> Chaion Lee asks whether the value of gold is regulated by the marginal or
> average cost of gold production.
>
> I don't really think this is a short question. The problem is that in
> order to answer it it is necessary to specify a model and in the course
> of doing so establish the level of abstraction at which you are working.
>
> I think now that the relative price of gold is largely determined by
> speculation on future technological change in gold relative to other
> commodities. Given the relative price of gold, the marginal cost of
> production would in the intermediate run determine which gold producers
> would be active, and which mines would be closed down, as in any industry.
Why not ask the more general question: why isn't the value of every
commodity determined by marginal rather than average production
conditions, as in Marx's specification?
Note that if there are non-reproducible quality differentials in
inputs (which Marx certainly does not rule out, whatever he has to
say about the tendency toward homogenization of labor), then if
commodities exchange at their values, determined by *average* SNLT,
then the market will necessarily unravel, with the marginal
("high-cost") firms being driven out of business, a new average being
determined, the new marginal firms being driven out of business,
another new average being determined, etc, until there is only one
firm-that with the lowest "cost" of production--in the market.
In other words, formulation of the value of a commodity in terms of
*average* SNLT creates an unnecessary confusion between "natural
monopoly" and "pure competition", to borrow some terms for the sake
of precise comparison.
Positing value in terms of *marginal* SNLT eliminates this particular
confusion.
Gil