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In the messages by Akira [OPE-L:2212] and Lefteris [OPE-L:2221] there seems
to be a misunderstanding. I have no doubt that, if the value of gold
declined, other things equal, the price level would rise and so would the
quantity of gold in circulation. This result would also be perfectly
acceptable to quantity theorists - Ricardo spelt it out very clearly.
My question was quite different: in a Ricardian (but also Sraffian, even
Walrasian) framework of n goods one of which is money, what is the process
of equalisation for the rate of profit of the money sector? The problem
arises because the price of gold is 1, or gold directly buys. With the QTM,
the problem is very easy. Without it, it is very difficult indeed.
Duncan [OPE-L:2158] remarked:
"If capitalists are trying to move capital into the gold industry to capture
higher than average rates of profit, won't they bid up the prices of labor
and other inputs to gold production? Isn't this a possible mechanism for
equalizing profit rates that doesn't involve the quantity theory?"
I suppose that this is true, and analogous to what happens in other
sectors. I wonder though if it is a sufficiently strong argument - strong
enough to counterpose to the QMT. Since the direct price effect is
excluded, it would take longer for gold profit rates to equalise than for
other sectors. This, at the very least, would seem to imply protracted
price instability originating in the gold industry. Do we have a theory for
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