[OPE-L:5774] Re: explaining inconvertible money

Duncan K. Foley (dkf2@columbia.edu)
Sat, 29 Nov 1997 13:02:01 -0500 (EST)

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Some comments on Alejandro's "Explaining incovertible money".

I wrote a paper about this some years ago, "On Marx's Theory of Money",
which is available on my home page: http://www.columbia.edu/~dkf2. In that
paper there is a detailed discussion of some of the issues raised by
applying Marx's theory of money to contemporary economic systems, including
some of the points that are coming up in the current discussion.

Alfredo wrote:

>2- In chapter 9 of Capital 3, we learn that prices do not correspond to
>values; there is no one-to-one correspondence between the SNLT to produce any
>commodity and its price.
>3- This *implies* that - even in Marx's own time - gold *never* actually
>functioned as the measure of value along the lines of Capital 1 chapter 1.
>For under capitalism, because of the uniformisation of profit rates, there is
>*never* a one-to-one relationship between price and value. To suppose
>differently is to remain in a world of simple commodity production, or at
>least with a very abstract understanding of capitalism (before profits enter
>the scene explicitly).

There are two different issues here. Suppose we consider an economy in
which competition tendentially enforces equal rates of profit, gold is
produced without significant diminishing returns, so that there is no rent,
and organic compositions of capital differ significantly between gold
production and other commodity production, and technical change is
proceeding very slowly relative to price formation and production. Given
the real wage or the value of labor-power, we can calculate the relative
prices of production of gold and the other commodities (for example, by
Sraffian techniques). In that economy the gold prices of nongold
commodities will fluctuate around their prices of production expressed in
terms of gold as a numeraire. This is not the picture of Volume I because
prices are not proportional to embodied labor coefficients, as Alfredo
points out, but where gold would be functioning as a measure of value. The
_quantitative_ deviation of gold prices from embodied labor coefficients
would not prevent gold from serving as the socially accepted general
equivalent measure of value of commodities. I think this is the most
consistent way to extend Marx's theory of money to the case of unequal
organic compositions of capital and prices of production deviating from
embodied labor coefficients.

>4- Conclusion: under capitalism, gold is *never* the measure of value, and it
>need *not* be money.

I don't agree with this conclusion, because it isn't supported by the
arguments, and is also inconsistent with the fact that gold did serve as
the measure of value in 19th century capitalism.


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