From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Sun Aug 25 2002 - 16:57:36 EDT
Fred writes in 7541: > >3. Marx explained the existence of absolute rent in the following way: > >The prices of agricultural (and mineral) commodities are not equal to the >PRICES OF PRODUCTION of these commodities, but are instead equal to the >VALUES of these commodities, i.e. are proportional to the labor-time >requirements to produce these commodities; and more specifically, are >proportional to the labor-times required on the least fertile land. There would be reason to believe that the purchasing power of gold would be determined by its value if through variation in output capitalists could regulate supply so as to ensure gold in fact exchanges at its value. But there is no such mechanism to control the supply of gold which is hardly affected by the output decisions of capitalists. As already mentioned, RICARDO realized this point and then forgot it. "If the quantity of gold in the market for the purpose of commerce only were 10,000 ounces, and the consumption in our mfg 2000 oz annually, it might be riased one fourth or 25% in its value in one year by withholding the annual supply; but if in consequence, of its being used as money, the quantity employed were 100,000 oz, it would not be raised one fourth in value in less than ten years." p. 193-4 of Sraffa's ed. I already elaborated on this point in OPE-L 7528. So if newly produced gold has purchasing power below its (say rising) value (as worse mines are brought into existence), a reduction in output would tend only to decrease marginally the supply of gold and thus not raise the exchange value of gold. Gold producers would in effect have to wait for the supply of gold to decrease naturally before the purchasing price of gold approached its new value. We are thus beyond the long term needed for capitalists to effect adjustments. If newly produced gold has purchasing power greater than its value, an increase in output would hardly increase the supply of gold which may thus continue to have an exchange value greater than its value. This situation of demand-supply imbalance could persist until deflationary pressures brought on a general crisis and the circulation of commodities and therewith demand for gold dampened considerably. I do not read in Marx any argument that gold will actually tend to exchange at its value. There is of course an argument that it will not tend to exchange at its price of production on account of landed property. But there is no strong positive argument that it will tend even in the normal so called long term to exchange at its value. An aspect of the peculiarity of gold is that its price will tend to be always in disequilibrium to its value and price of production. This makes analysis very difficult. So if one wants to isolate the effects of say decreasing agricultural productivity (Ricardo) or say rising labor productivity in the form of ever more developed forces of production (Marx), then one simply has to fix both the value of gold and the monetary expression of labor time. This is done simply by methodological fiat. But once such an analysis is conducted, then one is left without a sturdy bridge to the real capitalist economy in which the MEL is not fixed and constant, whether the system is on or off the gold standard. It is of course true that absolute rent can be explained on the basis of price- "untransformed value" equilibrium as long as the OCC is lower in these branches than the social average. But Marx also notes that this is a weak basis for the persistence of absolute rent since the OCC in these branches may approach the economy average. So the theory of rent developed before competition is hardly developed at all. Comradely, Rakesh
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