[OPE-L:5775] Re: Commodity Money

Duncan K. Foley (dkf2@columbia.edu)
Sat, 29 Nov 1997 13:02:04 -0500 (EST)

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Some comments on Claus' "Commodity Money"

To begin with, let me reaffirm that I find Claus' reading and
interpretation of what Marx wrote about money very careful and persuasive.
I don't mean to attribute to him the notion that Marx's theory has to be
correct, or the only basis for thinking about contemporary monetary issues.


>> As a result many writers who adhere extremely strictly to
>> Marx's literal words ...
>Claus: to assert that Marx's theory requires money to be a commodity does
>not express - in my opinion - an irreflected adherence to literal words,
>but to the logic of his theory, which is what requires us not only to drop
>literal quotations, but to replace his theory of money.
>> ... in most of their discussion seem to feel free to add
>> on any old theory of money that comes into their heads, or that they
>> perhaps remember dimly from a class on money, usually some version of the
>> quantity of money theory of prices.
>Claus: I'm sorry, but I have not understood the meaning of this.


First, this had no reference to Claus at all. I probably shouldn't make
unattributed references like this, but I wanted to call attention to what I
think is a real problem without getting into a specific argument over any
particular person's paper.

Second, what I meant was a tendency I see in some recent Marxist papers to
combine the labor theory of value in some interpretation with the quantity
of money theory of prices, which is basically the notion that the money
price level is proportional to the "quantity of money" "created" by the
central bank, or in symbolic terms, reading the equation of exchange as P =
MV/T, where P is the index of money prices, M the quantity of money, V the
transactions velocity of money, and T an index of real transactions.

>> This is doubly damaging, since some of
>> Marx's points are explicit critiques of the quantity of money theory of
>> prices, and the theory itself is badly flawed and increasingly
>> by modern econometric investigation.
>Claus: I'm also not sure about the meaning, but if it means that Marx's
>theory of money as a commodity compromises it with the quantity theorem, I
>would not agree.

Duncan responds:

I'm afraid I wrote too rapidly to be understood. In my view Marx's theory
of money, following Tooke, fundamentally criticizes the quantity of money
theory of prices, and interprets the equation of exchange as M = PT/V,
determining the quantity of money in circulation, with the prices of
commodities determined by the labor theory of value, or prices of
production theory.


>Claus: As long as we don't have a theory of money alternative to Marx's but
>consistent with his value theory, it doesn't seem to be possible to do this
>in marxist terms. However, if Marx's theory of money is still sustainable,
>there would be no theoretical reason for not being able to do it.

Duncan: Now I'm having some trouble understanding. Do you mean, "if Marx's
theory of gold as commodity money is still sustainable"? If so, I'm afraid
I have to dissent, for reasons I explained above.


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