Marxism, Communism, and Socialism/Marxist Economics/

On Commodities
Commodities is to capitalism as elements are to chemistry. It is very important in capitalism. (Economics, Marx and Engels argued, is the science of capitalism).

The commodity has two values: one if its usefulness, fulfilling a need, it's called a use-value; the other "expresses" the use-value in relations to each other, called the exchange-value. Use-value is concerned with "quality"(or the character of different sorts of commodities), and exchange-value is concerned with "quantity".

Here's where Marx's translation gets warped: every commodity has both forms of value. If we take away value, we are left with labor. But since we screwed around with the value, we screw around with the labor also.

Value is affected directly by labor. Marx cites the example of power-looms which decreased the labor necessary to weave by half, in effect the value of the linen decreased by half also.

There are two factors in labor: labor-power, the degree of power given by labor; and labor-time, how much time is consumed by laboring. The reason why gold is so valuable is because so much labor-time is dedicated to finding it, then labor-power to extract it. For example: Brazil around the 1820s found a rich vein of diamonds. They spent so much labor-power on the diamonds that the combined value within the next three years of the diamonds is as much as Brazil's sugar crops within one year, because the amount of labor dedicated to each respective sector created a balanced value. We determine labor through necessary labor time.

NOTE: Not all things with a use-value is created by labor, e.g. virgin soil, air, etc. A use-value can have no value. Labor is able to create value, but it is also capable of not doing so.

Marx gives the example a coat=20 yards of linen. That would mean that the coat takes 2W labor time, and the 20 yards of linen has 2W labor time. The element that allows us to say 1 coat=20 yards linen is value. Money is a commodity which is used to express value, it could be gold, cattle, etc.

Now it gets tricky... when there is a series of commodities set to be expressed through the means of gold, it is the "money form of value"; for example:

2 ton Iron 20 yards linen 2 coats = 3 ounces gold 1 table x commodity A

This is the "price form". Prices go up because of an increased amount of labor on the commodity, or a decreased amount on the gold. The opposite is true too.

The circulation of commodities and money is a little weird at first, but I'll try to explain it. There is the sale transaction, the commodity-money(C-M), which exchanges a commodity for money. Then there is the purchase transaction, the money-commodity(M-C), which exchanges money for commodity.

What happens is the two form the C-M-C process, the circulation of commodities; or selling in order to purchase. The equation N x P = V x S, or the number of sales(N) at the average price(P) equals the velocity, or number of transactions,(V) multiplied by the money supply(S).

This all assumes that money is not being hoarded, of course. Then money itself is a commodity. Finally, money, if based on a standard, has its standard as the universal money; that is to say, if money is backed by gold, the unvirsal money is gold.

Transformation of Money into Capital
The general formula for the circulation of commodities is C-M-C. The opposite is basically the same for the merchant's point of view: M-C-M. However, there is a profit to be "made". If one buys 1000 yds of linen for $20, then sells it for $25, you exchange $20 for $25. So, it is M-C-M', where M'= M + M. That triangle thingy, for those who don't know, means "the difference between"; in this case it would mean $5 surplus-value.

There is a contradiction, though, that the value is expressed through another commodity of equal value. Yet the exchange was of unequal values! This surplus-value could be used to get more capital. Well, the difference between M' and M would be the percent which prices are affected.

Every human has labor-power. It is the only commodity which they are born with, and forced to sell in capitalism. There is a limit, however, to how much labor-power that can be expended; old age takes its toll. As Marx says: "The price of the labour-power is fixed by the contract, although it is not realised till later, like the rent of a house. The labour-power is sold, although it is only paid for at a later period."