From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Fri Aug 30 2002 - 20:08:14 EDT
I have probably made some important analytical mistakes in this reply to Gil's 7568 Gil writes: >Was: Re: Re: Re: Re: RE: Fred's remarks on Marx, Sraffa & Rents > >Hi, Fred. You write > >>Gil, the fact that, in a system of commodity money, the money commodity >>has no price and is a scarce precious metal is not a historical >>contingency, but a necessity due to the nature of money. Marx did not >>discuss the money commodity in Part 2 of Volume 3 because the money >>commodity has no price of production and does not participate in the >>equalization of profit rates like other industries. > >Fred, my point--or one of them, anyway--was that the money commodity >need not have a "price of production" for it to be appropriately >included in the so-called "price of production" equation system. So >long as its *inputs* have prices of production and it is produced by >capitalist firms, then a corresponding relationship I referred to as >an "accounting equation" would necessarily still have to be >satisfied along with the others, and thus must be included. Gil, That the money commodity is produced by capitalist firms and that its inputs have prices of production rather than simple prices does not change the value of the money commodity (the value of the money commodity is the same whether the inputs have value prices or prices of production) or provide any reason to drop the assumption that exchange value of the money commodity is not proportional to its value. Marx's theory of production price does not apply to commodities a.in which scarce land is a means of production (Michele Naples), b. which are not freely reproducible (David Ricardo), and c. the supply of which cannot be regulated through variation in output decisions (the additional condition which I am proposing in the spirit of the Marxian system) For these reasons, the money commodity does not itself tend to sell at its price of production. The introduction of production price gives no reason to think that the exchange value of the money commodity will have be modified. So distributional change alone cannot change the MEL in Marx's theory whether or not the money commodity producing sector has a perfectly average composition of capital or employs unassisted labor only. If Ricardo's curious effect depended on special properties of the money commodity, e.g, it was produced by unassisted labor or had what Marx would call an average composition of capital, no such special assumptions about the money commodity are needed in Marx's theory for the MEL to remain invariant to changes in distibution such as i. the formation of a uniform rate of profit and prices of production through the intra capitalist redistribution of surplus value since the money commodity sector will opt out of that process (not only as a result of extra surplus value being claimed as absolute rent before it is competed away but also because the supply of the gold commodity cannot be regulated in order to ensure that it exchanges at its value or the transformed value of price of production). ii. distributional shifts between workers and capitalists since this cannot change the value of the money commodity So... if it takes 0.5 hrs to produce a unit of gold which is set equal to $1, the monetary expression of one hour of socially necessary abstract labor time (MEL) will remain $2 even after the transformation of values into prices or a change in the distribution of income between capitalists and workers. While the profit rate or absolute rent in the gold producing sector would be modified by either of distributional changes above, the purchasing power of the money commodity (0.5 hrs per unit of gold) and the MEL ($2) should not change. Hence total price will not change in a transformation, incomplete or complete. On Marx's assumptions about the money commodity I cannot see how the size of the pie can undergo apparent change as changes are made in how the pie is sliced up among capitalists (the transformation) or between capitalists and workers (distribution). Bortkiewiecz and Sweezy got a change in the size of the pie from a mere redistribution of surplus value because they made wrong assumptions about how the money commodity would be affected by the formation of prices of production. They assumed that its relative price would have to adjust to ensure that it sold at a price of production, but Marx never assumed the money commodity would sell at its price of production. And there are strong theoretical reasons (a-c) to assume that it would not. So...in Marx's theory, Ricardo's futile search for a standard of value with the "right" composition of capital has no place and there is simply no need for Sraffa's ingenious construction of a standard commodity. I have never understood what the Sraffian revolution has to do with Marx's own theory. Marx does not need the money commodity sector to have the socially average composition of capital in order to serve as invariable standard of value in the face of distributional shifts; if anything, Marx may have assumed that the money commodity sector has to have a below average composition of capital in order to serve as an invariable standard of value in the face of changes in distribution. At any rate, the 40yr old Sraffian revolution may solve a real problem in Ricardian economics but it simply cannot be relevant to Marxian theory as the money commodity is not and should not be subject the laws of competitive price formation on Marx's own assumptions. All the best, Rakesh
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