[OPE-L:2254] Re: New Solution

Duncan K Foley (dkf2@columbia.edu)
Thu, 16 May 1996 11:50:26 -0700

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On Thu, 16 May 1996, Chai-on Lee wrote:

> Dear Riccardo, Duncan, Simon, Paul, Fred, Michaels and others:
> To make our debates more succinct and that shorter, I would like you to
> enumerate the necessities and/or the reasons to change the notion of
> money from a commodity-money into the non-commodity money. I will
> take the lead by enumerating the theoretical difficulties that arise
> when we take the non-commodity money conception.
> (1) You must explain how the value of money is determined. And,
> if it can be determined *with no reference to labor content*, then
> the values of other ordinary commodities have no reason to be
> determined by the labor contents. Why the two cases can be
> justified in the determination of money-value and commodity-value?

This is a very important question. In my view, as we discussed some on the
list, contemporary monetary systems are based on the debt of the nation
states. I have also suggested that the valuation of assets like debts
takes place through financial market speculation, and that this same
process is at the heart of changes in the value of national moneys. I
don't agree that this implies the prices of other commodities don't depend
on their labor content (and other cost factors), since they are produced
at a profit, and competition will play a role in regulating their relative

> (2) Money is put on a more abstract level than commodity values in
> your money conception since your conception is in the context of
> "monetary theory of labor value". Money is something other than the
> commodity. The value of money is therefore to be explained *with no
> reference to commodity values*. The exchange between money
> and other ordinary commodity is of course not on an equivalent
> level.

It might help here to distinguish two aspects of the theory of money: 1)
the function of money in a capitalist system which I think is to represent
abstract labor time, and 2) the specific determinations of particular
monetary systems (such as the gold standard or national state credit
systems). In the first sense money might be a commodity, such as gold,
that has evolved to take over the function of representing abstract labor,
or it might be an abstract unit of account, like the dollar, representing
the credit of a particular nation state. In the state-credit money systems
the determination of the price level (or the value of money) depends on
more on issues of public finance, whereas in a gold standard system, the
relative price of gold is governed by competition (of whatever form) like
other commodities.

> (3) In view of the above two points, the labor theory of value in a
> commodity money system should be radically different from that in a
> non-commodity money system. This is why there have been so
> wide varieties between us.

I don't immediately see why this should be so. In both systems money
represents a certain amount of social labor time, which is the important
issue for the LTV. What differs, as you point out, is the mechanisms that
govern the determination of the value of money.

> In my commodity money conception, however, the first two
> questions do not apply and Marx's value theory is seen correct and
> right in every aspect.
> To repeat, please be explicit about *why* you so obstinately
> oppose the commodity money conception. If the only reason for your
> conception is nothing but this that today's paper money is no more a
> labor-product, then you must have a serious misconception of today's
> world capitalism. [with far more serious misconception of Marx's value theory].

I'm not sure I oppose the commodity money conception at all, much less
obstinately. It is surely the right way to approach the analysis of 19th
century capitalism. Perhaps we need to agree more deeply on the process by
which the gold standard of the 19th century evolved over history into the
state-credit system of contemporary capitalism.