[OPE-L:7702] RE: Re: RE: Re: Itoh on gold money

From: Itoh Makoto (mktitoh@kokugakuin.ac.jp)
Date: Sun Sep 22 2002 - 11:19:54 EDT

Dear Fred;
Thank you for your reply. In my experience, it would indeed need patient theretical cooperation such as we are seeing in the recent OPEL mails even just to clarify problems themselves in these kinds of issue. Let me try to raise some questions as for your reply by new insertions (Itoh2).
-----Original Message----- 
From: Fred B. Moseley [mailto:fmoseley@mtholyoke.edu] 
Sent: 2002/09/18 (水) 5:08 
To: ope-l@galaxy.csuchico.edu 
Subject: [OPE-L:7673] Re: RE: Re: Itoh on gold money

	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.

	(Ioth2) Then, can we not assume, as a numerical example,  that the constant productivity of gold industry embodies 200 thousand hours of labour (50c+90v+60s in tousand hours) into 2857 ounce of gold called 100 thousand dollars under the present social condition of production (as I assumed in my Basic Theory of Capitalism) ? We need to clarify three dimensions; physical input and output relations, hours of labour embodied in them as the substance of values and prices as the form of value. z=0.5 in this case is determined both technical conditions of production and by Marx's notion of standard of prices, or the name of pysical quantiy of gold, say thirty-fifth of an ounce is called a dollar, and is independent from the determination of prices of production.  z, in this sense, is not price in usual sense, and can remain constant through the whole transformation procedure. If we follow Marx's procedure and assume that all the products have prices directly proportional to the su!
bstance of values (so-called value-prices), then, a capitalist in the gold industry must invest 70 thousand dollars (25c+45v in thousand dollars) and obtain 30 thousand dollars as profit, which is directly proportional to 60 thousand of hours of surplus labour embodied in 2857 ounce of gold produced. Does this example so far suit your requirement?     
	> 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. 

	(Itoh2) Will you not try to follow Marx's theoretical system in Capital first, and abstract from the issue of rent in the basic theory of prices of production? As the theory of rent must clarify the redistribution of surplus value upon the ground of theories of prices of production and market prices of production (or market-values in chapter 10 of Capital vol.3).  
	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?

	(Itoh2) Can it really be correct, Fred, to assume that the income received in the gold industry does not change in the transformation of values into prices of production? For instance, if the prices of production of means of production is transformed from 25 thousand dollars of vlaue-price into 32 thousand dollars, and that of means of consumption for workers from 45 thousand dollars into 48 thousand dollars, (representing the higher organic compostiton of capital in these departments compared to the other department of production, say luxury goods for capitalists), then the income received in the gold industry becomes less. Though workers must receive 90 thousand hours of labour as the substance of value labour-power, through 48 thousand dollars of wages as the form of value, the capitalist of gold industry would now obtain, not 30 thousand dollars or 60 thousand hours of surplus labour, but just 20 thousand dollars of profit or 40 thousand hours of labour. The fact that t!
hirty-fifth of an ounce of gold is continuously called a dollar and need not be 'sold' cheaper through the transtorfmation procedure, cannot help your assertion in such a case. How do you think of this example?       
	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.

	(Itoh2) What do you mean by saying that gold has no price of production? Gold must have a name for a certain quantity, as standard of prices, say a dollar for theity -fifth of an ounce. It must have also the form of  value in exchange with other commodities. Even if it has not price of production in usual sense unlike other commodities, do you not think that a dollar or thirty-fifth of an ounce of gold becomes to have different exchange value when the social system of value-prices transformed into the system of prices of production? (Although my own positive theory of value and prices of production in The Basic Theory of Capitalism omits the hypothetical system of value-prices.)   
	> (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?

	(Itoh2) You seem to reach almost the same difficult point which I struggled in our book. If indeed the imbalnce between supply and demand of gold is greater than can  be accomodated by hoarding and dishoarding, (and this may well happen always due to the anarchical natrue of capitalist production), what is the social balancing mechanism to increase or decrese production of gold?
	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. 

	(Itoh2) It is hard for me to summarize my theoretical struggle briefly here. But probaly we have to think the whole theory of motion of price level of commodities, or inflation and deflation through business cycles, including the effect of credit system. Besides, if inflationary rise of general price level tends to drive out the marginal gold mines in the theoretical structure of differential rent, does it not induce a fall in the value of an unit gold as money, and vise versa? But will you please reread 6.3 of our book, Political Economy of Money and Finance, and try to think together with us? 
	Makoto, thanks again very much for this very interesting and productive

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