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. Which then raises the question: if prices can be put on anything independently of their value, and if they can in any case quantitatively fluctuate all over the place independently of value, then why is Marx so fixated on the labor theory of value? Aren’t the conventional political economists—even to this day—correct to say that all we can observe and all that can have real meaning is contained in the concept of price, and that the labor theory of value is therefore irrelevant?
Marx does not defend his choice here; he didn’t particularly have to, given that the labor theory of value was widely accepted by his Ricardian contemporaries. But today, with the labor theory widely questioned or abandoned, even by some Marxist economists, it behooves us to construct some sort of response. Marx would, I think, appeal to the concept of the material base: if everybody tried to live off the spectacle of waterfalls or through trading in conscience and honor, no one would survive. Real production, the real transformation of nature through labor processes, is crucial to our existence; and it is this material labor that forms the basis for the production and reproduction of all human life. We can’t dress in conscience and honor (remember the fable of the emperor’s new clothes), we can’t dress in the spectacle of a waterfall; clothes do not come to us that way, they come to us through human labor processes and commodity exchange. Even in a city like Washington, D.C., where a vast amount of trading in conscience and honor seems to occur, there is always the question of where everybody’s breakfast comes from, as well as the electronics, the paper, the automobiles, the houses and the highways that sustain daily life. To pretend this all arrives magically through the market, facilitated by the magic of the money that happens to be in our pocket, is to succumb totally to the fetishism of the commodity. We need the concept of value as socially necessary labor-time in order to break through the fetishism.
Whether or not you believe that Marx was right to take a position such as this is up to you to decide. To understand Capital on Marx’s own terms, though, you have to be prepared to accept an argument somewhat along these lines, at least until you get to the end of the book. It is also important to recognize that Marx is, nevertheless, conceding something here that is terribly important. That is, the price system is indeed a surface appearance that has its own objective reality (it really is “as it appears”) as well as a vital function—the regulation of demand and supply fluctuations so that they converge on an equilibrium price—and this system can easily get out of control on its own terms. As we will later see even in this chapter, the quantitative and qualitative incongruities have serious consequences for how market systems and money-forms work. (They can even yield not only the possibility, but also the inevitability, of financial and monetary crises!)
But Marx’s presumption—and if you are to understand him, you must bear with him on this point—is that value as socially necessary labor-time lies at the center of things. If we assume that values are fixed (though perpetual shifts in technology and social and natural relations constantly remind us that in fact it’s quite the contrary), then we’ll see prices fluctuating over time around “natural” prices, the state of equilibrium between demand and supply. This equilibrium price is merely an appearance, a representation of socially necessary labor-time that generates the value crystallized in money. And this value is what the market prices are actually fluctuating around (196). Market prices perpetually and necessarily deviate from values; if they didn’t, there would be no way of equilibrating the market. As for the qualitative incongruities, some of them (such as speculation in land values and land rents) have an important material role to play (not to be taken up until Volume III) in processes of urbanization and the production of space. But this is something that cannot be considered here.
Section 2: The Means of Circulation
It is useful to study Marx’s introductory paragraphs carefully since they often signal a general argument or theme that needs to be borne in mind. Here he reminds us that “we saw in a former chapter that the exchange of commodities implies contradictory and mutually exclusive conditions” (198). What is he referring to? Look back at the section on relative and equivalent forms of value. There, he identified three peculiarities of the money commodity. First, that “use-value becomes the form of appearance of its opposite, value”; second, that “concrete labour becomes the form of manifestation of its opposite, abstract human labour”; and third, that “private labour takes the form of its opposite, namely labour in its directly social form” (148, 150, 151).
Gold is a particular commodity produced and appropriable by private persons, with a particular use-value, and yet all those particularities are somehow buried within the universal equivalent of the money commodity. “The further development of the commodity does not abolish these contradictions,” Marx observes, “but rather provides the form within which they have room to move.” There are some clues here—pay particular attention to that phrase, “the form within which [contradictions] have room to move”—as to the nature of Marx’s dialectical method. There is, he says, a general “way in which real contradictions are resolved. For instance, it is a contradiction to depict one body as constantly falling towards another and at the same time constantly flying away from it. The ellipse is a form of motion within which this contradiction is both realized and resolved” (198, emphasis added).
Earlier, I described the dialectic as a form of expansionary logic. Some people like to think about the dialectic as being strictly about thesis, antithesis and synthesis, but what Marx is saying here is that there is no synthesis. There is only the internalization of and greater accommodation of the contradiction.