[11. Additional Points: Smith’s Confusion on the Question of the Measure of Value. General Character of the Contradictions in Smith]
Marx refers briefly to other elements of confusion in Smith's theory. Smith's confused theory of value, whereby at one time he correctly defines value in terms of labour-time, and at others in terms of the value of labour-power, i.e. wages, has been referred to earlier. But, Smith also confuses labour as the measure of value, which also forms the substance of value, with money as a measure of value.
It is abstract labour which forms the substance of value, and the measure of that value is the quantity of labour-time. Money, for example, in the form of gold, only acts as a measure of value to the extent that, with commodity exchange, value assumes the value form of exchange value, i.e. the expression of the value of one commodity in a quantity of some other use value. Money is simply an expression of exchange value, i.e. of a given quantity of value/labour-time in the form of a universal equivalent, be it gold, silver, sheep or goats, or indeed tokens representing this claim to a quantity of labour-time.
The measure of the value of a commodity in labour-time can only change if the amount of socially necessary labour-time required for its production changes. Money comes to act as a measure of value, only to the extent that value takes the form of exchange value, and the money commodity assumes the role of universal equivalent against which every other commodity can be exchanged. Later Marx makes the point that every commodity is money, because every commodity is exchange value, and thereby represents the value of every other commodity. In this way, the labour used in the production of this money commodity, thereby becomes the proxy for abstract labour itself. But, the measure of the value of any commodity can never be determined by its exchange relation to the money commodity, as opposed to the labour-time required for its production. Only its exchange value or price, as expressed by its relation to money, can thereby be expressed.
That is not just because value and exchange value are two different things – the latter being an historically determined form of expression of the former – but because money itself is a commodity whose own value is determined by the socially necessary labour-time required for its production, and this value itself continually changes, as a consequence of changes in social productivity.
Labour is the substance and measure of value, and so has no value itself, whereas money (gold) is a commodity, which can only perform the function of universal equivalent, and expression of exchange value, because it does itself have value.
The value of a commodity only changes if the labour-time required for its production changes, but the price of a commodity, its value expressed in money, can change even if its value remains constant, as a result of the value of money itself changing.
“With regard to the latter the attempt is then made to square the circle —to find a commodity whose value does not change to serve as a constant measure for others.” (p 150-1)
These contradictions in Smith's theory are important, Marx says, because they arise due to problems which Smith encounters, and attempts to resolve. Smith does not solve those problems, but the contradictions into which he is led, illustrate that there is a problem to solve.
“His correct instinct in this connection is best shown by the fact that his successors take opposing stands based on one aspect of his teaching or the other.” (p 151)