From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Thu Sep 05 2002 - 16:07:32 EDT
On Sun, 1 Sep 2002, Itoh Makoto wrote: > > As for the special nature and process of equlaization of profit rate > for the gold industry under the gold standard system, Makoto Itoh and > Costas Lapavitsas, Political Economy of Money and Finance (Macmillan and > St.Martin's, 1999) tried to clarify the basic principle in relation > with the balancing process of demand and supply of gold through business > cycles in a section 6.3.2. It assumes that the gold industry is subject > to equalization of propfit rate though in a specicial way different from > other industries. > Makoto, thanks for joining this interesting discussion on money and the transformation problem. I read this section of your book on the balancing of supply and demand over the business cycle, and I will comment on that in below But first I would like to comment on your earlier Chapter 2 on "Value and Money in Marx's Political Economy". It seems to me that your discussion of the exchange-value of gold money (pp. 39-42) leaves out altogether the component of rent, including absolute rent on the least productive mines, which Michele and Rakesh and I have emphasized. Your discussion seems to suggest that the exchange-value of gold money is determined by its "price of production", without taking into account absolute rent. (I put "price of production" in quotes because, as you note, gold money does not really have a price of production; this is shorthand for the exchange-value of gold with other commodities, taking into account the equalization of the profit rate in the gold industry.) And you don't mention that, if the least productive gold mines have a lower than average composition of capital, then, according to Marx's theory, the exchange-value of gold will be determined by its "value", not by its "price of production", because the monopoly power of the owners of the gold mines enables them to stop the redistribution of surplus-value from the gold industry to other industries. Am I missing something in your discussion? Thanks in advance for your clarification, as time permits. Now to the section of your book on the balancing of supply and demand over the business cycle, which I read with interest, but am not sure I understand completely. Your argument seems to be that, in the boom phase of the cycle, an increase of prices reduces the rate of profit in the gold industry (by increasing the price of inputs, I presume). The reduction in the rate of profit in the gold industry in turn causes a reduction in the current production of gold, which tends to moderate the boom, both by reducing demand by the gold industry and by raising interest rates. The bust phase of the cycle results in the opposite dynamics. Is this roughly accurate? Please correct, if necessary. I have several questions: 1. Is there any empirical evidence of such counter-cyclical changes in the production of gold? 2. Would you also argue that such a reduction in the current production of gold also tends to reduce the prices of other commodities, and thereby offset the original decline in the rate of profit, moving the rate of profit in the gold industry back to the economy-wide average rate of profit? If so, then how do you respond to Rakesh's argument that the current production of gold is only a small percentage of the total stock of gold money, so that changes in the current production of gold have very little effect on overall supply of gold, and thus have very little effect on the exchange-value of gold in terms of the prices of other commodities. (You also mention on p. 143 the "large existing stock of gold", which slows down the "mechanism that balances the supply and demand for gold.") But, if changes in the current production of gold do not have much effect on the prices of other commodities, and thus have little effect on the rate of profit in the gold industry, then what is the mechanism that tends to equalize the rate of profit in the gold industry to the social average? Thanks in advance for your responses to these questions, when you have the time. Comradely, Fred
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