[OPE-L:7622] Re: RE: Itoh on gold money

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Fri Sep 06 2002 - 14:27:38 EDT

Makoto writes in 7616:

>	(Itoh) There must be at least three different steps to be 
>analyzed even within the basic theory. The first step is on the 
>values of commodities including gold. The effect of equalization of 
>profit rates among capitalists and the ground rent should still be 
>abstracted. Otherwise you have to discuss the determination of 
>exchnage values of agricultural products, etc. in relation with 
>differential and absolute rent from the beginning of 'Capital'.


I am glad that you are carrying out this exchange with Fred who I 
think will prove a more acute interlocutor for you. I do not however 
understand your point here.

Marx does not have to discuss the exchange value of agricultural 
products in relation to absolute rent in KI. Marx makes the 
assumption from KI on that agro-mineral products sell at their value. 
While in KIII we discover that for the mass of commodities  exchange 
value is determined by the transformed value of price of production 
(from which Marx abstracts absolute ground and absolute urban rent in 
particular), we find that the vol I assumption of value/price 
proportionality may well hold for scarce agro minerals by end of 
KIII. So Marx never drops the assumption of price value 
proportionality for agro minerals and yet still explains the 
possibility of absolute rent.

In Marx's system, absolute rent is not price determining but price 
determined. Of course the distinction between price determining and 
price determined has no place in neo classical economics.

>  As you put it, gold has not really price of production. However, 
>its exchange value is inverse of prices of other commodities. Under 
>the given standard of price, say an ounce of gold is 3 pounds 17 
>shilling 10.5 pence, the profit rate of gold producing capitalists 
>with given technical conditions must fluctuate according to the 
>changes of prices of other commodities. I don't see any reason why 
>capitalists in other industries can not competitively invest or come 
>into the gold industry, if its profit rate is constantly higher than 
>the social average. The fact that gold producers are relatively 
>small sized is also a good evidence for assuming such competitive 
>pressure. Without such !
>competitive pressure among producers, even the value itself can not 
>work as the gravitational center of exchange values. Marx's theory 
>of absolute rent does not refute the equalization of profit rates 
>among capitalists including those who pay absolute rent in 

Yes but gold capitalists have to make over and above the average rate 
of profit if they are to pay absolute rent to the owners of scarce 
land  or mine for the rights to work them.

Again for agro minerals and the gold industry in particular  M'-M/M 
cannot be set to the average rate of profit in the rest of the 
economy. This is a fundamental mistake which Bortkiewicz made, and it 
is the basic mistake which Gil is making in recommending that we can 
use the price of production equation for gold as an accounting 
equation in the transformation procedure. David Yaffe had already 
pointed out the mistake 25 years ago.

>	And you don't mention that, if the least productive gold mines have a
>	lower than average composition of capital, then, according to Marx's
>	theory, the exchange-value of gold will be determined by its 
>"value", not
>	by its "price of production", because the monopoly power of 
>the owners of
>	the gold mines enables them to stop the redistribution of surplus-value
>	from the gold industry to other industries.
>	(Itoh) There are two pints here to be clarified here beside 
>already noted. First do you negate the theory of prices of 
>production for the whole prodcts paying the absolute rent?

Yes in Marx's system the introduction of prices of production does 
not negate that agro minerals continue to sell at value, not prices 
of production.

>  If not, what is the basic difference in this point between the gold 
>industry and agricutrue? In a sense, all the land owners can reject 
>investment to gain the abosulte rent to the extent that the 
>comepetive pressure from the additiona investment to the existing 
>lease land allows it. Second, in this regard, as I argued in my 
>boook, The Basic Theory of Capitalism (Macmillan, Barns and Noble, 
>1988, p.248),  Marx's theory itself to pose the value as the source 
>and limit of ablolute rent is problematic. Do you think that 
>absolute rent disppears or does not exist either when the organic 
>composition of capital in agriculture bacomes higher than the social 
>average or in case of the urban land for manufacturing industries 
>with higher composition of capital than the social average?  The 
>concept of monopoly re!
>nt is in my understanding may not well applicable to those cases.

Yes absolute rent as a price determined phenomenon would not exist in 
those cases; in your cases we would have rent as a monopoly, 
price-determining phenomenon, which Marx presumably would have 
considered in the book on competition.

Comradely, Rakesh

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