion, they had to be settled by law. The purely formal operation thus devolved upon the government. The metal which was to serve as the money ​material, was found already adopted in the community. In different countries the legal standard of price is naturally different. In England e. g. the ounce as a weight of metal is divided into pennyweights, grains and carats Troy, but the ounce of gold as the unit of money is divided into 3 7-8 sovereigns, the sovereign into 20 shillings, the shilling into 12 pence, so that 100 pounds of 22 carat gold (1200 ounces) = 4672 sovereigns and 10 ​shillings. In the world market, however, where national boundaries disappear, these national characteristics of the measure of money also disappear and give place to the general measures of weight of metals.
The price of a commodity or the quantity of gold into which it is ideally transformed, is, therefore, now expressed in the names of coins of the gold standard. Thus, instead of saying: a quarter of wheat is worth an ounce of gold, it is said in England to be worth 3 £ 17s. 10½d. All prices are thus expressed in the same denominations. The peculiar form which commodities lend to their exchange values is transformed into a money-denomination by which commodities tell each other how much they are worth. Money in its turn becomes money of account.
We transform commodities into money of account, in our mind, on paper, in conversation, whenever it is a question of expressing any kind of wealth in terms of exchange value. For that transformation we need the gold substance, but only in imagination. In order to estimate the value of a thousand bales of cotton in a ​certain number of ounces of gold and then to express this number of ounces in the denominations of the ounce, £. s. d., not a single atom of gold is required. Thus, not a single ounce of gold was in circulation in Scotland before Robert Peel's Bank Act of 1845, although the gold ounce, expressed in its English standard of account, 3£ 17s. 10½d., served as the legal standard of price. In a similar manner silver serves as standard of price in the trade between Siberia and China, although that trade virtually amounts to barter. It is, therefore, immaterial to money, as money of account, whether or not its entire unit of measure or the fractions thereof are really coined. In England, at the time of William the Conqueror, 1£, then a pound of pure silver, and the shilling, 1-20 of a pound, existed only as money of account, while the penny, 1-240 of a pound of silver, was the largest silver coin in (existence. On the other hand, there are no shillings and pence in England to-day, although they are legal denominations for certain parts of an ounce of gold. Money as money of account may exist exclusively in idea, while the money in actual existence may be coined according to an entirely different standard. Thus the money in circulation in many English colonies of North America consisted until late in the eighteenth century of Spanish and Portuguese coins, although the money of account was throughout the same as in England.
​Owing to the fact that money, when serving as the standard of price, appears under the same reckoning names as do the prices of commodities, and that, therefore, the sum of 3£ 17s. lO½d. may signify, on the one hand, an ounce weight of gold, and on the other, the value of a ton of iron, this reckoning name of money has been called its mint-price. Hence, there sprang up the extraordinary notion that the value of gold is estimated in its own material, and that, in contradistinction to all other commodities, its price is fixed by the State. It was erroneously thought that the giving of reckonning names to definite weights of gold is the same thing as fixing the value of those weights. In so far as gold serves as one of the elements in determining price, i. e., where it performs the function of money of account, it not only has no fixed price, but has no price whatever. In order to have a price, i. e., in order to express itself in a specific commodity as a universal equivalent that other commodity would have to play the same exclusive ​role in the process of circulation as gold. But two commodities excluding all other commodities mutually exclude each other. Therefore, wherever gold and silver have by law been made to perform side by side the function of money or of a measure of value it has always been tried, but in vain, to treat them as one and the same material. To assume that there is an invariable ratio between the quantities of gold and silver in which a given quantity of labor-time is incorporated, is to assume, in fact, that gold and silver are of one and the same material, and that a given mass of the less valuable metal, silver, is a constant fraction of a given mass of gold. From the reign of Edward III to the time of George II, the history of money in England consists of one long series of perturbations caused by the clashing of the legally fixed ratio between the values of gold and silver, with the fluctuations in their real values. At one time gold was too high; at another, silver. The metal that for the time being was estimated below its value was withdrawn from circulation, melted and exported. The ratio between the two metals was then again altered by law, but the new nominal ratio soon came into conflict again with the real one. In our own times, the slight and transient fall in the value of gold compared with silver, which was a consequence of the Indo-Chinese demand for silver, produced on a far more extended scale in France the same phenomena, export of silver, and its expulsion from circulation by gold. During the years 1855, 1856 and 1857, the excess in France of gold imports over gold exports amounted to £41,580,000, while the excess of silver exports over silver imports was ​£14,704,000. In fact, in those countries in which both metals are legally measures of value, and therefore both legal tender, so that every one has the option of paying in either metal, the metal that rises in value is at a premium, and, like every other commodity, measures its price in the over-estimated metal which alone serves in reality as the standard of value. The result of all experience and history with regard to this question is simply that, where two commodities perform by law the functions of a measure of value, in practice one alone maintains that position.
* ↑ True, Aristotle sees that the exchange value of commodities underlies their prices: "ὅτι ἡ ἀλλαγὴ ἦν πρὶν τὸ νόμισμα εἶναι, δῆλον: διαφέρει γὰρ οὐδὲν ἢ εἰ κλῖναι πέντε ἀντὶ οἰκίας, ἢ ὅσου αἱ πέντε κλῖναι." It is clear that exchange existed before coin. For it does not make any difference whether you give five beds for a house, or as much money as five beds are worth"). On the other hand, since commodities acquire only in price the form of exchange value with respect to one another, he makes them commensurable through money. "Διὸ δεῖ πάντα τετιμῆσθαι· οὕτω γὰρ ἀεὶ ἔσται ἀλλαγὴ, εἰ δὲ τοῦτο, κοινωνία. Τὸ δὴ νόμισμα ὥσπερ μέτρον σύμμετρα ποιῆσαν ἰσάξει, οὕτε γὰρ ἂν μὴ οὔσης ἀλλαγῆς κοινωνία ἦν, οὐτ’ ἀλλαγὴ ἰσότητος μὴ οὔσης, οὔτ’ ἰσότης, μὴ οὔσης συμμετρίας." ("Therefore all has to be appraised. In that way exchange may always take place, and, with it, society can exist. Coin, like measure, makes everything commensurable and equal, for without exchange there would be no society, without equality there would be no exchange, and without commensurability, no equality.") He does not conceal from himself that these different objects measured by money are entirely incommensurable quantities. What he is after is the common unit of commodities as exchange values, which as an ancient Greek he was unable to find. He gets out of the difficulty by making commensurable through money what is in itself incommensurable, so far as it is necessary for practical purposes, "Τῇ μὲν οὖν ἀληθείᾳ ἀδύνατον τὰ τοσοῦτον διαφέροντα σύμμετρα γενέσθαι, πρὸς δὲ τὴν χρείαν ἐνδέχεται ἱκανῶς." ("In truth it is impossible to make things that are so different, commensurable, but for practical purposes it is permissible.") Aristotle, Ethica Nicomachea, l. 5, c. 8, edit. Bekkeri, Oxonii, 1837.
* ↑ The peculiar circumstance that, while the ounce of gold serves in England as the unit of the standard of money, it is not divided into aliquot parts has been explained as follows: "Our coinage was originally adapted to the employment of silver only—hence an ounce of silver can always be divided into a certain adequate number of pieces of coin; but as gold was introduced at a later period into a coinage adapted only to silver, an ounce of gold cannot be coined into an adequate number of pieces." Maclaren: "A Sketch of the History of the Currency," p. 16, London, 1858.
* ↑ "Money may continually vary in value and yet be as good a measure of value as if it remained perfectly stationary. Suppose, for instance, it is reduced in value. . . . Before the reduction, a guinea would purchase three bushels of wheat or 6 days' labour; subsequently it would purchase only 2 bushels of wheat, or 4 days' labour. In both cases, the relations of wheat and labour to money being given, their mutual relations can be inferred; in other words, we can ascertain that a bushel of wheat is worth 2 days' labour. This, which is all that measuring value implies, is as readily done after the reduction as before. The excellence of a thing as a measure of value is altogether independent of its own variableness in value" (p. 11, Bailey, "Money and its Vicissitudes," London, 1837).
* ↑ "Le monete lequali oggi sono ideali sono le piu antiche d'ogni nazione, e tutte furono un tempo reali (the latter assertion is too sweeping), e perchè erano reali con esse si contava." Galiani, "Della Moneta," l. c., p. 153 ("Coins which are ideal to-day [i. e., whose names no longer correspond to their value] are among the more ancient with every nation; at one time they were all real, and for that reason served for the purpose of counting.")
* ↑ The romantic A. Müller says: "According to our idea every independent sovereign has the right to name the metal money, and to give it a nominal social value, rank, standing and title (p. 276, V. II., A. H. Müller, "Die Elemente der Staatskunst," Berlin, 1809). As far as title is concerned the Hon. Hofrath is right; but he forgets the substance. How confused his "ideas" were, may be seen, e. g., from the following passage: "Everybody understands how much depends upon the right determination of the mint-price, especially in a country like England, where the government with magnificent liberality coins money gratuitously (Herr Müller seems to think that the members of the English government defray the mint expenses out of their own pockets), where it does not charge any mintage, etc., and thus if the mint-price of gold were set considerably above its market price, if instead of paying as now £3 17s. l0½d. per 1 oz. of gold, it would set the price of an ounce of gold at £3 19s., all money would flow into the mint and exchanging for the silver contained there bring it into the market to be exchanged there for the cheaper gold; the latter would in the same manner be brought again to the mint and the entire coinage system would be upset" (l. c, p. 280–281). To preserve order in English coinage, Müller falls back on "disorder." While shilling and pence are mere names of certain parts of an ounce of gold represented by signs of silver and copper, he imagines that an ounce of gold is estimated in gold, silver and copper and thus confers upon the Englishmen the blessing of a triple standard of value. Silver as a measure of money, next to gold, was formally abolished only in 1816 by 56 George III., c. 68. As a matter of fact, it was legally abolished as early as 1734 by 14 George II., c. 42, and still earlier by actual practice. There were two circumstances that made A. Müller capable of a so-called higher conception of political economy: first, his wide ignorance of economic facts; second, his dilettanti-like visionary attitude toward philosophy.
* ↑ "Ἀνάχαρσις πυνθανομένου τινὸς, πρὸς τί οἱ Ἕλληνες χρῶνται τῷ ἀργυρίῳ εἶπεν πρὸς τὸ ἀριθμεῖν." (Athen. Deipn. l. IV. 49. v. 2, ed. Schweighäuser, 1802.) (When Anacharsis was asked for what purpose the Greeks used money, he replied, "For reckoning.")
* ↑ G. Garnier, one of the early French translators of Adam Smith, conceived the queer notion of fixing a proportion between the use of money of account and that of actual money. His proportion is 10 to 1. (G. Garnier, "Histoire de la Monnaie depuis les temps de la plus haute antiquité," etc., t. l, p. 78.)
* ↑ The act of Maryland in 1723 by which tobacco was made the legal standard, but its value reduced to terms of English gold money, namely one penny equal to one pound of tobacco, reminds of the "leges barbarorum," in which, inversely, certain sums of money were expressed in terms of oxen, cows, etc. In that case neither gold nor silver, but the ox and the cow were the actual material of the money of account.
* ↑ Thus, we read, e. g., in the "Familiar Words" of Mr. David Urquhart: "The value of gold is to be measured by itself; how can any substance be the measure of its own worth in other things? The worth of gold is to be established by its own weight, under a false denomination of that weight—and an ounce is to be worth so many pounds and fractions of pounds. This is falsifying a measure, not establishing a standard."
* ↑ "Money is the measure of Commerce, and of the rate of everything, and therefore ought to be kept (as all other measures) as steady and invariable as may be. But this cannot be, if your money be made of two Metals, whose proportion . . . constantly varies in respect of one another." John Locke: Some Considerations on the Lowering of Interest, etc., 1691 (p. 166, p. 65 in his Works 7 ed., London, 1768, vol. III.