I agree that to serve as MONEY a commodity must be scarce. But it need not be scarce to serve as a NUMERAIRE. A subtext of this discussion is whether it is useful (or possible) to discuss the mechanisms that connect prices, distribution and the technical conditions of production separately from the role money plays in a market economy. I've argued that it is both possible and useful. Naples maintains that it is not possible, but her (and other) efforts to integrate the two kinds of issues have, on the whole, not been very successful. Let me underscore that I DO NOT BELIEVE that monetary phenomena are irrelevant to distribution: my position is that we can learn something useful about distribution by separating, in our theoretical work, the aspects of distribution that do not concern money or finance from the aspects of it that do. Regards, Gary > >But Gary, Naples speaks to this directly. A commodity would not be >commodity money if it was not structurally scarce unlike freely >reproducible commodities. And a structurally scarce commodity in >which land is a crucial means of production (as Naples puts it) will >not tend to exchange at its price of production. > >In his transformation procedure Marx could only have meant to include >such commodities as can be increased in quantity by exertion of human >industry, and on the production of which competition operates >*without restraint*. This is how for example Richard Jones clarified >Ricardo's meaning in comments on Malthus, and it seems that Pasinetti >would agree. Now to be sure, the supply of gold can be multiplied >(and certainly has been) but it cannot be multiplied without great >difficulties, which it may take time to overcome and overcome at last >with expense, if at all. There is, in other words, a difference >between reproducible and freely or infinitely reproducible. A >commodity would not become commodity money if it were freely or >infinintely reproducible--this seems to Naples' point. > > >Ultimately this is major reason why monopoly profit in the gold >producing sector would not be competed away. > > >One should expect monopoly profit in the money commodity sector for >three reasons: > > >(I) given the non substitutability of the money commodity as a means >of payment, etc, strong demand will not tend to be self correcting. > > >(II) relative to demand there is scarce supply itself the result of > (a)natural shortage--gold is not freely reproducible and no >commodity that was would have been chosen as the money commodity, as >Naples suggests. > (b) property right constraints on new investments and thus supply > >(III) a lower relative OCC in the gold producing sector with the >landowner capturing the extra surplus value and thus preventing that >extra surplus value from being competed away as Fred has explained >Naples' implicit reasoning. > > >That is, we can assume that > >1. if gold was not the money commodity, we can say straighforwardly >that value of gold is greater than what the price of production of >gold would be if the gold sector could enter the equalisation process >(which it cannot as a result of absolute rent) > >2. assuming gold as the money commodity, the actual value of gold >rather than the purely hypothetical price of production of gold is >more likely to be expressed as the purchasing power of the money >commodity; there was never any reason to make the price of production >of gold the unit of account in the Bortkiewicz-Sweezy transformation >exercise. > >3. the exchange value or rather purchasing power of money is however >ultimately a monopoly price, dependent on the strength of demand. We >can't give a supply side or classical interpretation of the exchange >value of commodity money based on either its value or price of >production. Money simply does not belong in a set of transformation >equations which are meant to derive supply side determined long term >equilibrium exchange ratios. > >Given what he was trying to study, Marx was reasonable to assume >that the value of, say, an ounce of gold is fixed unlike the value of >any other commodity and that the exchange value of money or monetary >expression of labor time would not change as a result of the >transformation of values into prices. > >So to repeat: there was no theoretical warrant for Bortkiewicz and >Sweezy to have made the price of production of gold the monetary unit >in the transformation from value (or simple prices of value prices) >to prices of production; this lead to the empirically nonsensical >result that the relation between total price of production and total >value price or simple price hinged on the composition of capital in >Dept III. This assumption was driven by the desire to keep the math >game alive, not to study the real capitalist economy. There was no >real sense in saying that if the price of production of gold is lower >(or higher) than its value, as a result of the transformation from >values to prices, this would then be expresses in the sum of prices >of all other commodities rising above (or falling below) their values. > >Since gold could only be a non transformed value--as Naples >argues--Marx was quite right to use the 'value of money' and >'exchange value' of money interchangeably even after he carried out >the transformation; and Bortkiewicz, Sweezy and others (including for >example Allin C on this list) are wrong to fault him for doing so. > >Marx fixed the value of money and thus the monetary expression of >labor value. There would then be no reason to suppose that any change >from the value prices (or simple prices) of the outputs to their >price of production could change total price in the aggregate; even >if the inputs were to be included in the transformation and >retroactively revalued, there would still no reason for the sum of >the output prices of production to change since neither the labor >value of the output nor the monetary expression of labor value can be >affected by the transformation. And in this latter complete >transformation, it is possible to show via the Shaikh-Gouvnerneur >iteration that that sum of surplus does in fact determine the >capitalists' class real income, composed of profit and revenue. > > >Marx's own assumptions about money allowed him to concentrate on the >effects of rising productivity or, what is the same thing, the >development of the forces of productiononon the relations of >production--that is, the production and realization of surplus value. > > > >Rakesh > > > > > > > >> >> >> Michele Naples writes in her contribution to *Marx and Non >>> Equilibrium Economics*, ed. Alan Freeman and Guglielmo Carchedi >>> (1996): >>> >>> "Marx used 'value of money' and 'exchange value' of money >>> interchangeably because to him, gold, was a non transformed >> >> value...As I have suggested elsewhere...Marx's language is consistent >> >> because gold is produced in mines. Thus *gold exchanges at its value* >>> rather than price of production, since mineowners collect absolute >>> rent. The neo Ricardian solution is wrong on gold because it >>> abstracts from land, a crucial means of production in mining, and >>> from landowners' rent. It treats gold as infinitely reproducible, >>> like other commodities. But Marx made clear that the good which >>> serves as commodity money must be scarce to serve as money. Just as >>> Marx rejected Ricardo, he would reject the neo Ricardian model where >>> the exchange value of money is determined in the same way as other >> >> commodities' price of production." p.103
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