Re: (OPE-L) Re: on money substance and abstract labor

From: Allin Cottrell (
Date: Sat Jun 12 2004 - 21:03:38 EDT

Claus wrote:

"Now, the widespread view today is that money is no more a commodity,
because gold not only does not circulate, as is also not used
officially to define the standard of prices. In my opinion this
conclusion has two problems:"

"1) it does not account for the role played by gold in the monetary
system of our days. This account seems to me to be necessary, since
gold is present in very expressive amount as an official international
monetary reserve and in even greater amount as private reserves;"

Petroleum also bulks large in national reserves; so do wheat and
butter.  The role of gold in present-day monetary systems seems
nugatory, a mere historical hold-over.  You wrote earlier:

"[T]he Dollar is still valued at $42,2222 an ounce of gold in the
balance sheet of the Fed."

I would claim this has it backwards.  It's not that the dollar is
valued at 0.0237 (1/42.222) ounces of gold.  This statement has no
economic meaning.  The Fed is not willing to sell gold at $42 the
ounce, nor is it able to buy gold at that price.  Rather, the Fed
finds itself holding gold for historical reasons: it is obliged to
produce a balance sheet, and for that purpose the gold must be valued
in terms of the current monetary standard, namely the dollar.  They
could do the valuation at the current market price, but for whatever
reason (convenience?) they choose to value the gold at $42.22 per
ounce.  They are able to perform this "conventional" valuation
(meaning, one based on an arbitary convention) only because it doesn't
matter to anyone, since they do not undertake to buy or sell gold at
the stipulated accounting price.

"2) if one abandons the definition of money as a commodity, in Marx,
one is left without a theoretically consistent concept of money."

I think this begs the question.  In my view the chartalist conception
of money is theoretically consistent.

"In Marx's theory money is the general equivalent of value because it
is also a commodity. Thus, the value of the standard of prices is
given by the amount of social labor necessary to produce it."

Yes, we all know that.  But Marx was wrong on this point.  He
apparently thought something like this: To measure (or express) the
length of objects, a ruler must itself be an object with length.  To
measure (or express) the value of commodities, money must itself be a
commodity with a value.

This sort of argument has several problems.  The physical side of the
analogy is wrong.  We can measure the length of objects by means of
instruments that are not in themselves objects with length (sonar,
lasers).  Besides, money does not "measure" the value of commodities.
It provides a unit of account in which prices are stated.  These
prices can be quite arbitrary (as in the case of the Fed's accounting
valuation of gold).  But for reproducible commodities sold regularly
on organized markets, there are definite social mechanisms enforcing
some degree of convergence of relative prices onto relative values.
The absolute level of prices is determined "elsewhere", roughly
speaking by the balance between the state's emission of money and its
cancellation of money via taxation.

Allin Cottrell
Department of Economics
Wake Forest University, NC

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