Gil, I am not making Fred's argument. I am making my argument. Since I sent this to you offlist last night, I shall just fwd it to the list, and include some reply to your latest post 7496. Let's just focus on whether gold is the kind of commodity which should be included in a theory of competitive price formation. Is gold the kind of commodity which belongs in Marx's transformation tables or Sraffa's equations? One question is whether the labor value of gold or its price of production would regulate the market price of gold in any sense. We know that Marx, following Ricardo, thought that there was no reason to assume that labor value would regulate price if the commodity was not *freely* reproducible. Neither Ricardo nor Marx thought for example that the labor value of an artistic masterpiece would regulate its market price. Moreover, for the price of production of gold to regulate its market price, capital has to be free to flow in and out of gold production. But first let's say that gold production secures less than the average profit rate. Will capital withdraw? Well quite possibly yes! Capital could in fact FULLY withdraw as society would be able to get by on extant gold (most of the extracted gold throughout history is with us in circulation or as hoards; very little has been lost on sunken ships!). In this case gold production would simply cease and thus could not even be represented as an industry or commodity in Marx's transformation table or Sraffa's linear equations! Take now the case of an above average profit rate in gold--as Fred may put it, capital will flow into of this industry, causing an increase in the supply of this commodity, which in turn causes a decrease in its price and therefore an decrease in its rate of profit toward the average rate of profit. At least gold capitalists have to believe that capital could flood into their branch; otherwise they may not preemptively lower price. There is no guarantee however that the marginal mines that would have to be worked even exist or could yield gold at the average rate of profit. So gold opts out of the equalisation process. It is more likely that the the profit rate on new gold production will be brought down to the average, if not below that, by an attentuation of, say, general crisis conditions than an increased supply of gold. To be sure, gold is reproducible in some sense, but it's not freely reproducible, and the law of value only governs the price formation of that set of commodities. So the adjustment process cannot be counted on to proceed through increased production or the possibility thereof. It may be possible to increase production profitably; it may not be. One simply cannot say. Gold simply does not belong in the process of competitive price adjustment. There is simply no reason to believe that the price of gold would be governed over time and in any sense by its labor value or its labor cost of reproduction as with reproducible commodities(is the price of gold determined by the 4000 yr historic average cost to extract an ounce of gold, the labor time needed to extract an ounce now from the best, worst or average mine?) or its price of production (for example, let's say capital withdraws from less than average profitable gold production, then how could its price be determined as cost price + average rate of profit on new production?) Marx never meant his price theory to apply to all commodities; even if gold had not been the money commodity, it would not belong to the set of commodities subject to Marxian laws of price formation. >> > >First, this commits the fallacy of confusing the actual with the >possible. It's also true that not that much horse manure is >produced *for sale* (some is, for fertilizer), but that doesn't >imply it's not reproducible. Moreover, gold is reproducible--just, >perhaps, at a high cost (more on that below). There is no guarantee that the costs of new production would be low enough that the average profit could be made. Precious metals are simply not freely reproducible commodities. > But second, and more to the point, the quotes I adduced from K.III >Part 1 indicate that Marx *assumed* the money commodity at the level >of abstraction he pursues here, and he says nothing about problems >of reproducibility associated with that commodity. Marx also did not include gold in his five industry scheme. You and Bortkiewicz are the ones proposing that he do so. I am saying that this would be inconsistent with his theory. Precious metals are not the kind of commodity the price of which is regulated by the law of value. >First, Marx does not mention these problems when he asserts that >money takes commodity form, so he evidently abstracts from them, as >suggested above. > Second, the above does not suggest gold is not >"reproducible"--e.g., the quantity supplied of gold could have been >constant over this period--rather it suggests that marginal cost of >production is significantly rising beyond a given margin of >production. yes. > However this problem is not unique to gold as a money commodity. yes. > It would also exist for gold, or silver, or any other >precious metal used for intermediate or final consumption; other >minerals and metals (cobalt?); and some agricultural products. yes. > So this would be a problem for Marx's analysis of capitalist >production *whether or not* he assumed a money commodity. doesn't follow. Marx's analysis is not meant to apply to such commodities. > But again, he evidently assumed all such problems away--and if he >assumes them away for non-money commodities, he can just as well do >so for a money commodity. No Marx assumes away such non freely reproducible commodities from that set which he thinks is subject to his value theoretic laws of competitive price formation. It does not seem consistent with Marx's theory to include gold inhis five industry example, and not only because gold was the money commodity. Gold is simply not a freely reproducible commodity. > >>The price of gold does not seem ever subject to have been subject >>at the farthest remove to a direct or indirect law of value, i.e., >>the law of price of production; gold simply has to be considered >>apart from the process of competitive price formation. The >>assumption of the gold standard by emergent powers, the >>demonetization of silver,,and international crises, etc all have >>decisive effects on the price formation of gold. > >I don't see how *this* historically-based argument applies to the >purely theoretical point under discussion any more than does Fred's >historically based argument. Marx evidently abstracts from such >considerations in his analysis of KIII Part 1. You didn't respond to the rest of my post below. Rakesh >Gil > > > >> Marx's five industry example of competitive price formatation nor >>in Sraffian linear equations. We'll have to settle for the standard >>commodity as the only kind of "money" which belongs in the Sraffian >>framework. >> >>There is a further problem with the above. >> >>Gil grants that Marx posits the value of no other commodity as >>fixed, so why then does Marx stipulate a fixed value for the money >>commodity alone? There is no answer in the above. In so doing, >>Marx has certainly not attempted a descriptively faithful >>representation of the bourgeois system. Even in Gil's passages >>Marx only briefly and most superficially considers a changing value >>of money to underscore that doing so only needlessly complicates >>his point. >> >>Moreover if one grants that Marx has stipulated a constant value of >>money and cost prices have to be in some price form (market, price >>of production, direct), then it follows that Marx begins his >>transformation analysis with a monetary expression of labor time >>already fixed. On what grounds would one justify changing it in the >>course of the transformation? >> >> >>Rakesh
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