[OPE-L:2046] Re: Re: Re: the money supply

From: Allin Cottrell (cottrell@ricardo.ecn.wfu.edu)
Date: Thu Jan 06 2000 - 10:27:25 EST

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On Wed, 5 Jan 2000, Claus Germer wrote:

> In order for me to understand your point of view, could you
> explain:

> 1) how does the state influence the determination of the
> exchange values of the commodities, and how do these
> exchange values come to correspond to the labor contents af
> the commodities?

A good question. Right now I'm getting ready to go to a
conference so I'll have to be brief. I'll try to give a better
answer when I get back.

For now I just want to make one point: that it's possible to
provide a mechanism whereby relative prices get into line with
labour values, _without_ positing a money (e.g. gold) that
itself has a labour value.

For example, take Adam Smith: "If among a nation of hunters ...
it usually costs twice the labour to kill a beaver which it does
to kill a deer, one beaver should naturally exchange for or be
worth two deer."

Smith is implicitly supposing that the relative labour times to
bring home beaver and deer are common knowledge, and that if the
exchange ratio were far from the "natural" 1:2 then exchange
would not take place, since people could see that they'd have to
expend more labour time to get a beaver via the hunting of deer
plus exchange than by hunting the beaver directly (or vice

Now of course I'm not claiming that this mechanism (involving
common knowledge of the labour-times required to produce things,
derived independently of prices) applies under capitalism. The
capitalist mechanism has to be much more complex. But notice
the logical point that the Smithian mechanism does not depend on
a commodity money. Smith thinks of the deer-beaver exchange as
a case of barter but his argument would not be affected if
exchange was carried out via some sort of tokens with no
inherent labour value. People could still see that, regardless
of the "absolute" price of deer and beaver in terms of such
tokens, equilibrium requires that the price of a beaver be twice
that of a deer.

I'm suggesting that the case under capitalism shares this very
general feature: to get _relative_ prices (roughly) into line
with labour values we need a definite economic mechanism
(different from Smith's, to be sure), but this mechanism does
not have to depend on the _absolute_ money prices of individual
commodities being themselves explicable in terms of the labour
theory of value.

Allin Cottrell.

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