[OPE-L:7566] From Michele Naples on Gold

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Thu Aug 29 2002 - 15:21:41 EDT

This post is from Michele Naples. rb
It?s been interesting to read the discussion about gold, Marx?s view that it
exchanges at value and the implications for the transformation problem.  I have
to say at the outset, however, that I view any effort to fit Marx into a
long-run equilibrium box as the imposition of the Walrasian method on an
exploitation theory of the profit rate, which is not methodologically 
sound.  If
capitalism is crisis-prone, it must be overdetermined, not determinate.  There
are supposed to be too many variables and too few unknowns.  This does not
violate the labor theory of value, it means capitalism is incapable of long-run
equilibrium.  To me this is an appealing conclusion.  I frankly don?t 
why anyone would rather conclude that it?s necessary to choose between surplus
value or values as aggregating to profits or prices, since the resultant
Ricardian profit rate (dependent only on production conditions in basics) still
violates Marx?s theory that economy-wide conditions were determinate.  Marx
explicitly challenged Ricardo?s view on this in his Theories of Surplus Value.
People may find these solutions interesting, but they are not Marx.

That said, on gold, Fred rightly points out that Marx hung his view that gold
exchanges at value on its lower-than-average composition of capital, and that
it?s not clear why mining or agriculture today should necessarily have
below-average compositions. Coal mining, for instance, has a huge 
composition of
capital relative to the economy average, at least in price terms.  Doesn?t the
marginal mine still earn a rent?  Given Marx?s emphasis on private property in
the means as the basis for capturing surplus value, I would think the answer is
yes.  [BTW, Fred, I?d think the value of a mined good is not 
determined by labor
productivity in the marginal mine, but on the average technique employed.  It?s
the socially necessary labor.  So it seems to me that if the 
lowest-rent mine is
not best-practice or average-practice, it would create less than one unit of
snal (labor-value units) per hour.]

Rakesh is right to emphasize that the quantity of gold in existence swamps
current production, and that this makes gold quite different from other
commodities.  Gold, like the housing stock, is an asset, a stock far exceeding
current flows.  But Marx was clear that today?s flow, and the associated value
of producing gold today, determine the value of any of the gold stock.

Rakesh also talked about the demand for gold as hedge against inflation?that?s
not appropriate here, since it?s a short-term problem generated by monetary
crisis, not a value question.  It has to do with the fact that gold is the
ultimate means of payment and store of value, it does not cause its value to be
higher or lower.  Marx argued in the Grundrisse, I think, that in times of
crisis when the price of gold rises, the reality is that the value of goods are
falling, since there is widespread overproduction, beyond what was socially
necessary.  There is no change in the value of gold despite the rush to gold.

Rakesh has suggested that gold?s value be seen as resulting from a monopoly
(over the means of production by gold-mine owners) and therefore absolute rent
can be interpreted as a monopoly rent. I?m concerned that this takes us down a
slippery slope towards neoclassical modeling, diminishing returns, etc.

What strikes me is that is that farm and mine products are what we now commonly
call raw materials or primary products.  They are not produced with other
inputs, they are extracted from the earth.  Just as joint products are not the
same as capital goods that have not been fully depreciated (the Ricardian
treatment of fixed capital), farm and mine product are not the same as produced
means of production, they are extracted.  So then logically they 
should be dealt
with differently from produced intermediate goods.  I don?t think we need to
make the case in terms of the organic composition of capital in those sectors,
as Marx did. The point is the crucial, irreplaceable role that the land
component plays in their availability, and the power this gives those mine- and
landowners to charge rent. From this perspective, even if coal mining has an
above-average organic composition of capital, and therefore coal operators
should earn surplus value above what is produced in coal, in addition those
operators should keep the surplus value their land-holding permits them to lay
claim to.  Then the value of coal and surplus value created in 
coal-mining would
set the rent on coal mines, and the organic composition of capital in 
coal would
determine how much additional surplus value would be allocated to 
coal operators
from other sectors.  From this perspective all of the profit over and 
above rent
that coal operators get is surplus value created in other sectors.

Thing is, I don?t see that this insight does anything to substantially modify
the standard equilibrium solution to the transformation problem.  The value of
the m gold and other mine or farm products is known before the profit rate is
known, and their surplus values do not get redistributed through the pricing
mechanism.  Nevertheless the n-m other sectors earn only the uniform 
profit rate
based on the redistributing surplus value, determined by the surplus value in
the b-m basic sectors that is allocated subject to profit-rate equalization,
assuming that no mine or farm product isn?t basic, although a few may 
be.  [Even
diamonds have industrial uses, but perhaps asparagus and endive are only
luxuries.] This is still a profit rate that does not depend on production
conditions in non-basics, and as such it is a Ricardian but not 
Marxian solution
to the transformation problem.

Thanks for including me in the discussion.  I?ll be interested to hear others?

- Michele

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