The function of money as a measure of value manifests itself through the measurement of the monetary value (price) of goods. Without a quantitative determination of value in the price of a commodity, a normal market economy and an equivalent commodity relationship between commodity producers are impossible.
A measure of value is a function in which money provides the expression and measurement of the value of goods by providing it with the form of price.
The twofold purpose of this function – to express and measure value – is explained by the fact that the value of a commodity cannot be expressed otherwise than by comparing it with a commodity – a common equivalent, the value of which is generally recognized. And only through a quantitative determination in units of an equivalent product is the measurement of the value of goods carried out.
The value of a commodity could be directly expressed in terms of the expenditure of labor, and a unit of labor time could be its direct measure. However, significant differences in the cost of individual labor per unit of time make this instrument unsuitable for measuring value. The value of a commodity can also be expressed by the value of other commodities, as is done in barter exchange systems. However, in this case, each product would have not one, but many prices – as many as there are products in the given market (minus one). And these prices would be too subjective. Therefore, the processes of pricing and exchange would be too complex, laborious, which makes this method of measuring value unsuitable.
The dual purpose of the measure of value was most clearly manifested in the conditions of the use of precious metals as a monetary commodity: all goods were valued in terms of a gold or silver equivalent, i.e. the price was determined as a certain weight quantity of this metal. These “gold” or “silver” prices were initially determined by weight and were nearly identical in all markets.
With the beginning of the centralized minting of coins by states, a monetary scale arose, or scale of prices, which first coincided with the weight. So, in England, the pound sterling as a monetary unit was equal to the pound of silver, and the coin was minted with a weight one/240 pounds of silver. The Italian monetary unit lira (in Italian pound) was formed in the same way. Over time, the scale of prices for certain reasons significantly deviated from the weight scale, and in each country to a different extent. Therefore, prices, which were expressed in national money, began to differ significantly in different markets, which necessitated the use of special coefficients for the comparison of currencies (exchange rates).
So, in the conditions of circulation of real money, the price was formed as a result of their double functioning – as the embodiment of general labor to express the value of specific goods and as a price scale for determining the weight of the money metal. The scale of prices as a weight quantity of a noble metal, taken as a monetary unit, is a component of the function of a measure of value, complements its purpose to express the value of goods. It can neither be opposed to the measure of value, considering them to be two different functions, nor can we identify the measure of value with it, reducing only to counting money.
In the conditions of circulation of defective money, the mechanism of the measure of value has changed significantly. There is no gold or silver between the value of the commodity to be measured and the money price as a result of such measurement. there is no “noble” price. The need for the weight quantity of the precious metal, taken as a monetary unit and serving as a price scale, has disappeared. All states of the world have ceased to fix the gold content of monetary units. One gets the impression that the monetary unit directly measures the value of the commodity and that the function of the measure of value is reduced to a technical calculation, to providing the practice of pricing with a counting unit.
Representatives of modern economic theories that do not recognize the labor nature of value, in fact, reduce the function of a measure of value to such counting units. Representatives of the labor theory of value are trying to explain the mechanism of this function from the standpoint of the labor origin of value. Some of them believe that irreplaceable signs only represent gold in circulation, which performs the function of a measure of value in the same way as it was in the conditions of gold circulation. According to the second, in modern conditions the mechanism of the formation of the labor value of goods has changed so much that it can be measured in money without intrinsic value. Still others see the way out in the fact that, since modern money is also carriers of exchange value, through equating (exchanging) them with ordinary goods, it is possible to ensure the measurement of the value of the latter.
None of these approaches have yet received general acceptance. However, the last one seems to be the most fruitful.
Indeed, if we assume that all modern forms of money are carriers of exchange value, then it is possible to determine the real scheme for the performance of such money as a measure of value. All ordinary goods, entering the sphere of exchange, seek for themselves some kind of monetary equivalent.
In the collision of the parties – the desire to sell and the willingness to buy – is ultimately determined by the exchange value of the goods or the amount of money with which the goods are valued in the market and which satisfies both sides of the purchase and sale transaction.
This is what the economic content of the expression of value with the help of money comes down to in modern conditions.
The very mechanism of action of the price scale is changing. As a tool for measuring the monetary price, it does not act separately from the determination of value, but simultaneously with it as one process, since the value equivalent to the commodity is already expressed in monetary units, and not in the weight of gold or silver. Therefore, the role of the scale of prices is supposedly absorbed by the measure of value. The prevailing level of prices for goods also predetermines the scale of prices for new goods, and not vice versa, as it was under the conditions of the gold standard.
Money performs the function of a measure of value ideally. The manufacturer in advance, before appearing with the product on the market, determines the price at which it is profitable to sell it. But even when meeting with a buyer in the market, where the price of goods is finally decided, the presence of money in any form (gold coins, banknotes, checks, credit cards, etc.) is not necessary. The sale can generally take place on debt, against future money, but the price is determined at the time of the purchase and sale operation. Moreover, the availability of real money is not required in the case of the establishment of commodity prices by state bodies. However, these bodies must have a clear idea of the exchange value of money, which actually developed and operates in the market in order to establish a price that is adequate to the value of the goods.
Money (as a measure of value) is widely used as a counting unit (as a unit of account). With their help, it is possible to give a quantitative expression to all economic processes and phenomena at the micro and macro levels, at all stages of the process of social reproduction, without which their organization and management is impossible. Therefore, the social role of money as a measure of value goes far beyond providing all commodities with the same form of price. So, with the help of counting money, an enterprise can determine in advance its costs of production and income from sales of products, the level of profitability of production, without which it is impossible to develop the correct entrepreneurial tactics and strategy.
At the macroeconomic level, with the help of counting money, such important indicators of economic development as the volume of gross domestic product, national income, investments, financial and credit resources, etc., are determined, without which conscious regulation of the economic life of society is impossible.