# [OPE-L:7656] Re: Gold & prices of production--Postscript

From: Gil Skillman (gskillman@mail.wesleyan.edu)
Date: Fri Sep 13 2002 - 14:36:51 EDT

Fred, you write

>Gil, I still don't understand your equation.  Would you please write the
>equation in mathematical symbols?

Sure, but first things first:  I need to understand what it is exactly
you're having a problem with.  So I must respond to your next question with
a question of my own.

>Let's not forget that this is supposed to be an equation for gold as the
>money commodity (as in your earlier 7621).  Why then do you speak of the
>demand PRICE, since gold has no price?

Of course I haven't forgotten this.  But it's you, not me, who has insisted
that "the income of the gold industry must contain a component of
rent."  So before I can answer this and your subsequent questions, I first
need to find out what you understand this to mean.  More specifically, in a
scenario involving capitalist production of gold in the absence of an
absolute rent, the accounting equation for gold shows that a portion of
each unit of gold produced goes to pay constant and variable capital costs,
which are of course represented in terms of gold as well.  The aggregate
difference between gold produced and gold expended in constant and variable
capital costs represents "the income of the gold industry" in this
scenario, which in the absence of rent corresponds to the rate of profit r

A. Now, since a unit of gold produced is still a unit of gold produced
whether or not rent exists, we have to ask where this rent comes from, and
thus where it shows up in the accounting equation.  There are only two
possible choices:  *either* the existence of rent reflects the exercise of
monopsony power of gold producers against suppliers of constant or variable
capital inputs, reflected in artificial depression of the wage rate or
constant capital commodity prices and thus a reduction in constant or
variable capital outlays and thus an augmentation of r to incorporate A,
*or* the rent reflects a payment for an additional input--"land," say, or
more specifically, "land which contains gold mines."

In the latter interpretation, it is entirely immaterial whether or not
gold-producing capitalists actually own the land in which the mines are
located.  If they own the land themselves, then they "pay" the rent that
would otherwise be commanded by outside landlords to themselves, in the
same sense that Marx indicates in K.III that self-financing industrial
capitalists "pay" the market interest rate to themselves.  So for the sake
of argument let's assume that capitalists pay the rent to outside landlords
in this case.

Tell me which of the two possibilities you have in mind, and I'll be able
to answer your question.  But in any case, it should be obvious that I'm
not departing from the premise that gold does not have a "price" in Marx's
sense.

Before closing, let me fast-forward to your last question:

>It seems odd to add this demand equation to a Sraffian system of
>simultaneous cost of production equations. I wonder why the Sraffians
>themselves do not add such an equation, and instead assume that absolute
>rent = 0. Gary, can you help us out here?

Point taken: it *is* odd, sort of like mixing neoclassical and Sraffian
considerations in one model.  To me this is the most natural way to
proceed, but in fact, there *is* a distinctly Sraffian approach to absolute
rent (and thus, Sraffians do not necessarily assume "that absolute rent =
0") using a model of multiple techniques (see, e.g., Lynn Mainwaring,
_Value and Distribution in Capitalist Economies_, Ch. 12 Section 4).

But as it turns out, treating absolute rent in strictly Sraffian terms does
not at all alter my conclusion, since that approach involves replacing a
*single* price of production (or, in the present context, accounting)
equation with *two* equations (see equations 12.6 and 12.7 in Mainwaring),
so it remains the case that the addition of a variable, rent, is matched by
the addition of an equation, leaving my conclusion regarding inconsistency
intact.