A short question to Professor Foley and other interested persons.
We say the value of (gold) money is determined by the amount of labour
expended to produce the gold. However, since gold mines have disparate
productivities like the agricultural grounds with varying fertilities, I wonder
which production condition would determine the value of gold. Would the
marginal production condition or the average production condition prevail?
If the former, marginal principle, prevails, like in the agricultural products,
the quantity of gold socially demanded must be acting a role in determining
the value of gold. But, if the average principle prevails, we can decisively
preclude the quantity theory of money. But how to vindicate the latter
position? Somebody that has any good opinion should be welcomed if I can
be taught.
My presuppositions
(1) some gold mines are deserted on account of high production costs.
(2) the social demand for the means of circulation is not all satisfied with
real money alone. Many money substitutes (coins, certificates, bank-
notes, etc) can finance the needs of trade being legally backed by the
conversion system. Agricultural products have no such substitutes,
however, and so the marginal principle must apply to them.
In solidarity.
Chai-on Lee
<conlee@chonnam.chonnam.ac.kr>