[OPE-L:3382] Re: TSS and Value of Money

Duncan K. Fole (dkf2@columbia.edu)
Sun, 13 Oct 1996 07:40:26 -0700 (PDT)

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In reply to Steve's [OPE-L:3378]:

>Re Duncan's comments on the value & use-value of money, please take a
>look at the 2 replies I sent to Allin on this, which cover part of the
>textual basis in Marx for the approach I'm advocating to credit money
>and notes.

I did read your post, but unfortunately deleted it before I read this one.
Could you send me another copy of the earlier post? (dkf2@columbia.edu)

>We would have to differ on whether Marx's own analysis extends to fiat
>money, as I don't think the textual evidence is clear enough to point
>either way. I would argue that the concepts *do* easily extend to fiat
>money, even if Marx had not specifically considered it.

Since I've spent a horrifying amount of my professional time trying to
extend Marx's concepts to modern state-credit money systems (which I guess
is what you mean by "fiat money") I'm a little distressed at the idea that
it's easy to do! I certainly agree that the part of Marx's theory that has
to do with the functions of money extend easily, but the part having to do
with valuation and the price level seem much more problematic to me.

>I would also disagree with the statement that
>> <snip> He also has a theory of credit, but in the
>> context of a gold standard system where the price level of commodities is
>> determined by their production costs, so that the expansion of credit can
>> influence the accumulation process, but not prices.
>This is in general true of Vol I analysis--for the reason I put forward
>earlier, that Marx was "holding constant" some forces which would need
>to be considered in later works, of which Vols II & III as published
>were precursors, but certainly not what Marx would have been content
>with had he lived to complete his program.

I think we're now back at our original difference of viewpoint on the
development of Marx's economic thought. Those on the list who are more
expert than I on this issue might want to comment, but I think it's
dangerous to assume that material in Vols II and III represent more
advanced versions of Marx's ideas. But even in the somewhat unsatisfactory
discussion of credit in Volume III I don't see any trace of a link between
credit expansion and prices, except through the speculative inflation of
gold prices of commodities during booms.

>Nonetheless, in Vols II & III & TSV, you can find the beginnings of an
>analysis which supports the proposition that the expansion of credit can
>affect prices, as well as the accumulation process. The passage I'm
>thinking of here occurs when Marx is discussing Ricardo on rent as it
>applies to mineral resources in 11.2 of TSV II. He quotes Ricardo as
>"'The compensation *given* for the mine or quarry, is paid for the
>*value* of the coal or stone which can be removed from them, and has no
>connection with the *original* and indestructible *powers* of the land.'
>No! But there is a very significant connection with the "*original* and
>destructible *productions* of the soil. The word '*value*' here is just
>as ugly as the phrase '*repaid* himself with a profit' was above.
>Ricardo never uses the word *value* for utility or usefulness or "value
>in use". Does he therefore mean to say that the "compensation" is paid
>to the owner of the quarries and coalmines for the '*value*' the coal
>and stone have before they are removed from the quarry and the mine--in
>their original state? Then he invalidates his entire doctrine of value.
>Or does *value* mean here, as it must do, the *possible* use-value and
>hence the *prospective exchange*-value of coal or stone?..." (p. 248 PP
>Notice the final sentence (all emphases are Marx's): "does *value* mean
>here, as it must do, the *possible* use-value and hence the *prospective
>exchange*-value of coal or stone?" I interpret this as saying that price
>of these (speculative) assets is set not by their exchange-value--since
>as Marx cogently argues, they have none--but by their (uncertain)
>use-value. So the price level for unproven mineral resources--and by
>extension, the price level for speculative assets in general--is set not
>by their exchange-value, but by their (speculative) use-value.
>This is the basis for a 2 price theory of capitalism: one price level
>for commodities based on objective costs of production, another for
>speculative assets, based on expectations of the profit stream they will
>yield. This is also part of Minsky's analysis, as you'd be aware.

As I said earlier on the list, I think that the best way to reconstruct
Marx's theory of the valuation of the money-commodity is through a theory
of speculation, so I'm not sorry to see this quote (which I hadn't noticed
before). But it's not clear to me how the expansion of credit directly
influences the speculative valuation of commodities.


Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
fax: (212)-854-8947
e-mail: dkf2@columbia.edu