What in reality fundamentally characterises barter, is that it is an exchange, carried out on the spot, of goods immediately usable by the two parties, each of them giving one usable thing in order to enter into possession of another; whilst that which fundamentally characterises the operation of selling and buying, by means of money, is that it constitutes an exchange of goods carried out on the spot, of which one form only can be immediately used by one of the parties, the other party obtaining not a real thing but an instrument by which he will be able to procure it. So that the party who has received the money, the seller, has only thus obtained a power to make subsequently an inverse operation, that is a purchase where and when it pleases him. The operation of selling and buying is then nothing less than the exchange of a thing for a power. But can we still make use of the word «exchange» to define such an operation? We do not think so, and it is for this reason that we substitute for it that of «transaction.»
The word «exchange» has continued to be employed after having quitted the system of barter to enter upon the system of buying and selling, by means of money, just as the expression «money» has continued to be used to describe bank-notes, which are only paper having the power of money, as money is an instrument having the power of «things.» Thus we have here an example of the general rule, that the evolution of ideas and of facts, is always more rapid than that of the words which represent them.
Our opinion with regard to «exchange» will be found all the more justified since it will be seen later on that the power conferred by money upon the seller does not exclusively belong to the monetary system, but that it can be obtained, and that theoretically it always could be obtained, in quite another way, without exchanging anything, without having anything to do with money, by simple entry, registering or writing down of figures on paper which is not exchanged, but which remains in one's own hands.
Let us now come back to the question.
We proceed to show that the relative value of things is independent of the unity of value chosen, and that the transactions can be registered, written down, abstraction made of the real, actual value of the material support which has served to fix this unity.
In a general way and within possibly narrow limits, very different and variable according as the case may be, given the existence in actual society of fortunes and desires of all degrees of importance, one can, in principle, admit that theoretically, the value v of a thing or of a certain quantity of goods, is proportional to the average d of the desire to possess it, which the men demanding it have, either on account of its use, or from any other reason, multiplied by the number h of these men and divided by the number o offered of this thing; these three factors d, h and o not being probably in other respects determinable with precision.
We shall then have for the formula of value:
v = u × dh/o
u being a coefficient of proportionality depending on the unity of value adopted.
It will be seen that the term dh/o represents in reality the account of the conditions of the supply and of the demand at the moment and at the place where the value is determined[B]. In substituting E, we have a new term expressive of the value: