[OPE-L:7613] Re: Re: Re: Gold in the Transformation Problem

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Fri Sep 06 2002 - 04:12:27 EDT

re Gil's 7611

I shall only make a brief reply.

>Insofar as it is logically possible to imagine a world in which the 
>realized level of this rent is zero, this observation doesn't rebut 
>my point.  What you assert here is, in effect, that by its nature, 
>the production of gold *must* accrue a strictly positive absolute 
>rent.  Of course, the fact that gold is "privately owned" is not at 
>issue; all commodities and means of production are privately owned 
>under capitalism.  "Scarcity" in the sense you intend it here only 
>matters if the scarcity constraint is binding at the margin, which 
>is once again a matter of historical contingency, not theoretical 

It is not a  matter of historical contigency  that the money 
commodity in a system of general commodity production was not a 
*freely* reproducible or an ordinary, run-of-mill durable consumer 
good with a small secondary market; as Michele Naples has already 

"... Marx made clear that the good which serves as commodity money 
must be scarce to serve as money. Just as Marx rejected Ricardo, he 
would reject the neo Ricardian model where the exchange value of 
money is determined in the same way as other commodities' price of 
production." Freeman and Carchedi, eds. p.103

Gold is not inherently money, but the money commodity is inherently a 
scarce precious metal.

As a store of value, money would have to be relatively 
indestructible, and it seems that its role as a store of value would 
be undermined if the extant supply of money commodity did not dwarf 
current output a low level  of which could only be ensured by 
inherent scarcity of commodity that is to serve as money.

The money commodity cannot be the kind of commodity for which there 
is a price of production--that is, a freely reproducible good.  As an 
inherently scarce good, absolute rent has to enter in at the ground 
level in the "price" formation process. One should not use a price of 
production equation for the money commodity as accounting identity.

The question is also not whether the supply of goods in circulation 
exceeds the amount of current production. That is certainly not the 
claim which I made. The question is--as Michele has said in her OPE-L 
post--whether the former "swamps" the latter. And very little of the 
quantity of the gold which does circulate results from current 
production--as Fred says, perhaps only 5%; this swamping is not 
characteristic of so called consumer durables. Moreover,  Gil does 
not speak to my examples in the very non polemic posts which I have 
written on this question.  In those posts I emphasized that the 
changes in supply which are needed to 'equilibriate' the exchange 
value of a commodity with its price of production are very difficult 
to effect in the case of a precious, relatively indestructible metal 
through changes in the level of its current production. I am not 
saying that changes in supply cannot be effected at all through 
variation in current output levels.

But that they are so difficult to effect in the case of the money 
commodity is not a historical accident. And these difficulties 
greatly complicate any tendency towards the formation of prices of 
production in the case of precious metals.

So I think Gil has to consider why Michele and many of us would not 
consider it a historical accident that the money commodity does not 
take part in the transformation process. Of course we have yet to 
develop our reasons in a systematic way. The above is but  a first 

A "by the way":  it does seem to me that Marx did not determine the 
exchange value of money in the same way as other commodities' prices 
of production; if he had, he wouldn't have held constant the general 
price level as he considered in KIII, part 2 the effects on relative 
prices from a redistribution of surplus value in the formation of 
prices of production and a change in the level of wages.


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