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2. The Objective Exchange-Value of Money
It follows from what has been said that there can be no discussion of the problem of the value of money without consideration of its objective exchange value. Under modern conditions, objective exchange value, which Wieser also calls Verkehrswert (or value in business transactions), is the most important kind of value, because it governs the social and not merely the individual aspect of economic life. Except in its explanation of the fundamentals of value theory, economics deals almost exclusively with objective exchange value.7 And while this is true to some extent of all goods, including those which are useful apart from any exchange value which they possess, it is still truer of money.
"The objective exchange value of goods is their objective significance in exchange, or, in other words, their capacity in given circumstances to procure a specific quantity of other goods as an equivalent in exchange."8 It should be observed that even objective exchange value is not really a property of the goods themselves, bestowed on them by nature, for in the last resort it also is derived from the human process of valuing individual goods. But the exchange ratios that are established between different goods in commercial transactions, and are determined by the collective influence of the subjective valuations of all the persons doing business in the market, present themselves to separate individuals, who usually have an infinitesimal influence on the determination of the ratios, as accomplished facts, which in most cases have to be accepted unconditionally. It has thus been easy for false abstraction from this state of affairs to give rise to the opinion that each good comes to the market endowed with a definite quantity of value independent of the valuations of individuals.9 From this point of view, goods are not exchanged for one another, by human beings; they simply exchange.
Objective exchange value, as it appears in the subjective theory of value, has nothing except its name in common with the old idea developed by the Classical School of a value in exchange inherent in things themselves. In the value theory of Smith and Ricardo, and in that of their successors, value in exchange plays the leading part. These theories attempt to explain all the phenomena of value by starting from value in exchange, which they interpret as labor value or cost-of-production value. For modern value theory their terminology can claim only a historical importance, and a confusion of the two concepts of exchange value need no longer be feared. This removes the objections that have recently been made to the continued use of the expression "objective exchange value."10
If the objective exchange value of a good is its power to command a certain quantity of other goods in exchange, its price is this actual quantity of other goods. It follows that the concepts of price and objective exchange value are by no means identical. "But it is, nevertheless, true that both obey the same laws. For when the law of price declares that a good actually commands a particular price, and explains why it does so, it of course implies that the good is able to command this price, and explains why it is able to do so. The law of price comprehends the law of exchange value."11
By "the objective exchange value of money" we are accordingly to understand the possibility of obtaining a certain quantity of other economic goods in exchange for a given quantity of money; and by "the price of money" this actual quantity of other goods. It is possible to express the exchange value of a unit of money in units of any other commodity and speak of the commodity price of money; but in actual life this phraseology and the concept it expresses are unknown. For nowadays money is the sole indicator of prices.