[OPE-L:1114] LVB3:What Money is Worth

Alan Freeman (100042.617@compuserve.com)
Mon, 19 Feb 1996 04:53:29 -0800

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Dualist marxism: or, reluctant Ricardianism

This completes LVB 2 on the value of money.

We have not yet said what the value of money is but we have
already reached a standpoint from which we can assess the
'standard' marxist response.

Marx's chapter 5 argument does not just reproduce Ricardo's
idea. He studies, not just casually, but as an integral part
of the discussion, what happens when Ricardo's assumptions
are violated and capitalists indeed sell things whose value
is $40, for $45 in money; that is, price is in general not
equal to value.

Simon [OPE 1015] restates without any proof the catechism
that " 'Equivalent exchange' for Marx means both qualitative
and quantitative equality." If linen worth 8 hours per unit
exchanges for coats worth 4 hours per unit then they *must*
exchange, says Simon, at 2 coats for 1 linen. This is precisely
what Marx, from 1847 onwards, systematically denies.

If equivalent exchange was the only problem, and everything
could be proved by just saying it is so, then every post
could be as short as OPE 1015.

Price-value divergences *mean* that linen worth 8 hours does
not exchange for coats worth 8 hours. If they did exchange
at this rate, there would *be* no price-value divergences.

The problem is not to squeeze Marx into a strait-jacket by
denying this fact - a fact he not only accepts but makes his
distinctive hallmark - but to understand how he expresses it.
If this is done, it is found that he does so logically,
numerically and consistently.

The view widely accepted as 'Marxist' is this: even though
Marx virulently and polemically insists that wine worth $40
is almost never sold for $40 throughout the Philosophy of
Poverty, the whole of the Grundrisse, in Towards a Critique
of Political Economy, in many places in the Theories of
Surplus Value and in several places during Chapter 1-4 of
Volume I; even though Chapter 5 quite explicitly derives its
results from the assumption of unequal exchange which clearly
governs the preceding four chapters (or else why bother
*proving* the assumption can now be dropped?), even though
Volume III demonstrates that goods whose value is $40 cannot
*possibly* sell for $40; nevertheless, Marx defines value as
if they do.

The result is a hybrid system.

Value is to be distinguished from price. It is therefore
accepted that a difference arises between the value the
capitalist parts with, and the value the capitalist
acquires, between the value of money and the value of goods.
But against all the evidence that for Marx, the decisive
element of Capital is Money, instead the capitalist's
surplus is measured not in the money s/he parts with, but in
the goods s/he acquires.

The first casualty is money. Even though price-value
differences exist, nevertheless the value of *money* retains
its Ricardian definition; it is the labour embodied in a
pound which determines its value to the capitalist (and to
everyone), not its capacity for purchasing the products of
society. But as a consequence, price-value differences
cannot even be conceptualised, let alone measured. For, a
price-value difference is, in the last analysis, the
difference between the *money* price of a commodity and its
*money* value.

This may be expressed in hours, but it arises from money.
If, therefore, one understands the value of money to be the
labour which went into its manufacture, it becomes
impossible even to state what a price-value difference
really consists of. The difference between the value of wine
costing $40, and the value of a $50 paper note is, if one
thinks about it, almost the whole value of the wine. It is
only because this $50 note represents a claim on the value
of a definite portion of the entire produce of society that
one can even start to get near the problem.

The standard Marxist construction thus falls back on an
essentially Ricardian idea; the value appropriated by the
capitalist is equal to the value of the actual products
consumed (in which the capitalist has no interest
whatsoever) as opposed to the value of the money laid out
(which is the only thing that matters to the capitalist).

Equivalent and relative value form

The first point to note is that as indicated in [OPE 1014 of
9/2/96] the distinction between the equivalent form of value
and the relative form of value is in fact, contrary to what is
maintained by the standard construction, a numerical and not
just a qualitative distinction. To say that 20 units of
linen worth 30 hours exchange for a coat whose value is 20
hours, means that this coat has a value of 20 hours, but is
equivalent to a value of 30 hours.

This has a precise social meaning. It says that if this
exchange is effected, the coat-owner gains 10 hours. It is a
disguised form of a definite social relation in which,
through the medium of the market, the coat-owner arranges,
effectively, for the linen-owner to work more hours for him,
than he works for the linen-owner.

One function of value theory is to theorise such relations
consistently; to explain, in terms of labour time, the
social content of the exchange relation *without* the
assumption of exchange at value. Marx's ground plan is
therefore greatly more radical and universal than widely

Once money becomes the decisive and universal social relation
the linen-owners do not relate in the first instance to
the coat-owners but to the money-owners. And their relation
to the coat-owners, such as it is, is expressed in money.

This changes the *numerical* relation between the coat-owner
and the linen-owner.

The value of the money in which the price of the coat is
expressed is neither equal to the value of the coat, nor the
value of the linen, but is a distinct value quantity in its
own right, between the value of the coat and the value of
the linen. Marx's defetishisation of money consists neither
in abolishing money, as Ricardian analyses have it, nor
in reducing everything to money, as the Value-Form analysis
has it, but in explaining how many hours are represented
in a given quantity of money as a result of the concrete
combination of the processes of production and circulation
which make up capitalist reproduction as a whole.

This number of hours can only be fully developed on the
basis of 'many capitals' because it presupposes the analysis
of credit, hence interest, hence commercial capital, hence
the equalisation ot the profit rate, hence the state, foreign
trade, etc. But I think it is a very serious misconception
to think that because of this, it is completely absent from
Volume I. Like all the categories which are fully concretised
in Volume III, it is also present in Volume I in an abstract
form; we know only that a given sum of money does represent
a definite number of hours, and that this number of hours is
given not by the intrinsic value of the money but by the
value of the goods against which it exchanges.

Every money sum paid by one individual to another, be it rent,
taxes, wages, profit, dividend, arms spending, charity or
whatever, represents no more nor less than a definite proportion
of the total labour of society; each sum of money represents
a disguised claim on this labour, directly proportional to this
sum of money.

The distinction between the equivalent and relative form is
the first step on this road, for it distinguishes the
commodity on the right, which is produced and then
alienated, from the commodity on the left, which is
alienated and then consumed. Consider more closely the

30 hours of linen are represented by 20 hours of coat; i.e.

1.5 hours of linen are represented by 1 hour of coat.

For the linen, 1.5 represents the labour in the commodity
itself. For the coat, it represents the labour in another
commodity, the commodity for which it is exchanged. For the
linen it is the result of production, for the coat the
result of exchange.

But if prices differ from values, there is not just one
number of hours which the coat will purchase, but as many
numbers of hours as there are commodities. 1 hour's worth of
coat might fetch me 1.5 hours in linen, or 1.7 hours in
wine, or 0.8 hours in cotton, and so on.

Straight away this means exchange is NOT a transitive
relation. Indeed the more evolved is capitalism, the less
transitive is exchange. You can sell hats for money and buy
wine for money; but you won't find anyone who will give you
a bottle of wine for a hat.

One reason people turn from economics to the Bell Curve, is
that economics gives degrees for proving things everyone
knows to be ridiculous. The Bell Curve just heads straight
for popular prejudice; but at least it resorts to popular
prejudice that matches popular experience. Everyone knows
you cannot get a bottle of wine for a hat, yet economics
insists on acting as if you could. It makes itself even more
surreal than the surrealists.

It is because exchange is not transitive, because you cannot
exchange any commodity for any other commodity, that money
is necessary. What is transitive, is being exchangeable with
money. The evolution of a society in which all human
relations are subsumed under exchange relations, necessarily
demands and brings into being, special commodities whose
function is to act as universal equivalent. They do so, not
just by being 'better' equivalents than all other
commodities but by replacing the equivalence function of
other commodities.

But for precisely this reason, one cannot take relative
prices as a defined category, and money as a derived
category. This was neither Marx's procedure, nor does it
make economic sense. There is no such thing as a non-money
price. In order to understand what a price is, one must
*first* understand money. It is the relative prices of the
neoricardian account, not the money prices of Marx's
account, which are given ex cathedra, assuming what is to be
proven. In *order* to have prices, one must *first* have
money, and so in *order* to define prices, one must *first*
define money.

And this is a completely practical question, not just
a logical one. One does *not* walk into a market on Monday
and find tomatoes for $1, and on Tuesday for $20. Why not?
If all relative prices are equally possible then so are
all money prices. Why do we not see them?

The assertion that Marx's chapter 5 argument 'arbitrarily'
ignores the many different 'possible' money prices, arises
from the equally arbitrary presupposition that all these
different money prices really are possible.

I think that one of the reasons we have had a relatively
fertile debate throwing up a lot of new questions, but on
the other hand a debate in which mutual understanding has
been on the low side, is this basic issue. For our part
money is primary and relative prices are secondary. But for
Gil, relative prices are primary and money is secondary.

I don't expect Gil to accept this, but that's my take on it.