[OPE-L:7574] Re: Moving on...

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Fri Aug 30 2002 - 20:08:14 EDT

I have probably made some important analytical mistakes in this reply 
to Gil's 7568
Gil writes:

>Was: Re: Re: Re: Re: RE: Fred's remarks on Marx, Sraffa & Rents
>Hi, Fred. You write
>>Gil, the fact that, in a system of commodity money, the money commodity
>>has no price and is a scarce precious metal is not a historical
>>contingency, but a necessity due to the nature of money.  Marx did not
>>discuss the money commodity in Part 2 of Volume 3 because the money
>>commodity has no price of production and does not participate in the
>>equalization of profit rates like other industries.
>Fred, my point--or one of them, anyway--was that the money commodity 
>need not have a "price of production" for it to be appropriately 
>included in the so-called "price of production" equation system.  So 
>long as its *inputs* have prices of production and it is produced by 
>capitalist firms, then a corresponding relationship I referred to as 
>an "accounting equation" would necessarily still have to be 
>satisfied along with the others, and thus must be included.


That the money commodity is produced by capitalist firms and that its 
inputs have prices of production rather than simple prices does not 
change the value of the money commodity (the value of the money 
commodity is the same whether the inputs have value prices or prices 
of production) or provide any reason to drop the assumption that 
exchange value of the money commodity is not proportional to its 

Marx's theory of production price does not apply to commodities

a.in which scarce land is a means of production (Michele Naples),
b. which are not freely reproducible (David Ricardo), and
c. the supply of which cannot be regulated through variation in 
output decisions (the additional condition which I am proposing in 
the spirit of the Marxian system)

For these reasons, the money commodity does not itself tend to sell 
at its price of production.

The introduction of production price gives no reason to think that 
the exchange value of the money commodity will have be modified.

So distributional change alone cannot change the MEL in Marx's theory 
whether or not the money commodity producing sector has a perfectly 
average composition of capital or employs unassisted labor only.

If Ricardo's curious effect  depended on special properties of the 
money commodity, e.g, it was produced by unassisted labor or had what 
Marx would call an average composition of capital, no such special 
assumptions about the money commodity are needed in Marx's theory for 
the MEL to remain invariant to changes in distibution such as

i. the formation of a uniform rate of profit and prices of production 
through the intra capitalist redistribution of surplus value since 
the money commodity sector will opt out of that process (not only as 
a result of extra surplus value being claimed as absolute rent before 
it is competed away but also because the supply of the gold commodity 
cannot be regulated in order to ensure that it exchanges at its value 
or the transformed value of price  of production).

ii. distributional shifts between workers and capitalists since this 
cannot change the value of the money commodity

So... if it takes 0.5 hrs to produce a unit of gold which is set 
equal to $1, the monetary expression of one hour of socially 
necessary abstract labor time (MEL) will remain $2 even after the 
transformation of values into prices or a change in the distribution 
of income between capitalists and workers.

While the profit rate or absolute rent in the gold producing sector 
would be modified by either of distributional changes above, the 
purchasing power of the money commodity (0.5 hrs per unit of gold) 
and the MEL ($2) should not change. Hence total price will not change 
in a transformation, incomplete or complete.

On Marx's assumptions about the money commodity I cannot see how the 
size of the pie can undergo apparent change as changes are made in 
how the pie is sliced up among capitalists (the transformation) or 
between capitalists and workers (distribution). Bortkiewiecz and 
Sweezy got a change in the size of the pie from a mere redistribution 
of surplus value because they made wrong assumptions about how the 
money commodity would be affected by the formation of prices of 
production. They assumed that its relative price would have to adjust 
to ensure that it sold at a price of production, but Marx never 
assumed the money commodity would sell at its price of production. 
And there are strong theoretical reasons (a-c) to assume that it 
would not.

So...in Marx's theory, Ricardo's futile search for a standard of 
value with the "right" composition of capital has no place  and there 
is simply no need for Sraffa's ingenious construction of a  standard 

I have never understood what the Sraffian revolution has to do with 
Marx's own theory. Marx does not need the money commodity sector to 
have the socially average composition of capital in order to serve as 
invariable standard of value in the face of distributional shifts; if 
anything, Marx may have assumed that the money commodity sector has 
to have a below average composition of capital in order to serve as 
an invariable standard of value in the face of changes in 

At any rate, the 40yr old Sraffian revolution may solve a real 
problem in Ricardian economics  but it simply cannot be relevant to 
Marxian theory as the money commodity is not and should not be 
subject the laws of competitive price formation on Marx's own 

All the best, Rakesh

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