There were numerous attempts to find some third commodity to act as the measure of value as an absolute, constant measure. A similar attempt to find a measure of cardinal utility was undertaken by the proponents of subjective value. The attempts to find some such third commodity were a fool's errand, as Marx describes in Theories of Surplus Value, Chapter 20, and simply opened the door to those like Samuel Bailey, who sought to reject the idea of value being objectively determined, and to advocate, instead, the concept of value being purely subjective.
The problem arises precisely because of trying to measure exchange-value directly, in terms of some third commodity, rather than starting with the value of the commodity, measured directly in terms of labour-time. Only when that is done can the mutual relations between commodities, their exchange-values, be determined. As Marx describes, it is impossible to arrive at a direct, absolute measurement of exchange-value, because exchange-value itself is not a direct and absolute measure of value; it is indirect and relative. Whatever third commodity is chosen as the unit of measurement – including labour-power – is itself subject to constant changes in its own value, and so in its material relations with other commodities. That is why labour-power (wages) cannot be the basis of such measurement, whilst labour is, and that was the confusion that Smith was led into.
But, Marx says, precisely because it is possible to measure value directly, and objectively, in terms of labour-time, it is not necessary to have a direct and constant measure of exchange-value, in the form of some third commodity. If gold is chosen as this third commodity, then it measures other commodities proportionate to its own value. If a gram of gold has a value of 10 hours, then this may equal 1 metre of linen, or 1 litre of wine, so that we also know that 1 metre of linen equals I litre of wine. If the value of gold falls to 5 hours, then 2 grams of gold equal a metre of linen, or a litre of wine. So, the fact that the value of gold is not constant does not, at all, prevent it from acting as a measure of exchange-value, because its proportional relation to all other commodities does remain constant, i.e. relation to both linen and wine has changed equally, and 1 metre of linen continues to be equal to 1 litre of wine, a relation which is not all consequent upon their exchange-value measured in gold, but on the fact hat their own value remained 10 hours of labour. It is that direct and absolute measure of their value that determines their exchange-value with each other, and not their exchange-value measured indirectly and relatively against gold.
The other manifestation of this confusion, in relation to concrete labour, which produces use values, and abstract labour, which produces value, is that relating to what labour creates wealth. In terms of real wealth, it is that which produces use values, because real wealth consists of the quantity, quality and variety of such use values, available for consumption. However, bourgeois wealth consists of exchange-value, and, most notably, exchange-value incarnate – money. On the one hand, the mercantilists saw this accumulation of money as the indication of national wealth, and so the labour that produced it as productive, whereas the Physiocrats saw the surplus of use values, surplus product, as the measure of national wealth, and so the labour that produces it as productive.
Adam Smith stood upon much of the advances made by the Physiocrats, in terms of their recognition of the source of surplus value/product residing in production, rather than exchange, whilst he corrected their conception of value as use-value and identified it with abstract labour. Yet, as Marx describes, in Theories of Surplus Value, Part 1, Smith himself periodically falls into Physiocratic views when considering productive labour. The same failing can be seen today, in terms of seeing only physical commodities, rather than services, as the result of productive, and value creating labour.
“It was thus assumed that not every kind of labour which is materialised in use-values or yields products must thereby directly create wealth. But for both the Physiocrats and their opponents the crucial issue was not what kind of labour creates value but what kind of labour creates surplus value. They were thus discussing a complex form of the problem before having solved its elementary form; just as the historical progress of all sciences leads only through a multitude of contradictory moves to the real point of departure.” (p 57)
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