[OPE-L:3409] Re: TSS and Value of Money

Steve Keen (s.keen@uws.edu.au)
Mon, 14 Oct 1996 19:00:46 -0700 (PDT)

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On my observation that:

> >

> >We would have to differ on whether Marx's own analysis extends to fiat

> >money, as I don't think the textual evidence is clear enough to point

> >either way. I would argue that the concepts *do* easily extend to fiat

> >money, even if Marx had not specifically considered it.

Duncan commented:

> Since I've spent a horrifying amount of my professional time trying to

> extend Marx's concepts to modern state-credit money systems (which I guess

> is what you mean by "fiat money") I'm a little distressed at the idea that

> it's easy to do! I certainly agree that the part of Marx's theory that has

> to do with the functions of money extend easily, but the part having to do

> with valuation and the price level seem much more problematic to me.

At one level, I have to agree with you: I don't believe that Marx's

commodity-money analysis of Vol I can be extended to the credit-money

systems of modern capitalism. The change from the "everything is a

commodity" analysis of Vol I to what I believe Marx intended to later

apply (when the assumption that everything in capitalism is a commodity

was progressively dropped for labor-power, money, capital assets and so

on) is a profound one. But with that assumption dropped, within the

context of Marx's use-value/exchange-value dialectic, the reality and

role of credit money drops out easily.

Of course, I'm quite aware that I'm happily extrapolating here: no such

complete analysis was done by Marx. But there are those snippets I've

pointed out in Vol III & TSV II (among others), and they are consistent

with the basic tenets of his uv/ev analysis.


>> I think it's

> dangerous to assume that material in Vols II and III represent more

> advanced versions of Marx's ideas. But even in the somewhat unsatisfactory

> discussion of credit in Volume III I don't see any trace of a link between

> credit expansion and prices, except through the speculative inflation of

> gold prices of commodities during booms. ... <snip> But it's not clear
> to me how the expansion of credit directly influences the speculative
valuation of commodities.

Again, this is an extrapolation from the snippet below and Marx's uv/ev

analysis. If, as he argues here, the price level for unexploited

minerals (and similar speculative assets) is set by their *expected and

uncertain* us-value, whereas the price level for commodities in general

is set by their exchange-value, then there are two price levels, which

ultimately cannot get completely out of whack, but in the medium term

can diverge. When capitalist expectations are "euphoric", as Minsky puts

it, the capitalists can put huge prices on speculative assets; and these

same prices will collapse when the underlying boom evaporates. The rate

of growth of the price level for assets will thus rise above and then

fall well below the rate of growth of commodity price indices--something

we of course saw either side of the '87 Wall Street crash.



> >

> >Nonetheless, in Vols II & III & TSV, you can find the beginnings of an

> >analysis which supports the proposition that the expansion of credit can

> >affect prices, as well as the accumulation process. The passage I'm

> >thinking of here occurs when Marx is discussing Ricardo on rent as it

> >applies to mineral resources in 11.2 of TSV II. He quotes Ricardo as

> >saying:

> >

> >"'The compensation *given* for the mine or quarry, is paid for the

> >*value* of the coal or stone which can be removed from them, and has no

> >connection with the *original* and indestructible *powers* of the land.'

> >

> >No! But there is a very significant connection with the "*original* and

> >destructible *productions* of the soil. The word '*value*' here is just

> >as ugly as the phrase '*repaid* himself with a profit' was above.

> >

> >Ricardo never uses the word *value* for utility or usefulness or "value

> >in use". Does he therefore mean to say that the "compensation" is paid

> >to the owner of the quarries and coalmines for the '*value*' the coal

> >and stone have before they are removed from the quarry and the mine--in

> >their original state? Then he invalidates his entire doctrine of value.

> >Or does *value* mean here, as it must do, the *possible* use-value and

> >hence the *prospective exchange*-value of coal or stone?..." (p. 248 PP

> >edition).

> >

> >Notice the final sentence (all emphases are Marx's): "does *value* mean

> >here, as it must do, the *possible* use-value and hence the *prospective

> >exchange*-value of coal or stone?" I interpret this as saying that price

> >of these (speculative) assets is set not by their exchange-value--since

> >as Marx cogently argues, they have none--but by their (uncertain)

> >use-value. So the price level for unproven mineral resources--and by

> >extension, the price level for speculative assets in general--is set not

> >by their exchange-value, but by their (speculative) use-value.

> >

> >This is the basis for a 2 price theory of capitalism: one price level

> >for commodities based on objective costs of production, another for

> >speculative assets, based on expectations of the profit stream they will

> >yield. This is also part of Minsky's analysis, as you'd be aware.


> As I said earlier on the list, I think that the best way to reconstruct

> Marx's theory of the valuation of the money-commodity is through a theory

> of speculation, so I'm not sorry to see this quote (which I hadn't noticed

> before). But it's not clear to me how the expansion of credit directly

> influences the speculative valuation of commodities.


> Duncan


> Duncan K. Foley

> Department of Economics

> Barnard College

> New York, NY 10027

> (212)-854-3790

> fax: (212)-854-8947

> e-mail: dkf2@columbia.edu