Re: Money and Mind

From: Andrew Brown (andrew@LUBS.LEEDS.AC.UK)
Date: Mon May 31 2004 - 09:34:59 EDT


Hi Costats and all,

Let me clarify my comment on Costas� notion of money as �absolute
purchasing power�, in light of Costas� reply.

> Andy wrote:
>
> "Costas, money as form of 'purchasing power' means, quantitatively,
> that money serves as an index of the size of the feasible set, i.e. as
> no more than a numeraire. Money does not serve to homogenise
> the diversity of goods. Thus 'purchasing power' cannot be compared
> quantitatively through time due to qualitative change to the feasible
> set (changed in goods, new goods, old goods). In these
> circumstances a science of money must look for something other
> than 'purchasing power', as which the diverse goods are equivalent,
> shouldn't it?"
>
> This argument is not entirely clear to me but I read it as saying that
> money 'as purchasing power' cannot be a numeraire because the set of
> commodities changes over time.

Rather, there can be no numeraire (whether �money� or anything else) that
is quantitatively comparable through time because of changes in the set of
commodities.

>I do not see why change in the set over
> time is an especial problem for money 'as purchasing power'.

It is not an especial problem for money but a general problem for the
concept of �purchasing power�.

>Nor is it
> clear that this particular problem becomes less difficult when, say,
> abstract labour is chosen as factor of equivalence. The theoretical
> difficulties of making dead labour (especially of many vintages)
> equivalent with living labour are well-known.

It is clear. �Abstract labour� provides a unit of measure that is constant
through time (i.e. through change in the set of commodities). �Purchasing
power� has no such measure. It is one thing to have a problem in
determining the precise magnitude of a quantity (SNabLT) through time. It
is a more abstract, simple and fundamental problem to be bereft of a
constant *unit of measure* throught time. The problem with �purchasing
power� is the latter problem. The problem with valuing vintages of capital
is the former problem.

>
> In any case, in my view, money becomes the numeraire as commodities are
> regularly and universally offered for it in view of its unique purchasing
> power. In short, the unit of account function (as social process and not
> as abstract division by an economist) is inseparable from the means of
> exchange function. Both functions arise out of money's monopoly over
> buying ability. The coherence and consistency of the nomenclature of price
> is a different matter, and depends on the existence of abstract labour as
> social substance. In the absence of the latter, for instance, money would
> still operate as numeraire but prices could fail to exhibit transitivity.

I originally interpreted your para here to imply that you felt that the
question of �quantity� is a �different matter� to the question of quality.
As if quantity were a matter of �nomenclature�, a purely nominal,
secondary issue. Now, I am not so sure how to interpret your para. In any
case, the point I am getting at is that it the terms �unit of account�,
�purchasing power�, and other such, lead, on reflection, to a search for
the �third thing� that is value because of the problem of finding a unit
of measure that is constant through time. This is so in the CMP and prior
to the CMP. I�m not clear that your attempt to use these terms absent an
enquiry into value is fully consonant with this point.

Many thanks,

Andy


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