From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Thu Sep 05 2002 - 15:58:14 EDT
Rakesh, I have found some important empirical evidence to support your argument that the current production of gold during the gold standard period was very small compared to the total stock of gold money, so that changes in the current production of gold had very little effect on overall supply of gold, and thus had very little effect on the rate of profit in the gold industry. The evidence is from a book by George Warren and Frank Pearson, entitled *Prices*, published in 1933. (I think a later edition of this book had the title *Gold and Prices*). Table 18 on p. 105 shows that the ratio of current gold production to the total stock of gold money averaged about 5% from 1840 to 1930. Even the QUADRUPLING of current gold production in the 1850s only briefly increased this percentage to about 8% (and then fell back to less than 5%), and the later second QUADRUPLING of current gold production 1890-1915 again only briefly increased this percentage to about 7% (and then fell back again to less than 5%). I don't have more recent data, but my guess is that this percentage probably remained below 5% for the remainder of the gold standard period, since there was no more quadrupling of current gold production. Current gold production was an even smaller percentage of the total stock of money than the 10% in your example. Therefore, it would seem that, because of the very large stock of gold money already in circulation, changes in current gold production are not likely to have much effect on the rate of profit in the gold industry, and thus are not likely to result in an equalization of the rate of profit in the gold industry to the social average. There does not seem to be any mechanism that equalizes the rate of profit in the gold industry, except perhaps very slowly and weakly over a long period of time. Comradely, Fred
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