[OPE-L:7673] Re: RE: Re: Itoh on gold money

From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Tue Sep 17 2002 - 16:08:22 EDT

Makoto, thanks again for your patient clarifications of your
interpretation of Marxs theory.  My responses below.

On Thu, 12 Sep 2002, Itoh Makoto wrote:

> I thought you agreed in an earlier post that the money commodity has no
> price of production?
> (Itoh) First, let us concentrate to the theory of prices of production,
> where the theory of rent is abstracted. Then, although the money
> commodty need not be sold unlike any other commodities, as you say, the
> capitalist producers to produce it (say gold) must participate in
> capitalist competiton to equalize the rate of profit. When thirty-fifth
> of an ounce is defined as a dollar (as a standard of prices), the
> labour-time embodied in it is determined by social relations of
> technical conditions of production, which are basically independ from
> market conditions of demand and supply. When you assert that the value
> of money commodity does not have a price, do you assume that the labour
> substance of value in thirty-fifth of an ounce of gold (a dollar) is
> always one hour (so that its value equal an unit of price, or Z=1 in the
> transformation procedure)? 

No, I do not assume that "the labor substance of 1/35 oz. of gold is
ALWAYS one hour" (by which I assume you mean that the labor-time required
to produce 1/35 oz. of gold is one hour). The labor-time required to
produce gold may change over time.  But this has nothing to do with the
transformation of values into prices of production at a given period of
time, which assumes a given, unchanging level of productivity in the
economy as a whole, including the gold industry.

> On what theoretical relation do you assume
> between an unit of the money commidty called a dollar, and the
> labour-time embodied in it? I demanded frist to calarify the dimensions
> of substance of value(labour-time in hours) and prices of production
> (say, dollar) to Bortkiewicz and Sweezy type of theory, and asserted
> that the co-efficiet to connect the substance of value and name of an
> unit of money commodity can generally be not 1, but for example in my
> tables can be 0.5 (which means thirty-fifthe of an ounce of gold
> embodies two hours of labour-time). 

Again, I think you are confusing "z not equal to 1" with a change in the
labor-time required to produce a unit of gold.  z is a "transformation
coefficient".  It is a ratio of the "price of production" of gold to the
value of gold.  The value of gold - the labor-time required to produce
gold - remains the same.  The whole transformation procedure assumes
constant productivity and unchanging labor-time requirements, including in
the gold industry.

> Though the money commdity (gold) does not have price or price of
> prudoction in an usual sense like other commodities, we have to explain
> in the basic theory how its substance of value is related to its unit as
> a standard of prices, called a dollar. Then next, we have to clarify how
> capitalist competition equalizes the profit rates across industries
> including the gold industry and how it results in social redistribution
> of surplus labour-time, as I attempted to show in my three tables
> theory.            

I would argue that what as to be explained is how the gold industry
receives at least the average rate of profit.  The gold industry may, and
in reality does, receive a higher than average rate of profit, because
rent is also included in the rate of profit in the gold industry.  

I think I have explained how the gold industry receives a higher than
average rate of profit in previous posts.  The income received in the gold
industry - a definite quantity of gold - does not and cannot change in the
transformation of values into prices of production, i.e. the income
received in the gold industry continues to be proportional to the current
labor employed in the gold industry.  Since the gold industry has a lower
than average composition of capital (i.e. a higher proportion of current
labor to capital), the rate of profit in the gold industry is higher than
average.  The excess profit is paid to the owners of the gold mines in the
form of absolute rent.  

What is wrong with this explanation?

Furthermore, even if one wanted to abstract from rent and assume that the
rate of profit in the gold industry is somehow equalized to the average
rate of profit, such an equalization of the rate of profit in the gold
industry COULD NOT take place by means of the transformation of the value
of gold into the "price of production" of gold, as in the
Bortkiewicz-Sweezy-Itoh method, because gold has no price of production. 

> (Itoh) If the demand for gold including the demand for hoarding and for
> materials of manufacturing besides necessary quantity of means of
> circulation, can we assume that excess supply of gold beyond total
> demand for gold would inflate prices of other commodities so as to
> reduce the profit rate of gold industry by raising its costs instantly,
> and result in reduction of gold production, as you seem to suggest? If
> you would avoid the quantity theory of money under the gold standard
> system, how do you explain the balancing mechanism to adjust social
> demand for and supply of gold? The structure of differential rent may be
> also related to this issue. 

I think I have explained in recent posts my understanding of this
balancing process between the supply and demand for gold.  It happens
mainly through the hoarding and dishoarding of gold.  It certainly does
NOT happen though changes in the price of gold, since gold has no
price.  If the imbalance between supply and demand is greater than can be
accommodated by hoarding and dishoarding, then perhaps gold production
might increase or decrease accordingly.  

What is wrong with this explanation?

And, Makoto, what is your own explanation of this balancing mechanism
between the supply and demand for gold?  I am away from home and dont have
with me your and Costas book, but as I remember you discuss this briefly
toward the end of the earlier chapter on Marxs theory of money.  But I
dont remember the details.  Could you please summarize them for us?  What
does this balancing mechanism have to do with differential rent?  Thanks.  

Makoto, thanks again very much for this very interesting and productive


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