From: Rakesh Bhandari (email@example.com)
Date: Mon Sep 02 2002 - 13:40:45 EDT
re 7581 Dear Makoto, As I think about your questionsin 7581, may I call your attention to Fred Moseley's earlier (quite excellent) post 7541 a part of which I repost here. Fred Moseley wrote in OPE-L 7541: >2. I argue that the crucial flaw in Gary and Gil's argument is that it >assumes that the exchange-value of the numeraire, or the money commodity >(e.g. gold), is determined in the same way as the prices of all other >commodities, i.e. that the gold industry participates in the equalization >of profit rates like all other industries. This means that there is an >equation for the gold industry that is essentially the same as all the >other equations, i.e. that the price of gold is equal to production costs >plus the average profit. > >However, this crucial assumption is NOT TRUE. The exchange-value of gold >is DETERMINED DIFFERENTLY from the prices of manufactured commodities, >because gold is a scarce, privately-owned mineral, and thus the price of >gold MUST CONTAIN A COMPONENT OF RENT, which is paid to the owners of the >gold mines, including an "absolute" rent paid on the least fertile mines >(not just differential rent paid on all other mines). > > >3. Marx explained the existence of absolute rent in the following way: > >The prices of agricultural (and mineral) commodities are not equal to the >PRICES OF PRODUCTION of these commodities, but are instead equal to the >VALUES of these commodities, i.e. are proportional to the labor-time >requirements to produce these commodities; and more specifically, are >proportional to the labor-times required on the least fertile land. >Because the composition of capital on the least fertile land is lower than >the social average composition of capital, the values of agricultural >commodities are greater than their prices of production, and thus the >surplus-value contained in these commodities is greater than the average >profit. Landlords are able to secure for themselves this surplus profit, >and block the transformation of values into prices of production, because >of their ownership of the land. In other words, mining and agricultural >industries DO NOT PARTICIPATE IN THE EQUALIZATION OF PROFIT RATES with >manufacturing industries. > >Marx argued that Ricardo denied the existence of absolute rent because he >failed to recognize clearly the distinction between the values and the >prices of production of commodities. > >Gary, I hope you will agree that Marx's explanation of absolute rent >follows directly from his labor theory of value. > > >4. The main point for the purposes of our current discussion is that, >since gold is a scarce, privately-owned mineral, Marx's theory of absolute >rent also applies to gold. This means that the exchange-value of gold is >determined by the value of gold, and not by the price of production of >gold. In other words, the exchange-value of gold is determined >independently of the price of production equations for the manufacturing >industries, and independently of the equalization of the profit rate among >manufacturing industries.
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