[OPE-L:7610] Re: Gold in the Transformation Problem

From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Thu Sep 05 2002 - 16:18:15 EDT

On Thu, 5 Sep 2002, Gil Skillman wrote:

> As I see it, it isn't a question of "defending the inclusion of the gold 
> industry" in Marx's transformation analysis (or correspondingly in the 
> Sraffian price of production equations).  The relevant questions are rather 
> (a) whether Marx intended to categorically exclude gold from his K.III 
> Chapter 9 analysis on the sort of historical grounds raised by Fred, 
> despite Marx's earlier announcement that he intended to abstract from such 
> historically specific considerations, and (b) whether it is logically 
> possible to maintain Fred's/Marx's claim about the prior determination of 
> the rate of profit *given* capitalistically produced commodity money.
> On (b), as far as I can tell, no one has disputed my demonstration that 
> *given these conditions* there is an inconsistency in the claim that the 
> rate of profit is determined analytically prior to prices of 
> production.  The question is whether this demonstration is relevant to 
> Marx's, and thus Fred's, analytical project, which brings us to (a).  Since 
> Marx is dead, we have no way of settling the matter, so I won't bother 
> trying.  Marx does not clarify the matter either way in Ch. 9, and 
> presumably neither side of this discussion pretends to be able to go back 
> in time to read Marx's mind or to recall him from the dead to figure out 
> the answer.  But the discussion has at least given rise to a new (or at 
> least not previously obvious) theoretical insight about the economic 
> conditions under which Marx's/Fred's conclusion do and do not hold.

Gil, I certainly have disputed your "demonstration" and so has Rakesh.  
On the following three main theoretical grounds:

1.  Gold is a scarce, privately-owned mineral, and therefore the income of
the gold industry must contain a component of rent.  In terms of Sraffa's
theory, this adds an unknown, without adding another equation, so that the
rate of profit is not uniquely determined by given technical conditions of
production and the wage rate.

In terms of Marx's theory, the existence of absolute rent implies that the
income of the gold industry is determined by the "value" of gold,
independently of the equalization of the rate of profit in the other
(n-1) industries, which reduces the number of equations by one, so that
again the rate of profit is not uniquely determined by given technical
conditions of production and the wage rate.

2.  There always remains in existence a very large supply of gold in
circulation (approximately 20 times the quantity of current gold
production during the gold standard period), so that changes in current
gold production have only a very small effect of the rate of profit in the
gold industry, and thus there does not seem to be any effective mechanism
through which the rate of profit in the gold industry could be equalized
to the average rate of profit.  

3.  In terms of Marx's theory, since gold has no price, it is not possible
to transform the price of gold from value to price of production, and thus
it is not possible to transform the surplus-value contained in gold to
profit as a different magnitude.  This means that there can be no sharing
of surplus-value between the gold industry and other industries, which
implies that the rate of profit in the gold industry and the rate of
profit in the other (n-1) industries are determined independently of each

Gil, I look forward to your responses on these theoretical points.


P.S.  Beyond the points above, there is another even more fundamental
objection to your argument, that I have not yet discussed and will save
for a later post - that the initial givens in Marx's theory are not the
physical quantities of inputs and outputs (as in Sraffa's theory), but are
instead the money quantities of constant capital and variable capital
invested in the first phase of the circulation of capital to purchase
means of production and labor-power.  


> My original intention upon joining the discussion between Gary and Fred was 
> to begin with the scenario of commodity money and then move directly to 
> that involving fiat money.  But in light of discussion prompted by the 
> first scenario, I think it's necessary first to ask Fred about the ground 
> on which he advances (or understands Marx to advance) the theoretical 
> conclusions we're discussing. So I'll wait for Fred before moving on to the 
> case of fiat money.
> Gil  

I look forward to reading how you will incorporate fiat money into the
Sraffian system of equations.  It seems to me (and I think to Paul
C. too) that, in the case of fiat money, the rate of profit is definitely
not determined by given technical conditions and the real wage (even if
the case of commodity might remain in dispute).  

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