Re: (OPE-L) recent references on 'problem' of money commodity?

From: Allin Cottrell (
Date: Mon Nov 15 2004 - 22:19:48 EST

On Sun, 14 Nov 2004, Rakesh Bhandari wrote:

> If $1000 is set equal to x barrels of oil, y oz of gold, and z
> bushels of grain...

"is set equal to": do you mean, if we suppose $1000 to be the actual
price of the basket in some base period?  (Otherwise I can't attach
any meaning to the proposition: you can't just stipulate that $1000
is the value of any basket of commodities, since the dollar is a
real thing in its own right and what it exchanges for is not a
matter of stipulation -- unless unless we're talking about an
imaginary accounting price for gold, that is not actually
exchangeable at the notional price.)

> and the socially necessary abstract labor time required to produce
> that basket then decreases--say it took 1000 hours and now only
> takes 500 hours--then the MELT changes correspondingly, no?

The price/value ratio for that particular basket changes (unless the
price changes in the same direction and proportion as the labor
content -- that has not been specified).  But do we have grounds for
supposing that the overall MELT has changed in the same direction
and proportion?

> Before $1000 represented 1000 hours; now it represents only 500
> hours.

For these particular commodities (if their dollar price remains
unchanged); and not necessarily in general.

> If Greenspan had to stick to a gold standard, how would things
> work out? Say $1000 is set to w oz of gold. Where it once took
> 1000 hours to mine that amount of gold, it now takes 1500 hours in
> the mines that have not been tapped out. The MELT (the money
> new-value produced per hour of socially necessary labor-time)
> would now be 67 cents. $1000 would now purchase 1.5 x the labor
> time that it purchased before. The MELT has decreased; the Foley
> value of money increased.

I may be wrong, but as I understand it, the Foley value of money
partakes of no such nonsense: isn't his MELT defined in terms of the
entire net product (its labor content and its monetary value)?


Allin Cottrell
Department of Economics
Wake Forest University, NC

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