[OPE-L:1191] Re: Marx, Ricardo and money

Allin Cottrell (cottrell@wfu.edu)
Thu, 22 Feb 1996 11:52:46 -0800

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Steve writes:

> I argue that [a commodity-money perspective] "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...

This point may be incidental to Steve's larger argument, but I think it
is a muddle, for reasons set out in the working paper I mentioned
earlier. Strict application of the LTV to the case of commodity money
gives you an "inverse Quantity Theory": The (long-run equilibrium) prices
of goods in terms of gold are set by the relative labour-contents, and
the quantity of money has to adjust to match (given velocity of
circulation). I'd agree, though, that we need an analysis of
credit-money that is different from both the regular Quantity Theory and
the inverse version.