Measure of value
Distinguishing characteristics of measure of value includes:
- In brief, "...gold [or fiat currency, for instance] becomes the measure of value only because the exchange-value of all commodities is estimated in terms of gold."
- To be a measure of value, this money must also represent a dynamic or variable value (a "flexibility" or "liquidity") so as to be able to respond to all market fluctuations.
- The link to labour-time must not be forgotten in this, because the value of money "...will fall or rise equally in relation to all other commodities and will thus for all of them continue to represent a definite volume of labour-time."
- As the measure of value, the universal equivalent becomes the "standard of price".
"Gold [his example of money] becomes the measure of value because the exchange-value of all commodities is measured in gold, is expressed in the relation of a definite quantity of gold and a definite quantity of commodity containing equal amounts of labour-time. To begin with, gold becomes the universal equivalent, or money, only because it thus functions as the measure of value and as such its own value is measured directly in all commodity equivalents. The exchange-value of all commodities, on the other hand, is now expressed in gold.
One has to distinguish a qualitative and a quantitative aspect in this expression. The exchange-value of the commodity exists as the embodiment of equal uniform labour-time, the value of the commodity is thus fully expressed, for to the extent that commodities are equated with gold they are equated with one another. Their golden equivalent reflects the universal character of the labour-time contained in them on the one hand, and its quantity on the other hand.
The exchange-value of commodities thus expressed in the form of universal equivalence and simultaneously as the degree of this equivalence in terms of a specific commodity, that is a single equation in which commodities are compared with a specific commodity, constitutes price. Price is the converted form in which the exchange-value of commodities appears within the circulation process." [Karl Marx, A Contribution to the Critique of Political Economy, Part II: Money of Simple Circulation]