[OPE-L:1312] Re: Gold & credit money

mktitoh@e.u-tokyo.ac.jp (mktitoh@e.u-tokyo.ac.jp)
Mon, 4 Mar 1996 23:21:55 -0800

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Costas <CL5@soas.ac.uk> wrote in his OPE-l 1297 as follows;

'I also have a question regarding the theoretical price of gold in
Duncan's [1262], related to John Ernst's points.

It seems to me that no significant generality is lost if we disregard
absolute and differential rent in gold mining (as well as seignorage
for minting). It suffices to establish that gold is subject to the
transformation process, as are all other commodities. The question I
have is, what form will the transformation take? There is no gold
price of gold, or no realisation is necessary in gold production:
the capitalist buys directly with the output. Consequently, what is
the production price of gold, and how does it relate to its mint

My comment is mainly on the last part of this letter. The mint price, say a
quater ounce of gold is a pound sterling, usually signifies what Marx
called 'standard of price' (Capital, vol.1. Penguin ed. p.192), or just
naming of a certain physical quantity of gold whis is socially and
conventionally determined. The substance of value of a pound sterling of
gold is determined totally differently by social technological relations of
production. Let us assume an usual transformation procedure from values (or
value-prices) to prices of production, although I do not personally do not
use that. Then, you can use the ratio between a pound sterling and the
labour-time embodied in a quarter ounce (say 1/2 or whatever, technically
determinable) as an additional equation instead of 1 (without any strong
reason) in Bortkiewicz-Sweezy solution. The result of transformation alters
the cost (through transformed prices of wage goods and means of production
for gold producers) of producing a quater of ounce of gold. However, the
system of prices of production must in eauilibrium give a general rate of
profit also for gold production in such a solution. Otherwise, the
production of gold would be urged to expand more rapidly (when its rate of
profit is hihgher), or to reduce (when its rate fo profit lower than
Although there is no realization problem for gold, the rate of profit
for its producers would fluctate according to the result of transoformation
from values to prices of production, or more generally to the changes in
prices. The difficult issue, as I have argued in The Basic Theory of
Capitalism, is to estblish the exact and clear-cut logic to find out how
increased production of gold (in case of a higher rate of profit for gold
production) would evetually result in the rise of general level of prices
so as to cause a rise in cost of production of gold (of the same
aoumnt and the same denomination, a pound) in a capitalistic dynamism,
especially when a naive quantity theory is refused. Can the reation be
established through a business cycle or does it take a long wave(s) of
price changes?
The changes in the marginal mines must also be taken into consideration.
But I do not think that the changes in the marginal mine must necessarily
mean the changes in the organic composition of capital or technical method
of production, just like we do not in the theory of differential rent.

Dear Costas in particular;

Please check your e-mail <CL5@soas.ac.uk>. Is it not too stuffed up? I
have tried to reach you two or three times since the end of Feb. by that
address, but failed even through <postmaster@soas.ac.uk>, to communicate
with you including a similar points. I may send you the copy by air-mail.
Let me know personally if you read this and solved the trouble.

All the best,