[OPE-L:7409] Re: Interpretations of the "numeraire"

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Mon Jul 08 2002 - 02:36:28 EDT

Gil replies to me in 7408:

>>So yes isn't there a big difference between a theory which must 
>>select (and construct) a numeraire with (as Blaug emphasises) no 
>>real world significance in order to close a system of equations and 
>>thereby  throw into analytical relief a wage/profit frontier and a 
>>theory which attempts to explain why in the bourgeois mode of 
>>production the form of appearance of economic magnitudes has to be 
>>money which as a result of this function carries the seeds of 
>>economic contradiction and crisis?
>But as I explained in 7403, there is no necessary formal difference 
>between the two systems on this score.  The money commodity in the 
>latter theory can be represented in a manner that is *mathematically 
>identical* to the numeraire good in the former system--suggesting 
>the potential relevance of such things as "wage/profit frontiers" 
>for the system Marx intended to analyze.

Yes but from the former you cannot derive a theory of the nature of 
money such that it has functions other than as a numeraire, i.e., as 
a store of value, a means of payment, hoard, capital,  etc. For more 
on this, see Alfredo Saad Fihlo's book, last chapter.

The timelessness of an analytical apparatus built on simultaneous 
equations also makes no room for the problems which arise from 
failure to complete the circuit of money capital in a determinate 
time; if one assumes that the technical conditions are given and the 
only problem is the the determination of distribution + relative 
prices with an arbitrarily chosen numeraire--and  Peach and Blaug 
seem correct that the Sraffian standard commodity does not solve 
Ricardo's truly intractable problem of invariant measure which holds 
over time--then money is just reduced to being a numeraire alone and 
it is difficult to see how one then proceeds logically to make room 
for money as capital the turnover of which must be completed in a 
determinate time. There simply seems to  no theoretical way of 
escaping what Aoki characterizes as the classicals' thin conception 
of money.

Before one handles input output relations, one has to grapple with 
what Marx calls the qualitative value problem or the problem of 
money--that is why it is exactly in the bourgeois mode of production 
individual labor has to be transformed into general abstract social 
labor in some specified time. Once this problem is solved, it seems 
obvious that  the money commodity cannot be put along side all the 
other commodities or as just one more equation in a system of 
equations which can be closed since such a system of equations seems 
to lose the contradiction between commodities on one side and money 
on the other.

That is why I think Fred's approach which takes its given or starting 
point in money or in other words begins with money as capital rather 
than with given technical conditions is superior to the linear 
production approach, though I am not fully convinced by Fred's 

All the best, Rakesh

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