> Paul C in #5104:
>
> > I think that the basic objection is that the question of the price
> > level should first theoretically be solved without assuming fiat
> > money. It should be solved initially for economies with commodity
> > money as these are both conceptually and historically prior to
> > systems of fiat money since fiat money involves dealing with state
> > finance which is outside the scope of discussions of value theory.
> > Given commodity money, one is not at liberty to assume that a
> > particular ratio exists between labour time and money, since
> > gold must be treated as a branch of production like any other.
> > Its value must depend upon conditions of production in the gold
> > industry.
>
> Alejandro R.:
>
> Thanks for your clear response.
>
> The fact is that Marx assumes $1 = 1 working day in his
> transformation procedure. I think you agree with this. This assumption
> is explicit in the case of his letter to Engels. I dont think it is
> an "absurd assumption". So, what would be the explanaition for this?
>
> Re your point: I dont think Marx is "assuming fiat money" when
> assumes $1 = 1 working day. Moreover, one can interpret his
> assumption in the framework you are suggesting, i.e. a "money
> commodity" so that, e.g. $1 = 1 ounce of gold.
I think that Ajit has dealt with this. The assumption in these
cases was that the labour theory of value held.
> Focus in gold: 1 ounce of gold *contains* a certain amount of labor-
> time which differs from the labor-time it socially *represents*,
> correponding to its production price. Under these conditions, the
> SOCIALLY prevailing relation between gold and labor time is given,
> NOT by the labor time *contained* in gold (as happens in Vols I and
> II), but by the labor time REPRESENTED by one ounce of gold, i.e.
> by the inverse of its labor-production price, not by the inverse of
> its labor-value.
The problem here is that if you drop the assumption that the labour
theory of value holds, then 1oz gold no longer has a unique amount
of embodied labour that it will exchange for, or as you would have
it, a unique amount of labour that it represents.
If it exchanges against apparel and textile products it will,
assuming prices of production hold, exchange against less embodied
labour than if it exchanges against non-ferrous metal ores,given that
in the US textiles have a C/v ratio of about 1, and metal ores have
a C/v ratio of about 11. Which of these amounts of embodied labour
does gold actually represent?
> Re a particular point you raise:
>
> > money as these are both conceptually and historically prior to
> > systems of fiat money since fiat money involves dealing with state
> > finance which is outside the scope of discussions of value theory.
>
> Why is "state finance outside the scope of discussions of value
> theory"?
>
> Alejandro R.
Because
a) state fiat money is not a necessary condition for the existence
of commodities and money.
b) the social relations necessary to explain commodities exchange
and capitalist prices are not in themselves sufficient to explain
state finance and its relation to fiat money.