Re: [OPE-L] Why Marx does not Need a Commodity Theory of Money

Duncan K. Foley (
Sat, 3 Jan 1998 13:59:08 -0500 (EST)

Gerry in response to Mike W.'s essay on Marx's monetary theory, asks:

>...why _does_ Marx advance a money commodity
>theory? Was this merely a reflection of the historical realities of
>his own time (an interpretation I find doubtful), or did Marx have
>other logical reasons for wanting to make this connection between
>money, value, and commodities? If so, what were they?

I think, first of all, that these are very good questions, and worth
spending some effort trying to answer.

Like most of Marx's economic theory, his theory of money seems to be the
product of his careful re-working of previous thought on the subject.
Eighteenth- and nineteenth century monetary thought took it as axiomatic
that gold (or silver or copper) functioned as money. Ariel Arnon has
written on the source of Marx's monetary theory. He thinks the version in
_Capital_, Volume I, comes from Thomas Tooke. I think this is plausible,
and also perceive a sharp change in Marx's treatment of the theory of money
between _The German Ideology_, where he reproduces a Ricardian/Humean
quantity theory of money and _The Contribution to the Critique of Political
Economy_ and _Capital_ where he propounds a cost of production theory of
money prices. (This is, by the way, closer to Adam Smith's treatment of
money than to Ricardo's.)

I have lost track of the reference, but somewhere in _Capital_ or in the
_Grundrisse_ Marx has a footnote discussing a West African society that
uses imaginary bars of iron as a unit of account, but drops the argument
after some discussion, characterizing them as "idealists".

I guess my working hypothesis has always been that up to the twentieth
century all monetary systems were commodity money standards, and Marx had
no way of foreseeing the dramatic evolution of the monetary system we have
to cope with.

In the discussion on the list several people have pointed out that Marx did
envision a tremendous development of the credit system, and pointed to very
modern developments along these lines, which is correct. But I think that
when Marx talks about the disappearance of physical gold from circulation
in favor of credit, he always maintains a role for gold as the measure of
value. In this respect there are parallels between Marx and Smith as well.
Smith, like many of his compatriots ("the Scotch hate gold") believed that
nations should minimize the actual circulation of gold, which is expensive
to maintain and replace, by substituting banknotes and credit.


Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
fax: (212)-854-8947