[OPE-L:45] [OPE-L:275] Re: Re: Re: Chapter 1

Ajit Sinha (ecas@cc.newcastle.edu.au)
Mon, 02 Nov 1998 13:32:15 +1100

>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.
Exchange relation is an objective relation, and not an abstract
mathematical relation that holds between numbers such as 2 = 2. There are
two agents that exchange two commodities for some reason. Exchanging one
kilo of gold for one kilo of gold would be madness for both the agents. You
do not wanna lay the foundation of the analysis of an economic system on a
mad behavior. Reflexivity axiom for exchange relation is just too much of a
>>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.
I think I have answered this in my response to Paul C. The consequences of
money may not be trivial, but the question is whether money is deduced from
exchange relation or is posited before exchange relation is even specified?
Cheers, ajit sinha