[OPE-L:2076] Re: Re: Re: Re: the money supply

From: Claus Germer (cmgermer@sociais.ufpr.br)
Date: Mon Jan 10 2000 - 06:31:07 EST

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In [OPE-L:2046] Allin wrote:

>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?

The general argument in your answer seems inconsistent to me. You
jumped from the initial assumption of a state determined money to a line of
reasoning that starts from the exchange based on labor time between two
producers, without any reference to the state. I think the later is the
right line of reasoning, that had a first presentation by
the classical economists and was fully developed by Marx, but this is
the line of reasoning you object when you postulate that money is a
of the state, as sugested by Knapp and his followers. Thus, it seems to me,
you were supposed to start with the state providing a way for measuring the
values of
commodities according to labor times.

Besides this general objection to your post, there are other
that I would like to point out:

You start by saying that

>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.

Your argument seems to be that in Smith's explanation he assumes that "the
relative labor times are common knowledge", but that this assumption cannot
hold in capitalism, because in this case the mechanism must be much more
complex, which would open the way to - or require - some sort of purely
abstract money. And you go on to say:

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.

There are two flaws in this argument. The first is that you don't provide
any ground at all for your statemente that "the Smithian mechanism does not
depend on a commodity money". In chapter 3 of book 1, "Of the origin and
of money", Smith speaks only of commodity money, there being no mention of
money being replaced with any other device in the function of measure of
value, which is what he is implicitly talking about. And in chapter 2 of
book 2 he shows the replacement of credit money for money (gold) only as
means of circulation, this being clearly based on gold functionning as
measure of value. Smith's argument would not be affected by the
introduction of tokens
only if he had provided some indication of the way in which, in this case,
relative prices came in line with labour values, which he didn't do at all.
I would expect you to provide such an indication, which you didn't do.

Second, notice that, when you say that "his argument would not be affected
if exchange was carried out via some sort of tokens with no inherent labour
value", you are talking merely of the function of means of circulation of
money, since you refer to *exchange*, and you are implicitly assuming that
the values of the commodities have already been measured. Thus your
is doubly innocuous in terms of what you are trying to prove: first, you
say anything about the way values can be measured by a money created by
the state, which is the point you have been making; second, what you say
above does not contradict Marx's theory, since he explicitly states that
tokens without inherent labour value (symbols of value) can replace money
the function of means of circulation, once the values of commodities have
been measured by money (gold) and assuming there is a social authority -
more tipically the state - with power enough to enforce the circulation of
the tokens. However, tokens are only one of the ways to replace money as
means of circulation, the other being the promises to pay, from which
money derives, becoming the more common means of circulation in advanced
capitalism. By the way, in chapter 2 of book 2, where Smith develops the
replacement of money as means of circulation, he does not refer to tokens,
but only to "notes of banks", i.e., credit money, which leaves your
without ground.

Finally, your argument implies that the commodity nature of money depends
the possibility of the *common knowledge* about the labor content of the
commodities, which, according to you, doesn't hold in capitalism,
because in this case the mechanism must be *much more complex*, although
don't explain why. This is the hypothesis that you seem to take as a
justification for money being unable to be a commodity in capitalism. This
looks very litle consistent to me. First of all, it is not clear that for
Smith the
labor content of commodities is common knowledge *in that rude state of
society*, as he says. Second and more important, it would be better to
start from Marx,
whose theory is the one we are discussing, and who does not assume common
knowledge of the labor contents of the commodities, either in capitalism or
in the abstracted *simple production*. On the contrary, the mechanism by
which exchange is based on labor contents is not - and does not need to be
perceived by the producers.

Claus Germer
Departamento de Economia
Universidade Federal do Paraná
Rua Dr. Faivre, 405 - 3º andar
80060-140 Curitiba - Paraná

Tel: (041) 360-5214 - Ufpr
       (041) 254-3415 Res.

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