[OPE-L:7402] RE: RE: Commodity money in a Sraffian system

From: mongiovg (mongiovg@stjohns.edu)
Date: Wed Jul 03 2002 - 12:22:04 EDT

Hmmm.  This prompts two questions, Gil.

1. What difference does this make to your argument?  It seems like a bit of 
hair-splittlng to me. This in fact was what I wanted to nudge Fred into 
answering in my last post. I am surprised to find you and him on the same side 
of this issue, since that doesn't seem consistent with your other posts on the 

2.  Besides, I must disagree, or anyway ask you to say what you mean by 
numeraire.  I understand it to mean the standard in which prices are measured.
 Well then, the price of good x measured in terms of itself cannot be anything 
but one. In effect, when one expresses prices in terms of a numeraire one is 
posing the question, how many units of the numeraire good can be swapped for 
one unit of any other good?  On reasonable assumptions about human rationality 
we may suppose that under normal circumstances no more nor less than one unit 
of the numeraire can be swapped for one unit of the numeraire, whatever the 
numeraire happens to be.  It seems to me entirely irrelvent whether there is a 
market for the numeraire in terms of itself, as long as there is a market for 
it in terms of other goods.  And I'm not even sure there needs to be a market 
for it in terms of other goods if its function is purely to serve as a 
standard of measuring prices. So what is the harm, or the mistake of saying 
that the price of the numeraire is one.


>===== Original Message From Gil Skillman <gskillman@mail.wesleyan.edu> =====
>Gary, you wrote in part
>>Gil reminds us of Marx's remark that "gold has no price." It is
>>interesting to
>>me that Gil interprets that to be equivalent to what a modern economist 
>>by "gold is the numeraire and therefore its price is 1."
>I wasn't any too clear about this, but I want to note that I didn't add the
>"therefore" comment you attribute to me here, and for a
>reason:  identifying a commodity as the numeraire good in an exchange
>system *can* mean the same thing as "normalizing its price to one," but it
>doesn't have to.  And in my second post, I was arguing that in the specific
>case of commodity money, it is both economically appropriate to call the
>single money commodity the numeraire good and economically implausible to
>say that it has a price--i.e., an exchange ratio with itself--that happens
>to be equal to one, since as Fred and Marx rightly point out, the money
>commodity isn't exchanged for itself.
>Instead, the Sraffian "price of production equation" equation for the money
>commodity, say,
>1 = [p(c)*a + w*l] (1+r)
>is more in the nature of an accounting relation given that the law of one
>price obtains, indicating that each unit of gold produced must be just
>sufficient to cover the associated physical and labor production costs
>(measured in gold), augmented by the rate of profit common to all sectors.
>The math is the same as in the standard normalization procedure, of course,
>but the interpretation is different.

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