[OPE-L:7636] Re: Gold in the Transformation Problem

From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Tue Sep 10 2002 - 10:37:21 EDT

From: "Gil Skillman" <gskillman@mail.wesleyan.edu>

> Hi, Fred, you raise a number of interesting issues that I attempt to
> address below.  But perhaps we should also ask whether  its worth pursuing
> this line, insofar as it concerns an analytical scenario whose only
> relevance is in assessing the sense of your  claim (following Marx) that
> the determination of the rate of profit is analytically prior to the
> determination of prices of production.  If you don't find it too
> onerous/obnoxious, I think that if you could address the questions I posed
> in the "Moving on..." post, we could figure out if there are interesting
> issues--(my interpretation:  unresolved issues that can be pursued on
> mutually accepted theoretical  grounds)--that might be pursued on this
> question. [Alternatively, if you could point me in the general direction
> earlier posts in which you've already answered the questions I've posed, I
> could look them up in the archives myself.]

Gil, I will try to do this asap.  It is a tall order.  But I agree is
necessary.  In the meantime, a few short replies below.

> You say
> >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
> >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
> >rate of profit is not uniquely determined by given technical conditions
> >production and the wage rate.
> >
> >In terms of Marx's theory, the existence of absolute rent implies that
> >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.
> 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
> scarcity constraint is binding at the margin, which is once again a matter
> of historical contingency, not theoretical necessity.  That is, one could
> without contradiction imagine the capitalistic production of gold in which
> the level of rent were in fact zero.  (And not only *can* one, but the
> substance of your next point is that it's *quite plausible* to imagine a
> world in which the scarcity constraint on gold production is non-binding,
> since by your representation the supply of gold in circulation far exceeds
> the level of gold production!)  And in that case, the inconsistency I
> asserted again arises.

Gil, I think you are misunderstanding what I mean by scarce, and are also
confusing differential rent and absolute rent.  By scarce, I do not mean
diminishing marginal returns, which has to do with differential rent, not
absolute rent.  Differential rent is historically contingent in the sense
that only one kind of land or mine could be cultivated, or all the lands
or mines could be of equal fertility.  In these cases, differential rent
would disappear.

However, this is not what I mean by scarce.  Instead, I mean that
capitalists cannot increase production of a natural resource unless the
owners of that natural resource - the landlords - allow it.  And in
general, landlords will not allow an increase of produciton unless they
receive a rent, even on the least productive land or mines.  This rent
paid to landlords on the least productive land or mines is absolute
rent.  It is not historically contingent.  Rather, it is inherent in the
capitalist mode of production, or at least inherent in capitalist
production with private ownership of natural resources.  

> >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
> >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.
> Again, this is an accurate claim about descriptive reality that has no
> necessary relevance for the abstract theoretical considerations raised by
> Marx's discussion in K.III Ch 9 or the prices of production
> framework.  Note that you could make the same sort of claim as above for
> *all* durable consumption goods:  the supply of goods in circulation
> exceeds, often greatly, the amount of current production (consider:  used
> musical instruments; cars; furniture; just about everything sold on
> It also would apply to any durable constant capital goods that enjoy a
> secondary market (pickup or delivery trucks, say) Therefore, if this
> as a legitimate argument against the inclusion of the money commodity in
> the relevant equation system, then it must also count as an argument
> against including *any* durable consumption or constant capital good in
> Marx's transformation analysis and/or the Sraffian price of production
> equations.  

I will have to think about this some more.

> >3.  In terms of Marx's theory, since gold has no price, it is not
> >to transform the price of gold from value to price of production, and
> >it is not possible to transform the surplus-value contained in gold to
> >profit as a different magnitude.
> I don't see this.  Granting that gold does not itself have a price denies
> *neither*
> (A)  that gold is itself the measure of *monetary* value, so that one can
> derive the profit per unit of gold produced by subtracting from that unit
> the cost, in gold, of the inputs used up in producing that unit (e.g., if
> it costs me 50 cents to produce each unit of gold, then obviously I've
> earned a profit of 50 cents per unit of gold produced),
> *nor*
> (B) that gold itself, being a commodity, has a value, as do the constant
> and variable capital expended in producing gold, so that one may derive
> surplus value contained in a unit of gold as the difference between its
> value and the value of the contant and variable capital used up in
> producing it.
> Thus, as I understand it, it *is* possible to determine both profit and
> surplus value associated with gold production, despite the fact that gold
> does not have a price in Marx's sense.  Furthermore, these two quantities
> need not be equal, insofar as the prices of production of input
> need not be equal to their values measured in money, and (even more
> evidently), the value of a unit of gold will not in general equal one.

I will respond to this point in my longer forthcoming post in reply to
your "moving on ..." questions.  


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