[OPE-L:5181] OPE-L:5136 - Duncan's reply

Claus M. Germer (cmgermer@
Wed, 4 Jun 1997 16:25:22 -0700 (PDT)

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This is the complete (and corrected) version of my OPE-L:5175, which suddenly disappeared from my screen before I had finished it and - I dont know how - had been sent away. As you can see, my skills in dealing with the e-mail are still very unsatisfactory. I'm sorry.

About Duncan's OPE-L:5136:

>I think this is a very important question. Some observations:

>1) We live in societies in which the measure of value is the liability of
>the State, not a produced commodity. So this is not an abstract question.

I would make following comments:

1) It seems convenient to break the subject down into simpler elements. On the basis of Marx's theory of money, there are three relevant concepts concerning this subject: the general equivalent and the function of measure of value; the standard of prices; and credit money.

Central bank notes, like the dollar, being a liability of the State, are a form of credit money. They cannot perform the function of measure of value, according to Marx's criteria. The measure of value has the function to measure the amount of social labour contained in a commodity, and the point here is that, according to a rigorous theoretical demonstration attempted by Marx in the Grundrisse (see my EEA-97 paper, section 2), this function can only be performed by another commodity taken as a standard

(Marx: "But only in so far as it is itself a product of labour, and, therefore,
potentially variable in value, can gold serve as a measure of value", C, I,
Ch. 3,1).

This measurement takes place in the market, as gold enters into circulation and exchanges against the ordinary commodities.

Marx: "Money, like every other commodity, cannot express the magnitude
of its value except relatively in other commodities. (...). Such quantitative
determination of its relative value takes place at the source of its
production by means of barter. When it steps into circulation as money, its
value is already given" (Ib, ch. 2).

2) The modern standards of money, like the dollar, on the other hand, have a double character. Under one of them, the dollar is not a measure of value, but a 'measure of prices', in the following sense. The standard of money, or standard of prices, consists of a given quantity of the money-commodity fixed by law as the unit of prices, which is totally conventional and subject to a high degree of arbitrariness in its manipulation by the State. In this way, it serves as a unit to measure the amount of the money-commodity that expresses the value of a given commodity.

Marx: "As the measure of value it [money] serves to convert the values of
all the manifold commodities into prices, into imaginary quantities of gold;
as the standard of price it measures those quantities of gold" (Ibidem).

I would like to distinguish, for the sake of clarity, *price* form *standard of money-price*: *price* is more abstract, it is the money-form of value, i.e., the expression of value in the form of the money-commodity; *standard of money-price* is the price expressed in terms of the conventional standard of money. In this way, the 'standard of money-prices' of the commodities may change
without any change in their values (or prices in the first sense), whenever the standard of money changes. For instance, if the State reduces the content of gold of the standard of prices, the prices of commodities rise as *standard of money-prices*, but not as *prices*. In the USA, for example, after the Civil War, the support to the greenbacks and to silver-money, and in the thirties to the rise of the price of gold, was meant (at least by some proponents) to rise the 'standard of money-prices' by way of the devaluation of the standard of prices (the dollar in terms of gold).

In the second character, the modern standards of money are forms of credit money. In this sense, the dollar is a central bank note, being neither measure of value nor standard of prices. It is credit money, a title of credit, liability of the State. [It is not to forget that paper money can also represent a mere symbol of value, whose more developed form has been the "inconvertible paper money issued by the State and having compulsory circulation" (Ib, ch. 3,2.c)]. What is it that the State ows to the owner of the dollars? Originally it owed the amount of the money-commodity expressed in the conventional standard of prices. This amount is at present not declared officially and is not legally payable. But, as Duncan reminds in his OPE-L:5163:

>It's rather striking that since about 1986 the price of gold in
>dollars has not fluctuated a whole lot. Might the Fed be managing a de
>facto gold standard?

This is a difficult subject in Marxist theory of money today, but in my view it deserves better analysis before a stronger judgement can be made. Theoretically, in Marx's system, the standard of prices must express a given amount of the money-commodity. However, in today's economy it apparently doesnt do it. There is a contradiction between the internal laws and the observable phenomena. Can they be reconciled in Marx's theory? The answer to this problem requires, as I see it, to review the real development of the monetary system, under the light of Marx's theory, in order to find out if Marx's categories still hold and, if so, in what form they manifest themselves as the circumstances changed.

Anyway, in my judgement we can in no way attribute the function of measure of value to forms of credit money, like the dollar.

3) A final comment about Duncan's observation numer 2:

>2) Why can't a "fictitious capital" (the capitalized value of land rent or
>tax revenues) function as the measure of value? This surely requires
>capitalists to impute a value to the fictitious capital at the time they
>price the commodities, but wouldn't they have to do the same thing with

In the way I understand it, this is a different meaning of *measure of value* than the one referred to money's function of determining the value of a commodity, in the sense mentioned above. "Fictitious capital" is a very complex category that pressuposes both money and capital as such. It is an asset whose money-value is determined not by its content in labour, but by the interest it is able to bear. In this sense the existence os fictitious capital implies the previous existence of a system of prices, which means that the problem os measuring values has already been solved by the market.

Theoretically you cannot define the value of one commodity in terms of the value of another commodity. You have instead to define it in terms of some other element. One may make an analogy with Marx's critic to the definition of capital as the value of an investment: since the value of an investment is a sum of prices, this means that capital is defined as a sum of prices, which is again merely a price. Thus, this is not a definition of capital. If this is correct, the attempts to atribute to forms of credit money the function of measure of value, in Marx's sense, are inconsistent. This does not mean that Marx's concept is correct, but it cannot be denied that it is theoretically consistent. This means that you cannot reject his theory without proposing another consistent theoretical explanation of the way the labour contents of the commodities express themselves as values.

Best regards,