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MONEY, OR THE CIRCULATION OF COMMODITIES Economic Manuscripts: Capital Vol. I - Chapter Three Karl Marx. Capital Volume One Chapter Three: Money, Or the Circulation of Commodities Contents Section 1 — The Measure of Values Section 2 — The Medium of Circulation A. The Metamorphosis of Commodities B. The Currency of Money C. Coin and Symbols of Value Section 3 — Money A. Hoarding B. Means of Payment C. Universal Money SECTION 1 THE MEASURE OF VALUES Throughout this work, I assume, for the sake of simplicity, gold as the money-commodity. The first chief function of money is to supply commodities with the material for the expression of their values, or to represent their values as magnitudes of the same denomination, qualitatively equal, and quantitatively comparable. It thus serves as a universal measure of value. And only by virtue of this function does gold, the equivalent commodity par excellence, become money. It is not money that renders commodities commensurable. Just the contrary. It is because all commodities, as values, are realised human labour, and therefore commensurable, that their values can be measured by one and the same special commodity, and the latter be converted into the common measure of their values, i.e., into money. Money as a measure of value, is the phenomenal form that must of necessity be assumed by that measure of value which is immanent in commodities, labour-time. The expression of the value of a commodity in gold — x commodity A = y money-commodity — is...
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Summary
Marx dissects money's triple identity in capitalist society. First, money serves as a measure of value - the universal yardstick that lets us compare apples to automobiles by expressing both in dollar amounts. But here's the crucial insight: prices don't always reflect true value. A commodity might sell for more or less than the labor actually invested in it, creating opportunities for both profit and exploitation. Second, money acts as a medium of circulation, the grease that keeps the wheels of commerce turning. Marx traces the journey of a simple transaction - linen exchanged for gold, then gold for a Bible - revealing how money enables the complex web of exchanges that characterize modern life. But this system contains inherent contradictions: sellers need buyers, but timing rarely aligns perfectly, creating potential for crisis. Third, money functions as a store of value through hoarding and as a means of payment through credit systems. The hoarder sacrifices immediate pleasure for future security, while credit relationships create new forms of social power - the eternal struggle between debtor and creditor that has shaped civilizations from ancient Rome to modern America. Marx shows how these functions can conflict with each other, particularly during economic crises when the demand for 'hard cash' suddenly overwhelms everything else. This analysis reveals money not as a neutral tool, but as a social relationship that both enables and constrains human activity, setting the stage for understanding how capital itself operates.
That's what happens. To understand what the author is really doing—and to discuss this chapter with confidence—keep reading.
Terms to Know
Commodity
Anything produced to be sold rather than used by the maker. Marx argues that commodities have two types of value: use-value (how useful they are) and exchange-value (what they're worth in trade). This distinction is crucial because it shows how capitalism turns everything, including human labor, into something to be bought and sold.
Modern Usage:
Today we see this when companies turn basic needs like healthcare or housing into profit-making commodities rather than human rights.
Use-value vs Exchange-value
Use-value is how useful something actually is to you - a coat keeps you warm, food feeds you. Exchange-value is what you can sell it for. Marx shows these don't always match up - a diamond has high exchange-value but limited use-value, while water has enormous use-value but low exchange-value.
Modern Usage:
We see this disconnect when life-saving medications cost thousands of dollars, or when luxury brands charge premium prices for basic items.
Labor-time
The amount of work time socially necessary to produce something. Marx argues this is the real source of value - not supply and demand, but human effort. He distinguishes between individual labor-time and the average time it takes society to make something.
Modern Usage:
This explains why handmade items cost more than mass-produced ones, and why automation often leads to job losses and price drops.
Money-commodity
The special commodity (historically gold) that becomes the universal measure of value. It's still a commodity itself, but it serves as the standard against which all other commodities are measured. Money doesn't create value - it just expresses the value that's already there from human labor.
Modern Usage:
Today's paper money and digital currency play this same role, though they're no longer backed by gold.
Metamorphosis of commodities
The transformation process where commodities change from one form to another through exchange. A farmer's wheat becomes money, then the money becomes tools, then tools help produce more wheat. Marx shows how this circulation can break down at any point.
Modern Usage:
This is why economic crashes happen - when people stop buying, the whole chain of exchanges breaks down and businesses fail.
Hoarding
Withdrawing money from circulation and storing it instead of spending it. The hoarder sacrifices immediate pleasures to accumulate wealth. Marx sees this as both rational individual behavior and potentially destructive to the overall economy.
Modern Usage:
We see this in people who stuff cash under mattresses during uncertain times, or in companies that sit on huge cash reserves instead of investing.
Means of payment
Money used to settle debts rather than for immediate exchange. This creates credit relationships where goods are delivered before payment, establishing power dynamics between creditors and debtors. It's different from simple buying and selling.
Modern Usage:
This is how credit cards, mortgages, and payment plans work today - creating ongoing financial relationships rather than simple one-time exchanges.
Characters in This Chapter
The Linen-weaver
Representative commodity producer
Marx uses this figure throughout the chapter to show how commodities move through the market. The linen-weaver produces cloth, exchanges it for money, then uses that money to buy other necessities. This simple example reveals the complex social relationships hidden in every market transaction.
Modern Equivalent:
The small business owner trying to turn their product into cash to pay bills
The Hoarder
Accumulator of wealth
This character withdraws money from circulation, storing it instead of spending it. Marx shows how the hoarder sacrifices present enjoyment for future security, becoming a slave to their own gold. The hoarder represents one extreme of money's contradictory nature.
Modern Equivalent:
The person who never spends money and lives like they're broke despite having savings
The Debtor
Obligated payer
Someone who owes money and must pay it back at a specific time. Marx shows how debt relationships create new forms of social power and vulnerability. The debtor's need to pay creates pressure that can force them to sell their labor or possessions.
Modern Equivalent:
Anyone struggling with credit card debt or student loans
The Creditor
Power holder
The person or institution that is owed money. Marx reveals how creditors gain power over debtors' future labor and decisions. This relationship goes beyond simple buying and selling to create ongoing control over other people's economic choices.
Modern Equivalent:
The bank that holds your mortgage or the credit card company charging interest
Why This Matters
Connect literature to life
This chapter teaches how to spot when a single system serves conflicting purposes, creating built-in tensions that benefit those in control.
Practice This Today
This week, notice when your job asks you to be three different things at once - watch for the moments when these roles conflict and ask who benefits from the confusion.
You have the foundation. Now let's look closer.
Key Quotes & Analysis
"It is not money that renders commodities commensurable. Just the contrary. It is because all commodities, as values, are realised human labour, and therefore commensurable, that their values can be measured by one and the same special commodity."
Context: Marx is explaining why we can compare the value of completely different things using money.
This flips conventional thinking on its head. Money doesn't create the ability to compare things - rather, because everything valuable contains human work, we can compare them. Money just makes this comparison visible and practical.
In Today's Words:
Money doesn't make things comparable - they're already comparable because they all took human effort to make. Money just gives us a way to see and measure that.
"The miser is therefore the martyr of exchange-value."
Context: Marx is describing how hoarders sacrifice everything for the sake of accumulating money.
Marx shows the psychological cost of treating money as an end in itself rather than a means to get what you need. The hoarder becomes enslaved by their own wealth, unable to enjoy life because they're obsessed with accumulating more.
In Today's Words:
The person who hoards money becomes its slave, giving up all the good things in life just to watch their bank account grow.
"Money is a crystal formed of necessity in the course of the exchanges by which different products of labour are practically equated to one another."
Context: Marx is explaining how money naturally emerges from the process of trading different goods.
This beautiful metaphor shows money as something that crystallizes naturally from human economic activity, like salt forming from seawater. It's not imposed from outside but emerges from our need to compare and exchange different types of work.
In Today's Words:
Money forms naturally when people need a common way to trade different things - it's like a crystal that forms when you need it most.
Intelligence Amplifier™ Analysis
The Road of the Three-Faced Tool
When something serves multiple essential functions, those functions inevitably conflict with each other, creating predictable tensions and opportunities.
Thematic Threads
Hidden Contradictions
In This Chapter
Money's three functions create built-in conflicts that seem like external problems but are actually systemic features
Development
Building on earlier analysis of value versus price, now showing how these contradictions operate in practice
In Your Life:
When your job demands conflict with each other, it's often the system design, not your failure to balance them.
Social Power
In This Chapter
The creditor-debtor relationship creates new forms of control beyond direct ownership or employment
Development
Expanding from workplace power dynamics to financial power relationships
In Your Life:
Understanding debt relationships helps you recognize when financial obligations are reshaping your life choices.
Crisis Patterns
In This Chapter
When everyone suddenly demands the same function from money (storage/security), the system breaks down
Development
First detailed look at how individual rational choices can create collective irrationality
In Your Life:
During workplace or family crises, everyone often demands the same limited resource, creating predictable shortages.
Timing Mismatches
In This Chapter
Sellers need buyers and buyers need sellers, but rarely at the same moment, creating friction and opportunity
Development
Introduced here as fundamental market reality
In Your Life:
When you need something urgently, others may not be ready to provide it—and vice versa.
Sacrifice Patterns
In This Chapter
The hoarder gives up immediate pleasure for future security, revealing how money shapes behavior and values
Development
First exploration of how economic systems influence personal psychology
In Your Life:
Every time you save money instead of spending it, you're choosing between present and future versions of yourself.
Modern Adaptation
When the Paycheck Doesn't Add Up
Following Karl's story...
Karl's been tracking wage theft cases across three industries, and the pattern is crystal clear. Workers get paid in three different ways that don't line up. There's the posted hourly rate that management uses to calculate 'fair wages.' There's the actual cash that hits their bank account after mysterious deductions. And there's the real value they create through their labor - the $15 sandwich they make while earning $7.25 an hour. At the meatpacking plant, workers clock in but don't get paid for the twenty minutes spent putting on safety gear. At the warehouse, bathroom breaks get docked from productivity bonuses. At the restaurant, servers depend on tips to make up for sub-minimum wages, creating a system where customers subsidize labor costs. Karl realizes these aren't three separate problems - they're three faces of the same rigged system. The wage is supposed to be a measuring stick, a payment method, and a store of value for workers' time and effort. But just like money itself, these functions conflict. What measures 'fair' doesn't match what circulates as payment, and neither provides real security.
The Road
The road Marx walked in 1867, Karl walks today. The pattern is identical: any tool that serves multiple masters creates contradictions that benefit those who control the tool.
The Map
Karl can map which function is being prioritized in each workplace conflict. When management focuses on 'competitive wages' (measurement), they're avoiding discussion of actual take-home pay (circulation) or job security (storage).
Amplification
Before reading this, Karl might have fought each wage issue separately. Now they can NAME the triple function, PREDICT when contradictions will emerge, NAVIGATE by identifying which function workers need most in each battle.
You now have the context. Time to form your own thoughts.
Discussion Questions
- 1
Marx shows money serving three different roles at once - measuring value, moving goods around, and storing wealth. Can you think of something in your own life that has to serve multiple competing purposes like this?
analysis • surface - 2
Why does Marx argue that having one thing serve multiple functions creates built-in conflicts? What happens when everyone suddenly wants the same function at the same time?
analysis • medium - 3
Where do you see this 'triple function' pattern in your workplace or family life? Think about roles that demand you be multiple things to multiple people simultaneously.
application • medium - 4
When you're caught between competing demands (like being a caregiver, documenter, and cost-saver at work), how do you decide which function takes priority in the moment?
application • deep - 5
Marx suggests these conflicts aren't bugs in the system - they're features. What does this tell us about how to approach situations where we're pulled in multiple directions?
reflection • deep
Critical Thinking Exercise
Map Your Triple Functions
Choose one major role in your life (parent, worker, caregiver, friend). Write down three different functions this role demands of you - like how money must measure, circulate, and store. Then identify one recent situation where these functions conflicted with each other. What happened when you couldn't do all three things well at once?
Consider:
- •Notice which function you automatically prioritized - this reveals your instinctive values
- •Look for patterns in when these conflicts happen most often
- •Consider whether the people around you understand these competing demands
Journaling Prompt
Write about a time when you felt torn between different aspects of the same role. How did you navigate it, and what would you do differently knowing that these conflicts are built into the system rather than personal failures?
Coming Up Next...
Chapter 4: The Money-Making Machine Revealed
Moving forward, we'll examine to spot the difference between working for money versus making money work for you, and understand some business cycles create wealth while others just move it around. These insights bridge the gap between classic literature and modern experience.