Re: (OPE-L) recent references on 'problem' of money commodity?

From: Fred Moseley (fmoseley@MTHOLYOKE.EDU)
Date: Thu Nov 11 2004 - 11:23:40 EST


On Wed, 3 Nov 2004, Riccardo Bellofiore wrote:

> Just a clarification:
>
> (i) I agree with Germer that money WAS a commodity in Marx's theory,
> and that this was essential to understand his way to frame his value
> theory
>
> (ii) I think that money IS NOT a commodity, and that Marx's value
> theory can (and must) be reconstructed without money as a commodity.
>
> If I understand well, on point ii Claus and me part our company.
>
> the first is interpretation, the second reconstruction.
>
> I think Fred would not accept this distinction, since this would
> depart from a strictly orthodox reading of Marx. I think that the
> textual evidence is strongly on the side of i., and the theoretical
> developments after Marx strongly support ii.

I agree that Marx generally assumed throughout Capital that money is a
commodity.  And Marx himself may have thought that money had to be a
commodity, in order to function as a measure of value (but not as means of
circulation).

But I have concluded that money does not have to be a commodity in order
to function as measure of value, in spite of what Marx may have
thought.  This conclusion is discussed in my introduction to our money
conference volume, which I attached to my last message and also am
attaching to this message.  I would be happy to discuss this conclusion
further, if anyone wishes.


What exactly is Marx's value theory that is being "reconstructed" or
extended?  I argue that Marx's abstract value theory presented in
Volume 1 can be represented algebraically by the following equation:

(1)     P = (MELT) L

where L is the quantity of socially necessary labor-time required to
produce commodities, and  MELT is the "monetary expression of labor-time",
or the money new-value produced per hour of socially necessary
labor-time.  The price of commodities (P) is determined by the product of
these two factors.  For example, in Marx's numerical examples in Chapter 7
of Volume 1, the key chapter in which Marx's basic theory of surplus-value
is presented, L is first 30 hours, the MELT = 0.5 shillings / hour, and
the price of 10 lbs. of yarn is 15 shillings; then L is 60 hours, the MELT
is again = 0.5 shillings / hour, and the price of 20 lbs. of yarn is 30
shillings.

With commodity money, the MELT is determined by the inverse of the value
of the money commodity, i.e. the inverse of the labor-time required to
produce a unit of the money commodity (e.g. 2 hours per shilling of gold).

So the problem with non-commodity money is the following: what determines
the MELT, since it can no longer be determined by the inverse of the value
of the money commodity?

The "new interpretation" assumes that the MELT is determined by the
equation:

(2)     MELT = MVA / L

where MVA is "money value added", which is one component of the price of
commodities.

However, since the MELT depends on MVA, MVA cannot depend on the MELT,
and hence P cannot depend on the MELT, as in equation (1) - that would be
circular reasoning.

Therefore, the "new interpretation" ends up with no theory of MVA or P at
all.  MVA is simply taken as given, and used to determine the MELT, or to
provide an empirical measure of the MELT.

As I understand Riccardo's interpretation, he follows the "new
interpretation" with regard to the determination of the MELT (please
correct me if I am wrong).  Therefore, like the "new interpretation",
Riccardo's interpretation ends up with no quantitative theory of price
(or MVA) at all.

In order to extend or "reconstruct" Marx's value theory (in which prices
are determined by labor-times, as in equation 1) to incorporate
non-commodity money, the MELT must be determined in some way INDEPENDENTLY
OF P (and MVA), so that it can be used to determine P (and MVA) (along
with L).


My own explanation of the determination of the MELT with non-commodity
money is presented in a recent working paper, which I am also attaching to
this message.  It is based on the way in Marx himself determined the MELT
in the case of "inconvertible paper money", which he analyzed in Capital
and in earlier drafts (and which I discuss in the attached paper).

Very briefly, in the case of non-commodity money, the MELT is equal to the
ratio of the quantity of money in circulation (adjusted for velocity) and
the quantity of socially necessary labor-time (SNLT) that must be
represented as money (i.e MELT = M V / SNLT).  Therefore, in this case,
the MELT depends in part on the quantity of money in circulation, as in
Marx's case of inconvertible paper money, and in this sense Marx's theory
bears a superficial resemblance to the quantity theory of money.  However,
as I discuss in my paper, Marx's theory is different from and superior to
the quantity theory of money in the following important respects:

(1) according to Marx's theory, the quantity of money does not determine
prices directly, but only indirectly through the MELT; (2) Marx's theory
also explains the necessity of money in a commodity economy, and the
quantity theory does not; (3) Marx's theory explains not only the general
price level (by the MELT), but also explains individual prices, as
determined by the MELT and quantities of socially necessary labor-time,
and the quantity theory does not; and, most importantly, (4) Marx's theory
of money also provides the basis for a theory of surplus-value, and the
quantity theory does not.

Please see my working paper for further discussion, and I would be happy
to discuss further.



> And I also think that Fred's own thinking about money (say: the way
> the value of money is determined in a non-commodity money system) has
> had to deal, and change considerably in a few months, with this facts.


I would say that, until the last year or so, I did not see a way that the
MELT could be determined with non-commodity money.  But now I think I do
see a way in which the MELT could be determined with non-commodity money,
and it is essentially the same way in which Marx himself determined the
MELT in the case of inconvertible paper money.

My discussions with Riccardo and Claus and others at our money conference
(August 2003) and since have helped me greatly to clarify my ideas
(although they disagree with me), and I thank them very much (again) for
these productive discussions.  I am pleased with this progress, and
would be happy to discuss further.


Comradely,
Fred








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