Some comments on Allin [1159], Steve [1160], and Alan [1172].
1. Allin thinks that the labour theory of value has nothing to do
with the determination of the general price level. In a credit money
economy the latter is determined by the complex interaction of state
monetary policy and money wage determination.
My understanding is that this was Keynes' way and it has much to
commend it. There are two issues, however, which ought to be resolved.
First, if one does not take Keynes' way one must take Ricardo's
way, and this relies on the labour theory of value. The reference
point in the system is the intrinsic value of the money commodity
which prevents its exchange value (the inverse of the price level)
from moving arbritrarily. I believe that Marx also accepted this but
not Ricardo's mechanism for establishing the result (the Quantity
Theory). Why should we choose Keynes' way, and specifically for
credit money? Second, if we accept monetary policy and the money wage
as the determinants, do we not run the risk that our theory
ultimately argues that non-economic factors determine the price
level?
2. I would very much like to hear more about what Steve thinks is the
more sophisticated analysis of money to be found in Marx's work. I
was baffled by his statement that the commodity money concept
inevitably leads to the Quantity Theory.
3. I fully agree with Alan's general drift that the exchange value of
money and its intrinsic value in Marx's analysis can and do diverge.
I also agree that for Marx, contrary to Ricardo, this divergence was
mostly caused by fluctuations in the demand and supply of commodities
and not money. However, I have the impression that Alan thinks that
this, by itself, proves something. It doesn't. The point is what
determines the behaviour of this divergence? In other words, what is
the relationship of the price level to the intrinsic value of gold?
Two smaller points: i) The exchange value of money is real output per
dollar. Its intrinsic value is hours of socially necessary labour
time. There cannot be any question of one being collapsed into the
other: apples and oranges. The issue is what determines what. Alan
confuses things by bringing in the time chit. ii) The quotes from
Marx make little sense unless the monetary context is also
understood. The quotes criticising Ricardo pertain to the
Restriction period, 1797-1821, during which the banknotes of the Bank
of England were legally inconvertible to gold. During the period the
market price of gold rose repeatedly above its mint price. Ricardo's
argument was that banknotes had depreciated relative to gold but not
the gold coin relative to gold. Hence the importance of the
argument that circulating gold could become a token of itself. The
quotes about the general price level pertain to the subsequent period
in which banknotes were fully convertible but cyclical price
fluctuations had become the norm. It is cyclical price level
movements which Marx has in mind when he discusses the relationship
between exchange value and intrinsic value of money.
Costas