[OPE-L:2267] Re: New Solution

Chai-on Lee (conlee@chonnam.chonnam.ac.kr)
Fri, 17 May 1996 20:51:26 -0700

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Thank Duncan for your prompt reply which I appreciate dearly.
Now I can put my questions about your money conception.

Duncan (1)
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 prices.

Question (1): If the value of money is to be determined by financial
market speculation, why not the valuation of ordinary commodities
(eg. durable goods like gold) take place in a similar market speculation ?
Most ordinary commodities are more or less durable assets, and can
be the objects of market speculation. In the case of Keynes, he
analysed the speculation behavior among the three alternative kinds of
goods, ordinary commodity, financial asset and investment goods. And
their regulating factors were each's own rate of interest and the money
rate of interest. Each's own rate of interest referred to the expected rate
of price change, storage cost, liquidity premium, etc. All those factors
cannot be measured without a proper value account predetermined.
Logical orderings are therefore being entangled. How could you explain
the logical ordering in this case?

Duncan (2)
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 ommodity,
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

Question (2): Would it be alright if I conceive the function of
representing abstract labor as that of the measure of value? I
would like to do so. "Representing abstract labor" implies, by the
word itself, the abstract labor did exist before the money represent it.
So, the existence of abstract labor should itself have nothing to do
with money. It exists as a reality in the commodity production as the
labor that produces commodities, which is the same as my point.
The second aspect of monetary theory is, according to you, about
the monetary system. The difference between paper money and
gold money is not in their nature but in the mere system. This
means, IMO, that, although its system has changed, its nature
remains the same. Its valuation mechanism, its commodity
character must have been the same, which is the same as my point.

Duncan (3)
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.

Question (3): As seen in my Question (2), the abstract labor did
exist before the money represent it. It can be represented by any
commodity in the process of exchange. This, therefore, cannot be
an important aspect specifically of a monetary theory. Neither for the
LTV since it is simply about the form of value, not about the
abstract labor, nor about the substance of value.
If, as you argued, the mechanisms that govern the determination of
the value of money differ in two monetary systems, then the nature
of money must have already changed. But, as I argued in my
question (1), the changed mechanism of the determination of the
value of money is still unfounded.

Duncan (4)
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.

Question (4): We have no reason to dispute the fact that the gold
standard of the 19th century evolved over history into the state-credit
system of contemporary capitalism. We all know well enough. But
I argue the nature of money is still the same. But you argue the determination mechanism of the value of money, etc. have
already changed. I ask what theoretical difficulties do you think are
involved in my commodity money conception by the way?

Thank you again for your prompt reply.