In the opening chapter of Das Kapital, Karl Marx explains his theory of the origin of money, beginning with the prerequisite discussion of the respective origins of value and exchange. He posits first that the primary source of the value of any given commodity is that a commodity is, by definition, a product of a certain amount of human labor expended to produce an item that others find desirable or useful. It is the combination of the factors of having been produced by human labor and having been produced for others that creates a commodity and lends it values to it. If a thing is useful but not the product of human labor, it possesses a measure of “use-value,” says Marx, but not “exchange value,” the actual value of an object in terms of its exchangeability with other objects. It is not, then, a commodity at all. If, on the other hand, the object is the product of human labor but is not produced “for others” or “if the thing is useless,” says Marx, the labor which produced it is also useless and should not be considered real labor at all as it “creates no value.” When an object is produced for the purpose of exchange, however, it is a commodity in the proper sense of the term and “commodities . . . are something-two-fold,” Marx continues, “both objects of utility and, at the same time, depositories of value.”
The second subject which Marx discusses before approaching his theory of the origin of money is the origin of exchange. The origin of exchange, implicit in Marx’s discussion of the origin of value, Marx locates in human need and the progress of the means by which human need may be satisfied. While, for example,“the human race made clothes for thousands of years, without a single man becoming a tailor,” the production of greater qualities and quantities of clothing entailed the specialization of labor. This specialization of labor, in turn, necessitates exchange as the specialized laborer is incapable of producing everything that he requires to satisfy all of his needs. Marx’s theoretical tailor, for instance, continues to require a home, which he no longer possesses the ability to make for himself due to his dedication of time and knowledge to the production of clothing. As he a result, his needs require the specialization of a carpenter.
Exchange now becomes necessary. The tailor and the carpenter must trade with each other for the needs of each to be met. To facilitate this exchange, however, there must be an agreed-upon value of the commodities being exchanged. “The simplest value relation is evidently that of one commodity to some one other commodity of a different kind,” says Marx. In other words, the exchange relationship between two commodities determines the value of each commodity.
A simple one-for-one exchange of commodities, however, is nonsensical. In an exchange in which a tailor trades a single item of clothing he has produced for an entire house, the carpenter clearly has taken a great loss as the latter has undoubtedly put a great deal more labor into building a house than the former did while producing an item of clothing. As a result, the natural means of equivalence between commodities is “congealed labor.” In other words, says Marx two commodities are of equal value because they “have each cost the same amount of labour or the same quantity of labour time.” The amount of labor put into a commodity, then, is, in fact, the value of the commodity. It is only in this agreement that the tailor and the carpenter are able to proceed with an exchange, the carpenter gaining from the tailor an amount of clothing items in the production of which the tailor has expended an amount of labor equivalent to the labor of the carpenter in the production of the tailor’s new home.
From this system of labor-equivalent trade Marx goes on to extrapolate his theory of the origin of money. A prevalent flaw in the system of commodity trade was the continually fluctuating and difficult to determine equivalencies of value. For each trade, it was necessary to calculate anew the labor expenditure on each commodity to be traded. Improvements in the process of production of certain commodities also caused the relative values of said commodities to shift, sometimes dramatically, in value relations to other commodities as the amount of labor necessary to their production decreased. As a result, a new commodity with “the character of direct and universal exchangeability” became necessary. This tertiary commodity, gold, became, “by social custom,” a commodity whose stable value provided the means by which the relative value of other commodities could be determined. In this agreement upon a commodity of stable value, says Marx, is the origin of the money system of exchange.