[OPE-L:37] [OPE-L:266] Re: Re: Chapter 1

C. J. Arthur (cjarthur@pavilion.co.uk)
Sat, 31 Oct 1998 11:59:10 +0000

>Ajit Sinha:
>>I don't think
>>>exchange relation is necessarily an RST--a point I think Gil had made
>>>earlier. x does not exchange against x, and if x exchanges against y and y
>>>exchanges against z, it does not mean that x exchanges against z. You may
>>>always require y to mediate.
>Paul C.
>>Are you serious about this, do you really think that the value of
>>1 kilo of gold is not represented by one kilo of gold?
>>If that were not true, then one kilo of gold must exchange for
>>more or less than one kilo of gold. It thus implies that by
>>exchanging gold with gold one person could become arbitrarily richer.
>>If that were possible, there would be no problem in explaining the
>>origin of profit.
>"Value of one kilo of gold" in terms of what Paul? One needs to know what
>does "value" mean. The question we are concerned here is exchange between
>two commodities, and what kind of inferences we can draw from it. One kilo
>of gold does not exchange against one kilo of gold in market--it would be
>contrary to the very idea and purpose of exchange. That's why market
>exchange relationship is not reflexive.
There are three distinct relations here
1. A actually does exchange against B
2. A is exchangeable against B
3. The value of A is B.

Even if no one would actually exchange a kilo of gold for another kilo of
gold it is possible to deduce from the transitivity of statement 2 that
gold is exchangeable for gold, and of course if anyone were perverse enough
to actualise it each woudl end up with the same value.

>ajit sinha
>On transitivity, I was not alluding to the problem of arbitrage, which both
>Gil and Duncan have mentioned. My point is even simplier, and may be wrong
>but I don't think so yet. Let's suppose coal exchanges against steel and
>steel exchanges against coal. Furthermore dynamite exchanges against coal
>and coal exchanges against dynamite. This does not imply that steel will
>exchange against dynamite and dynamite will exchange against steel. Simply
>because these two industries don't need each others goods. So exchange
>between these two commodities can only be carried out through the use of
>coal as money. And this destroys the transitivity axiom for exchange of
>Once you have money in the relationship, then of course you can say that so
>much of steel and so much of dynamite are equal in value in terms of coal
>(money). But such statements are generally charecterized as "trivial",
>meaning it does not add anything to our knowledge.
The same point about specifying the relation applies as above. As long as
dynamite is exchageable for steel arbitragers can step in when possible.
Practically however I think lack of information makes arbitrage difficult
until we have money. The consequences of money are certainly not trivial
because now the capital form gets off the ground.