# [OPE-L:37] [OPE-L:266] Re: Re: Chapter 1

C. J. Arthur (cjarthur@pavilion.co.uk)
Sat, 31 Oct 1998 11:59:10 +0000

>
>Ajit Sinha:
>>I don't think
>>>exchange relation is necessarily an RST--a point I think Gil had made
>>>earlier. x does not exchange against x, and if x exchanges against y and y
>>>exchanges against z, it does not mean that x exchanges against z. You may
>>>always require y to mediate.
>______
>Paul C.
>>1 kilo of gold is not represented by one kilo of gold?
>>If that were not true, then one kilo of gold must exchange for
>>more or less than one kilo of gold. It thus implies that by
>>exchanging gold with gold one person could become arbitrarily richer.
>>If that were possible, there would be no problem in explaining the
>>origin of profit.
>____________
Ajit>
>"Value of one kilo of gold" in terms of what Paul? One needs to know what
>does "value" mean. The question we are concerned here is exchange between
>two commodities, and what kind of inferences we can draw from it. One kilo
>of gold does not exchange against one kilo of gold in market--it would be
>contrary to the very idea and purpose of exchange. That's why market
>exchange relationship is not reflexive.
________
Chris
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.

>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
>commodities.
>
>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.
_____
Chris
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.