In order for money to exist at all, value must first exist, because money is merely an expression of value, an expression of relative value, or exchange-value. And, in order for money to exist, as a standard of prices, first the general exchange relation between commodities, on the basis of those values, must exist, before one single commodity becomes separated off from all the others, to act as the general commodity, the universal equivalent form of value. Rather than the existence of money prices removing the need to investigate the nature of value, as the objective basis of exchange-value, and exchange relations, it illustrates that no such relations can exist, to begin with, without such an objective measure upon which to develop.
“Money is already a representation of value, and presupposes it. As the standard of price, money, for its part, already presupposes the (hypothetical) transformation of the commodity into money. If the values of all commodities are represented in money prices, then one can compare them, they are in fact already compared. But for the value to be represented as price, the value of commodities must have been expressed previously as money. Money is merely the form in which the value of commodities appears in the process of circulation. But how can one express x cotton in y money? This question resolves itself into this—how is it at all possible to express one commodity in another, or how to present commodities as equivalents? Only the elaboration of value, independent of the representation of one commodity in another, provides the answer.” (p 161-2)
The subjectivist conception of value is based upon the preferences of consumers, at any point in time. On this basis, 1A may exchange for 2B, at time t, but for 3B at time t+1, due to a change in consumer preferences. Bailey reflects this notion, and says,
“It is a “… mistake … that the relation of value can exist between commodities at different periods, which is in the nature of the case impossible; and if no relation exists there can be no measurement of it” (op. cit., p. 113).” (p 162)
Now, of course, consumer preferences play a part in determining demand. The basic requirement for a commodity is that it is a use value, that it has utility, real or perceived. If consumer preferences are such that no one finds any utility in a particular product, it will not become a commodity; it will have no value, no matter how much labour was embodied within it. Similarly, if 1,000 units of A are produced with an exchange-value of €1 per unit, this does not mean they can all be sold, at this price. If consumer preferences are such that, at this price, there is only demand for 800 units, then 200 units have been overproduced. The market price of each unit will then fall so as to clear the market. Suppliers will then have to reduce the capital employed in the production of A, to reduce supply, i.e. the amount of social labour-time devoted to this production will be reduced accordingly. If there are constant returns to scale, the market price of A will rise to its market value of €1 per unit. This then brings in the question of whether, at this lower scale of production, the market value of A may rise to, say, €1.10 per unit, with a consequent effect, once more, on the level of demand. In other words, the market value of €1 per unit was itself conditional on producing at a large enough scale that various economies of scale were achieved. As Marx says, capitalist production itself is only possible when large enough markets exist, so as to justify production on a large scale. Some products can never be produced capitalistically, because there is insufficient demand for them at market values that ensure average profits for producers. For some products, considered vital for capital, as a whole, that means that they have to be produced non-capitalistically, for example, by the state. That has been the case, in the past, with space technology, for example. But, at the other extreme, a lot of things, such as housework, exist outside the realm of exchange-value, and continue to exist within the realm of domestic labour.
Similarly, the market value of ice cream might be €1 per unit, but, on a hot day, the demand for ice cream may rise sharply, and sellers might increase prices, if demand exceeds supply. The opposite may occur during a cold, miserable period of weather.
Yet, the very fact that the question has to be phrased in terms of the demand for the commodity, at a given price, illustrates the problem, for Bailey and other theorists of subjective value, because its premise is that there is some “natural price”, as Smith calls it, some “equilibrium price” as modern orthodox economics calls it, which acts as the locus around which these movements, in the market price, occur, as a consequence of fluctuations in demand and supply. It begs the question of what determines not the fluctuations in its price, but their gravitation towards the equilibrium price?
If we even out these fluctuations, above and below the equilibrium price, then Bailey's objection is clearly seen to be false, because it is a normal part of the circulation of commodities, where money acts as means of payment, that the exchange relation established at point t is taken to hold also for point t + 1. In other words, if I agree to sell 1,000 widgets to a customer at a price of €1 per unit, today, with payment in 30 days, I do not, in 30 days time, say to the customer, sorry my preferences have changed, and I now require you to pay €1.10 per unit, any more than I would expect the buyer to announce that their preferences had changed, and they were now only paying €0.90, or were returning 100 units. Such changes do occur, but they are premised upon other objective changes, not changes in consumer preferences. For example, airlines have charged fuel price surcharges on flights, when rapid changes in their fuel costs affected them. Such adjustments are covered in English Law by the concept of force majeure.
Bailey continues this point, saying,
““… if […] it” (money) “is not a good medium of comparison between commodities at different periods [it asserts] its incapability of performing a function in a case where there is no function for it to perform” (op. cit., p. 118).” (p 162)
But, as Marx points out, money does perform this function, both as means of payment, and as store of value. In fact, if we examine those periods where paper money tokens have been issued in large quantities, resulting in hyper-inflation, it is precisely at such points that money commodities, such as gold, become in great demand. What is it about the gold, what is its utility, in such conditions, that leads to this demand? It does indeed have utility for being worked up in jewellery, and some industrial applications, but this does not explain its high level of demand, during such periods, because frequently it is merely stored, in safes and vaults, as a hoard. Its utility, what leads to the high level of demand, in such periods, is precisely its value; the fact that it requires a large amount of labour-time to explore for it, and extract it from the Earth, for relatively small volumes.
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