[OPE-L:3808] Re: m in Marx's theory

From: Duncan K. Foley (foleyd@cepa.newschool.edu)
Date: Sun Sep 10 2000 - 22:47:23 EDT

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I'm glad Fred agrees with me on the importance of the value of money,
but I already knew he did 15 (?) years ago.

Fred writes:

>Now, let's take a quick look at how Marx determined m in Capital.
>Throughout Capital, Marx assumed that m is equal to the inverse
>of the labor-time required to produce a unit of gold, or the amount of
>gold produced per hour of average social labor, which he took as
>given. In Chapter 3 of Volume 1, Marx said: "Henceforth we shall assume
>the value of gold as a GIVEN factor, as in fact we take it at the moment
>when we estimate the price of a commodity." (p. 314) In Chapter 7, Marx
>derived his numerical example of m (0.5 shillings per hour) from gold
>production. On the assumption that it takes two hours of labor to produce
>an amount of gold equal to one shilling, each hour of gold labor produces
>0.5 shillings worth of gold, so that m in all industries (e.g. cotton
>yarn) is equal to 0.5 shillings per hour. And so on.
>So far as I know, Marx never discussed any modification to this
>determination of m at more concrete levels. But gold production is also
>usually capitalist production. Therefore, the rate of profit in the gold
>industry should tend to be equalized with the average rate of profit in
>the rest of the economy. This seems to suggest (I could be wrong) that,
>at this more concrete level of abstraction with prices of production, m
>would no longer be determined solely by the gold produced per labor hour,
>but would also be affected by the equalization of profit rates across
>industries. But Marx apparently did not discuss this possibility at
>all. Nor can I think of Marxists since Marx who have discussed this
>question. If anyone knows of any discussions of this issue, either by
>Marx or others, please send me the references.

Actually, I have, both in Understanding Capital (though it may only
be a couple of sentences) and in my the article "Recent Developments
in the Labor Theory of Value" in the RRPE. If you are operating at
the level of abstraction where profit rates are equalized, then the
price of production of gold includes the average profit rate, I think.

Fred continues:

>Hence, this question - the determination of m with prices of production -
>remains an important unanswered question in Marx's theory.
>Furthermore, there is an additional important and difficult issue involved
>in the determination of m. Marx of course assumed throughout Capital that
>money was a (real) commodity (usually gold). There has been recent debate
>on OPEL and elsewhere about whether or not money MUST be a commodity in
>Marx's theory. As I have said before, I myself have not yet made up my
>mind on this issue. Either way, there are difficult questions. If money
>in Marx's theory has to be a commodity, then in what sense is money a
>commodity in contemporary capitalism? On the other hand, if money in
>Marx's theory does not have to be a commodity, but can simply be paper,
>without any automatic convertibility into a commodity, then how is m
>determined in this case, since it no longer seems linked to gold at
>all. Duncan has written some on these issues, which I have not had the
>time to review. Maybe Duncan could summarize a bit of his ideas on this
>subject, or at least give us a few key references.

This is an extremely vexed and unresolved set of questions, which
I've discussed both on and off list with Claus Germer, Chai-on Lee,
Suzanne de Brunhoff, Riccardo Bellofiore, and others. To summarize my
position (which amounts more to a bunch of questions and a very
tentative suggestion than a position):

1) It doesn't seem plausible that the market price of gold is
currently regulating the values of national currencies. (I think
Claus and Suzanne are not convinced of this.)

2) The form of money in contemporary capitalist economies is state
credit, the debt of the state. (I think Chai-on has some doubts about

3) This suggests that money is basically valued as the debt of the
state, which, in Marxist terms, is a "fictitious capital", the
capitalized value of that part of tax revenues devoted to paying
interest on the state debt. (The hard part here is to recognize that
currency and reserves, though they seem not to pay interest, actually
do pay interest in the form of their convenience, privacy, and
liquidity services. If, for example, the U.S. Treasury issued small
denomination interest-bearing debt ($20 treasury bills instead of
$10000 T-bills) the Fed could not circulate $20 Fed notes.)

4) This further suggests that the determinants of the value of money
in contemporary capitalism lie in the speculative valuation of the
government debt on asset markets. (Everybody I've tried this on has
doubts about this idea.) It requires one to believe that, for
example, workers, in bargaining over the money wage, are implicitly
valuing the state debt as well as their own labor-power.

The only thing that makes me tentatively hang onto this implausible
chain of ideas is that I haven't heard any coherent alternative


Duncan K. Foley
Leo Model Professor
Department of Economics
Graduate Faculty
New School University
65 Fifth Avenue
New York, NY 10003
messages: (212)-229-5717
fax: (212)-229-5724
e-mail: foleyd@cepa.newschool.edu
alternate: foleyd@newschool.edu
webpage: http://cepa.newschool.edu/~foleyd

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