[OPE-L:1189] Re: Marx, Ricardo and money

Steve.Keen@unsw.EDU.AU (Steve.Keen@unsw.EDU.AU)
Thu, 22 Feb 1996 10:33:19 -0800

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Costas asks:
|2. I would very much like to hear more about what Steve thinks is the
|more sophisticated analysis of money to be found in Marx's work. I
|was baffled by his statement that the commodity money concept
|inevitably leads to the Quantity Theory.

This has to be brief, for circumstantial reasons. The first part of my
answer will largely have to wait until I have time (in a month or so)
to put my interpretation of Marx forward in detail; but briefly, the
more sophisticated analysis is founded on the dialectical analysis of
the commodity--the "contradiction between use-value and exchange-
value" (Marx )--as it is applied to what are both commodities--since
they are traded--and non-commodities--since they are not produced by
means of other commodities.

The two clearest instances of this are labor-power (which is "produced
by other commodities" in that we must eat, etc. to live, but which is
not produced with the objective of making a profit--it is produced
in the C--M--C circuit, not the M--C--M one) and credit--which is
"produced" by agreement between borrower and lender.

If you approach the latter of these from the point of view of the *form*
in which that agreement can manifest itself--as the transfer of a
lump of gold--then you can end up with a commodity money perspective,
which is what Marx manifestly does in the vast majority of his writings.
I argue that this "inevitably leads to the Quantity Theory" because
the quantity of gold is a function of commodity production, and if money
is taken as a symbol for gold, then the relation of gold production to
the rest of output is a measure of the "value" of money, and if gold
production rises, the value of "money" must fall, leading to general

While we can dress this up, this argues that the quantity of gold
regulates the price level, and this quantity of gold is a function
of conditions of production. This is a form of "endogeneity", but
nothing like that of Post Keynesian economics, where the money supply
is an endogenous function of capitalist/banker expectations. I am
afraid that I see Marxian theories of money which are based on this
commodity money concept as quite simplistic and misleading.

The dialectical analysis, which Marx employs with respect to money and
assets in those two cites I posted, focuses on the substance of the
*substance* of the manner in which credit is "produced"--the simple
agreement between borrower and lender to exchange a large credit
balance in return for an obligation to repay it over time with an
interest premium. The interest premium then corresponds to the "price"
of credit/money, and it is affected by all the expectational issues
that Post Keynesians consider.

I argue that this perspective is nascent in Marx's observations on
money and assets when he starts to consider them through the prism
of the use-value/exchange-value analysis. The foundation of this
analysis is the assertion that commodities exchange for their
(exchange-)value, the purchaser purchases them for their (normally
qualitative, objective) use-value, and these two "values" are
incommensurable. When Marx muses what this means for money, he
concludes that the use-value of credit is its ability to let the
borrower generate a stream of surplus-value at a later date, but
surely what the borrower pays for this use-value is not the value
of credit--which is the physical labor that goes into organising
the loan.

Instead, Marx argues that credit money is fundamentally different
to normal commodities, and implies that, in contrast to normal
commodities, its exchange-value is set, not by its value, but
by its *use-value*. Though this might appear to contradict the
rest of his analysis, it does not, for the dialectical reason
that the general analysis applies to strict commodities, and money
is both a commodity (because it is traded) and a non-commodity
(because it is not produced by means of commodities).

This mechanism enables questions of expectations to enter into
a Marxian analysis of credit money, because in the case of this
non-commodity, the use-value ascribed to it by the purchaser
is *subjective*--it reflects the borrower's expectations of
the future. The whole question of capitalist expectations is
almost entirely absent from Marxist discourse (it dominates
Post Keynesian, of course); this omission is a product of
focusing on Marx's pedestrian commodity money analysis, and
ignoring (in general) the use-value/exchange-value aspects of
his thinking.

The vast majority of Marx's discussion of the use-value/exchange-
value dialectic were confined to the issue of the creation of
surplus value; the two cites I made re money were very much needles
in a haystack. But Marxists may have been more able to see those
needles if they had made greater use of the dialectical foundations
of the labor theory of value.

Steve Keen
PS the words "price inflation, etc. etc..." were omitted after
the word "general" above. Sorry that this ended up being longer
than I intended!