Rakesh, FYI, I'm receiving all of your dispatches as OPE-L posts, and my replies are correspondingly showing up on OPE-L as well. Gil >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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