[OPE-L:7631] Re: RE: Re: RE: Itoh on gold money

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Mon Sep 09 2002 - 19:59:22 EDT

Dear Makoto,
I think the points which you make are (unsurprisingly) excellent 
ones, and I shall have to find time again to read your analysis in 
the Basic Theory of Capitalism.

Just one point: I don't believe any commodity can serve as the 
general or universal equivalent in the value relation. That commodity 
on account of its role as a store of value would have to be 
relatively indestructible; it would have to be scarce; it couldn't be 
freely reproducible. That does not mean the money commodity has to be 
a precious metal. It does however strongly suggest that the money 
commodity cannot be of the type the exchange value of which tends to 
be equilibrated to its price of production.

Not all commodities tend to exchange at their respective prices of 
production; in saying that the overwhelming bulk of commodities do 
tend to exchange at their prices of production and that for them it's 
reasonable to abstract away from absolute ground and absolute urban 
rent it particular (in most of these cases rent is not really pure 
ground rent anyway but payment for the use of buildings which after 
all a product of labor, as Catephores underlines), Marx does not 
imply that it's always reasonable to abstract away from absolute 
ground rent.

It's simply no mere accident that the money commodity is one of those 
rare commodities in which one cannot abstract from ground rent in 
theorizing its exchange value. The money commodity is not like the 
bulk of commodities. And not only because it alone monopolizes direct 
exchangeability. In order to hold on to that position, it probably 
has to be physically different from the bulk of commodities. It has 
to relatively indestructible and scarce and difficult to reproduce. 
If money is to hold on to its role as a store of value, its supply 
has to dwarf the amount which can be currently produced. Otherwise, 
there would be no reason to believe that it would hold its value over 
time (see gold bug Charles Rist on this).  And it is these very 
characteristics which make the money commodity a very unlikely 
candidate to exchange at or have its purchasing power determined by 
its price of production.

That is, part of the contradiction between commodities and money 
shows up as the difference between the kind of commodity which kind 
most commodities are and the kind of commodity which kind the money 
commodity is very likely to be.

By putting money on the same footing with all other commodities, the 
von Bortkiewicz-Sweezy-Sraffa representation of the economic system 
essentially effaces a fundamental contradiction of the capitalist 

The money commodity is simply not similar to the mass of commodities 
that an equation for its price of production can be written alongside 
the equation for all other commodities. Again: it is no mere accident 
that the purchasing power of the money commodity will not tend to be 
determined by its price of production; that is--and to echo again 
Michele's point--it is no mere accident that ground rent cannot be 
reasonably abstracted away in the case of an inherently scarce good 
(Marx does however reasonably abstract from absolute rent in 
theorizing the prices of the mass of *freely reproducible* 
commodities in which scarce land does not enter as a means of 
production), and it is no mere accident that the supply of the money 
commodity which has to be indestructible and scarce swamps the 
current level of production variation of which thus has little effect 
on the supply of the money commodity and thereby little immediate 
success in equilibriating its exchange value to its either its direct 
value or transformed value.

>	Do you agree or disagree?
>	(Itoh) I disagree. Firstly, Marx's theory of absolute rent 
>itself in chap 45 of  the 3rd vol. of  Capital clearly states that 
>it depends on the general condition of market how the market price 
>of a land product comes closer to its value, and that landownership 
>can not determines it. If you insist that the exchange-value of gold 
>is determined by its value in accord with Marx's theory of absolute 
>rent, then you have to explain how and why the general condition of 
>market (or the balance between social demand and supply of gold) 
>always sssures it, while all the other coomidities are subject to 
>fluctuations of market prices. There cannot be a capitalist 
>mechanism of competition and the function of landownership to assure 
>such a difficult balancing.  At least my former qustion as for how 
>to think the social demand for gold in relation to its supply 
>remains in this context.

I agree that demand plays an essential role in determining whether 
gold has purchasing power above, at or below its value and thus in 
determining the magnitude of absolute rent.

I am sure that Fred will in time make other comments and respond to 
the rest of your stimulating post.

All the best, Rakesh

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