[OPE-L:5145] Re: [JOHN] Re: Questions to Ajit

Ajit Sinha (ecas@cc.newcastle.edu.au)
Thu, 29 May 1997 01:42:05 -0700 (PDT)

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At 12:33 PM 5/26/97 -0700, John Ernst wrote:

>Your question is a good one. I could simply say that Marx in CAPITAL
>often makes statements like -- let so much money represent so much labor
>as he considers technical change in sectors other than the one that
>produces the money commodity. But that is not a defense. Thus, let's
>proceed in a different fashion.
>I do not think it's an accident that the money commodity is produced
>with no raw material inputs and that entry into the branch of production
>that produces it is limited as one has to have, for example, a gold
>mine to produce gold. Correct me if I am wrong, but as I recall with
>Sraffa as with Ricardo we find no possibility of absolute rent. Thus,
>if I assume that labor is the only input in the gold sector, technical
>change in the other sectors will not change the amount of labor it
>takes to produce gold. Since the gold producers can earn absolute rent,
>the value of gold does not change with changes in the techniques of other
>sectors. That is, entry into and exit from the gold producing sector
>need not occur at all. The labor it takes to produce gold remains
>invariant, under these assumptions. Again, the assumptions would be
>made only for sake of examining matters like technical change. Hence,
>when someone says "let $1 represent 1 hour of labor", I do not consider
>the statement problematic as they discuss technical change in sectors
>other than the gold producing sector.

You are arguing very much in the same vain as Ricardo's controversial
'corn-model' case. According to Sraffa, Ricardo apparently made the argument
to Malthus, either in conversation or in a letter which is missing, that if
we assume corn production takes only corn and labor as inputs, and wages are
paid in terms of corn only, then the corn sector would determine a rate of
profit independent of all other prices, and all the prices will have to
adjust such that their rate of profit is equal to the corn rate of profit.
Malthus, of course, did not accept this reasoning arguing that the wage
basket does not contain only corn. Ricardo had to accept this, which
basically created the problem of the 'invariable measure of value'. Your
case of gold is similar. Gold is not produced by mere use of workers hands.
It requires all kinds of mining machineries and equipments that are produced
in other sectors of the economy. Moreover, I hear that water around a gold
mine is usually contaminated by mercury poisoning, so I guess mercury must
be used as a raw material in the production of gold for cleaning purposes
etc. Furthermore, all the economies do not have gold or silver mines of
their own; they have to import these metals. Thus all the means of
production used in the transpotation would become part of the production of
gold for these economies. Thus a technical change in any basic sector would
affect the cost of production in the gold sector, and so its prices,
irrespective of whether there is absolute rent or not in the production of
gold. Moreover, if we assume that it is the real wage that is given (which
is the Marx's case) then no streatch of imagination would guarantee your
condition, since the change in the prices of wage goods would change your
cost conditions--given that workers do not live by eating gold.

Moreover, you should remember that most of you have been arguing in terms of
fiat money, where even this thin reed, which you have presented above, won't
be available to hang on to. A fiat money has no intrinsic value of its own.
Its value is simply the amount of goods and servises it can buy. A change in
price of commodities, by definition, means a change in the value of the fiat
money. I think, by now you would have realized that the theory of prices you
have been holding on to is quite precarious, and needs to be given up.
Cheers, ajit sinha