Originator of a THESIS on money’s incapacity

[Ike Pettigrew]

I haven't read the thread, just the opening post, so apologies if I repeat something already discussed.Different concepts are involved here in relation to commodities: – value;- labour-power;- wages;- profit;- utility or usefulness in the ordinary dictionary sense;- use-value (in the Marxian sense, which I regard as distinct from the above);- exchange-value;- money; and,- price.Prakash RP begins by telling us that money "cannot measure the WORTH ( i.e. the use-value or usefulness ) of a commodity".He refers to commodities, rather than 'things' in general, and he is defining 'worth' in a specific way, but in doing so I believe he conflates two different things.  In my view, use-value is not the same as general usefulness, and 'worth' as a word does not seem to me to appropriately connect to utility or usefulness.  As I explain below, when there is talk about the 'worth' of something, in ordinary non-technical language I take that to relate to a discussion of its realisable exchange-value, not use-value, a polar opposite concept.  (What's it worth? normally refers to exchangeable value, whereas 'What's its worth to [you][me]?' would be more in line with the above usage).  On that basis, money can be seen as a measure of worth, but I think Prakash RP meant something different by 'worth' and maybe is influenced by the idea that 'value', being synonymous with 'worth' in ordinary language, is the use-value of labour.  Value is therefore being treated as synonymous with use-value, which I do not believe is quite correct.  I think the opposite is the case.To take the example of labour, the use-value is not value but the production of value.  My understanding is that there is a duality in the concept of value (worth): exchange value is the face of value, while its substance is simply labour, 'value' being the amount of labour necessary in the production of a community.  Use-value, to be Stoic about it, can be seen as the thing in itself, what it does, whereas value can be seen as simply a linguistic regression of exchange-value, and as such things become conceptually clearer.  So the value (use-value) of a lollipop could be that it quenches your thirst, but the value of the lollipop is the exchange-value of whatever commodity (whether money or otherwise) it was exchanged for.  (In relation to the use-value of labour, Marx uses the expression 'socially-necessary' to denote that we are dealing with averages rather than specific production events).  But use-value (and therefore, usefulness) simply does not enter into it until there is an exchange in the marketplace.  There is no innate use-value, as it is 'social', but I don't believe this is what Prakash RP meant by 'worth', and I don't want to be accused of being overly-literal.To summarise, then, Use-value I would define as the usefulness of a commodity or thing when exchanged or consumed or both.  It is therefore 'socialised', and Marx refers to use-value becoming social use-value.  Unless there is, or prospectively will be, a transactional exchange of some kind, there can be no meaningful use-value.  Marx does refer in Das Kapital to non-commodity things as having a use-value, such as the air that we breathe, but that sort of use-value can only be nominal since, in the case of the example I give, there is no transactional activity in the consumption of natural air.Usefulness, close in meaning to use-value but which I would distinguish, because the usefulness of a thing is broader than its use-value, is not 'socialised' in the same way that use-value must be (capitalists and workers producing for others, not for their own use), and is not something we can measure precisely from one 'thing' or commodity to another, but we can define it: it's simply the extent to which a commodity meets the needs of the producer or consumer.  Profit is the appropriation by capitalists of the difference between the surplus of realised exchange-value of the commodity over the exchange-value of labour.Exchange-value is the general value at which commodities may be exchanged for other commodities and is synonymous with value.Money is the primary commodity through which exchange-value is expressed: it is an abstraction of value.  What is legally or customarily thought of as 'money' might change from time-to-time.  What is a 'price' and how it comes about is complicated and nobody seem to agree, but in simple terms we can say that price is an expression of exchange value in a commodity marketplace (it is the variable ratio of money to the commodity).Although exchange-value and price are not exactly the same thing conceptually, in everyday terms we can treat them as synonymous.  Both use-value and exchange-value have 'value' in common.  They require labour (unless they are nominal, as in the above example of breathable air).  But there is a contradiction or tension between exchange-value (price, roughly-speaking) and use-value (usefulness of a commodity).  It seems to me this contradiction is what is at the root of everything that Marx wrote on capitalism.  I do think the classical economists have a point when they sometimes say that prices could be seen as an indirect indicator of utility/usefulness: in basic terms, and all things being equal, the higher the price, the more a commodity is demanded, from which we can infer that the commodity is, rightly or wrongly, perceived as having a higher utility than comparable commodities of a lower price.  It follows that this utility will be seen to vary depending on price movements: classical economists call this fluctuating aspect the 'marginal utility' of a product.  Not a direct measure of utility, obviously, and clearly imperfect, but indirectly an indicator.But the classical economists are not entirely right.  A commodity is produced not for use, but for profit, and prices cannot accurately encapsulate the use-value of a commodity because of the basic way capitalism works.  Capitalists normally have an incentive to maximise the price of their product, even at the expense of its use-value, and both capitalists and workers are not producing products for themselves, but for others: thus, workers are alienated from production, since capitalists control the means of living and force them to work not for themselves but for the benefit of others. This reality of alienation also means that use-value, in other words, has to be translated into 'social use-value'.  Furthermore, sometimes exchange-value and social use-value are in direct conflict as a result of the market itself.  This may seem odd, but to take an example (admittedly not a good example this, but the first thing that comes to mind): let's say I own a portfolio of real estate, I may have an incentive not to sell or let any of my properties to you, even if you are in desperate need of accommodation.  My interest is not use per se, but profit.  In extreme cases, I may even have an incentive to allow my properties to go to physical ruin rather than let them to you or anybody else.Conclusion – I think it follows from all this that money cannot be seen as anything more than a very indirect and unreliable indicator of the usefulness ('worth') of a commodity.  I don't therefore share the dismissiveness of the opening post, but I agree with the general conclusion.

[Alan Kerr]

Ok Prakash you are convinced that I'm confused and have a confused view of money. Tell me why I should switch to your definition of money. 

[ALB]

Prakash RP wrote:

' The answer to your question is no I don't. I don't think Alan K does either. ' ( ALB #59 )Should I take it to mean that you don't think that ' all my points are " logical mistakes " ' ( Alan's comment #44 ), that ' Marx's concept of money is wrong, and that economists that belong to the marginal-utility school are right ' ( Alan's comment #44 ) ? If you say ' yes ', I think I can also take it to mean that you approve of my claim to have presented humanity with the first and only proof of the thesis that money cannot measure the worth of a commodity, OK ?

Just because I don't think that all your points are logical mistakes doesn't mean that I therefore think none of your points are. For you to conclude that I do would indeed be a logical mistake of the simplest kind (some A are B, therefore all A are .I am afraid I don't think you should be awarded a Nobel Prize or that statutes should be erected in your honour all over the world for the great service you imagine you have done to humanity by repeating something that has been known for over 2000 years.

[Alan Kerr]

Dave B you say"Point one is whole separate discussion re fiat money."Karl and fred actually conspiciously avoided it like the plague even though it was around in their time."(Dave B comment #50)But you just need to read up to chapter 3 section 3."… We allude here only to inconvertible paper money issued by the State and having compulsory circulation…"(Marx Capital Volume I Chapter 3 Section 3)That is what you call fiat money.https://www.marxists.org/archive/marx/works/1867-c1/ch03.htm#a36

[Dave B]

iiI didn’t mean to suggest that he never mentioned it all. In fact he goes into it in more detail here, along with some interesting quotes from our friend Aristotle.   Karl Marx: Critique of Political Economy c. Coins and Tokens of Value    Aristotle’s conception of money was considerably more complex and profound than that of Plato. In the following passage he describes very well how as a result of barter between different communities the necessity arises of turning a specific commodity, that is a substance which has itself value, into money. “When the inhabitants of one country became more dependent on those of another, and they imported what they needed, and exported what they had too much of, money necessarily came into use … and hence men agreed to employ in their dealings with each other something which was intrinsically useful and easily applicable to the purposes of life, for example, iron, silver and the like.” (Aristotele, De Republica, L. I, C. 9, loc. cit [p. 14]. [The English translation is from Aristotle, Politica, by Benjamin Jowett, Oxford, 1966, 1257a.]) Michel Chevalier, who has either not read or not understood Aristotle, quotes this passage to show that according to Aristotle the medium of circulation must be a substance which is itself valuable. Aristotle, however, states plainly that money regarded simply as medium of circulation is merely a conventional or legal entity, as even its name indicates, and its use-value as specie is in fact only due to its function and not to any intrinsic use-value. “Others maintain that coined money is a mere sham, a thing not natural, but conventional only, because, if the users substitute another commodity for it, it is worthless, and because it is not useful as a means to any of the necessities of life.” (Aristoteles, De Republica [p. 15]. [The English translation is from Aristotle, Politica, 1257b.])   https://www.marxists.org/archive/marx/works/1859/critique-pol-economy/ch02_2c.htm I think describing as tokens and symbols of value is a bit of a dodge.

[Anonymous]

Prakash RP wrote:

' The answer to your question is no I don't. I don't think Alan K does either. ' ( ALB #59 )Should I take it to mean that you don't think that ' all my points are " logical mistakes " ' ( Alan's comment #44 ), that ' Marx's concept of money is wrong, and that economists that belong to the marginal-utility school are right ' ( Alan's comment #44)? If you say ' yes ', I think I can also take it to mean that you approve of my claim to have presented humanity with the first and only proof of the thesis that money cannot measure the worth of a commodity, OK?

You have not discovered anything new, there is not any new economic issue under the sky or any anything new for the benefits of mankind,  you are just repeating someone else conception discovered many years ago

[Alan Kerr]

 Thanks Dave, Yes, Karl Marx gives details. Just to be clear of course it's one thing when State says we can convert paper banknotes into fixed weight of gold. If I recall then if each note moves one time per day then the number of notes in circulation = sum of prices paid in cash.It's another thing when we cannot convert paper banknotes into fixed weight of gold. Again, if I recall then the law of paper money is that the amount of paper money in circulation must not exceed the amount of gold that would circulate if there was no paper money. Exceed and the value represented by each note must fall. That is general price inflation.Yet another thing is becoming possible. Suppose pure electronic money. Then sum of prices paid in cash = 0. Then there are no coins or notes for the Bank to issue in excess – no more general price inflation.

[Alan Kerr]

 Prakask, previously you said that the proof of the right view of money stems from the right definition. I cannot agree with that. But now you say the opposite that the right definition stems from the right view of money. I cannot disagree with that. I've been saying the same throughout. You cannot have it both ways. Debate doesn't work like that. I mean which argument are you trying to attack me with here in your comment #57? "… I'm wholly satisfied with and certain about the correctness of the definition of money based on Marx's view of it. I'm also outright certain about the correctness of my work. I don't think either that I ever asked you to state ' Marx' [sic] way to prove it ' ( your comment #56 ). I'd like you to have a close look at my comments #35, #41, #51, and #55, and state in clear terms what your stance on Marx's view of money and the correctness of the proof of the thesis at issue is."(From Prakash comment #57)

[ALB]

Alan Kerr wrote:

Suppose pure electronic money. Then sum of prices paid in cash = 0. Then there are no coins or notes for the Bank to issue in excess – no more general price inflation.

The famous cashless society. I am not sure that it would also be inflationless as electronic money also circulates and could be issued in excess to what the economy needed to maintain a stable price level. But that's perhaps the subject for another thread if you want to start one..

[Alan Kerr]

Thanks ALB,Assume a stable currency. The (labour time) value of commodities still changes and supply and demand still change. And both still change general prices.Let's just say that I stand by my comment (#67).Only you know what you mean (#69). It sounds to me that you mean that up to a point the Bank can create Bank deposits by lending money. That much is true. Then it sounds like you are claiming that Bank deposits cause inflation. But that has never been true.If cashless society works then it will soon enough settle that argument one way or the other.

[ALB]

1. You are right. With a stable currency the individual prices of most goods and services will still tend to fall due to increased productvity. But the standard of price will not change (that's what a stable currency means). And of course even without a stable currency the prices of most goods and services still tends to fall in real terms. In practice these days governments don't aim at a stable currency but one inflating at the rate of 2 percent compound per year. Which of course leads to a steadily rising general price level and it not being immediately evident that real prices are falling. 2. I don't know where you got the idea from that I think "the Bank can create Bank deposits by lending money", not that it's clear what you mean anyway since Bank with a capital B generally means the central bank, the government's banker, in Britain the Bank of England. As the central bank, the Bank of England can create as much money as means of payment as it likes but if it creates more than is needed by the economy for its transactions then inflation and (the same thing from another angle) a depreciation of the currency will result. This will happen irrespective of whether the Bank prints paper notes for the government to use to pay its employees or contractors or whether the government pays them via an electronic bank transfer. It would happen in a completely cashless economy too (not that, for practical reasons, this is likely to come about).3. I don't know either where you got the even more ridiculous idea that I think "Bank deposits cause inflation" (I'm taking it that you mean commercial bank deposits rather than Bank of England deposits). As you say, that's never been true. It's the other way round: with inflation the face-value of commercial banks' deposits will go up. If, on the other hand, you mean Bank of England deposits I don't suppose you would mean money deposited with the Bank of England (by commercial banks for instance), so presumably you would have to mean lines of credit opened by the Bank (as for the government). This, in fact, is one way how a central bank can get more money into circulation. Once again, if the amount created in this way is more than the economy requires then inflation will result.

[Alan Kerr]

– ALB, It was fun trying to read your mind.  Perhaps you should start new thread.  Let's just say that I stand by my comment (#67).

[ALB]

Actually whether or not there would/could be inflation/monetary depreciation (the same thing from different angles) in a purely cashless system is an interesting intellectual exercise. I say intellectual exercise since the coming of a completely cashless society is highly unlikely, even though there is clear trend towards less cash being used to make payments, with people using bank transfers, debit cards and contactless cards instead. According to an article in the Financial Times (9 December):

Quote:

Cash payments are in decline. Last year, just 40 per cent of payments in the UK were in cash, down from 87 per crent in 1985.

However, the value of what is paid in cash has been declining much more slowly:

Quote:

Even though the number of cash transactions has been falling, the value has dropped more slowly, at least since 2005.

Also:

Quote:

There is more cash in circulation, The value of notes and coins has more than doubled since 2005 — rising from £35.4bn in 2005 to £73.2bn.

Which is what you would expect as the government is aiming to achieve 2% a year compound inflation. 

[Prakash RP]

 ' In my view, use-value is not the same as general usefulness, and 'worth' as a word does not seem to me to appropriately connect to utility or usefulness.  As I explain below, when there is talk about the 'worth' of something, in ordinary non-technical language I take that to relate to a discussion of its realisable exchange-value, not use-value, a polar opposite concept.  (What's it worth? normally refers to exchangeable value, whereas 'What's its worth to [you][me]?' would be more in line with the above usage). … ' ( Ike Pettigrew, #61 ) Dear Ike, you're free not to take, as you please, the terms ' use-value ', ' usefulness', and ' worth ' as synonymous and replace ' worth ' in the statement of my thesis with ' usefulness ' or any other term which has the same meaning as these terms, and which you think is more appropriate than these terms. But it has nothing to do with what the thesis at issue means, has it ? Because you prefer the term ' black ' to ' dark ', it doesn't make the statement that dark clouds bring rain wrong. I've stated in unequivocal terms that all these terms ( ' use-value ', ' usefulness', and ' worth ' ) have been used to mean the same thing and something other than the value or exchange-value, OK ? If ' worth ' is taken to mean ' exchangeable value ', money that happens to be meant, by definition, to measure the ' exchangeable value ' can certainly ' be seen as a measure of worth '. Prakash RP has never treated value ' as synonymous with use-value '. This nonsense is wholly your brainchild, I'm afraid to say. I'd like to know in which work by Marx you've found the expression ' the use-value of labour '. Marx used the expression ' labour power ' that he defined as ' capacity for labour ' to mean ' a special commodity ' the ' use-value ' of which is ' labour ' ( CAPITAL Volume I, Part II, chapter VI; Part III, chapter VII, sections 1 & 2 ). I'd also like to know in which work by Marx the nonsense such as ' the exchange-value of labour ' occures.  ' Both use-value and exchange-value have "value" in common. ' ( comment #61 by Ike )  But according to Marx, both ' use-value ' and  ' exchange-value ' are abstractions, and he used the term ' value ' to mean only ' exchange-value '. The ' use-value ' makes a commodity valueable, i.e. the use-value is the cause while the value is its effect. I don't think it's right to say the ' use-value ' has got ' value '. The ' exchange-value ' is itself ' value '. It's a commodity that, according to Marx, has got ' use-value ' and ' value ' ( ' exchange-value ' ). Prices are determined by market forces ( laws of supply and demand ), not by the use-value ( usefulness or quality ) of commodities. So many instances around you bear evidence of this fact. Such an instance is prices of cell phones, land phones, and smart phones. When cell phones made their first appearance in the market, they were the luxury items meant for rich people. Today mobiles are far cheaper than land phones, and smart phones which are far superior, in terms of quality, than the first- generation cell phones are seen in the hands of the ordinary folks. Your work is replete with errors, and so it adds up to an exercise in futility, I'm sorry to say. You've spent too much labour and time to produce something that proves or disproves nothing. Nevertheless, you deserve thanks for taking part in this debate. and I'd ask you, if you'd pardon my asking, to have a look at my comments #51 & #55 and say what you wish to say.

[Prakash RP]

 '  Prakash RP wrote:' " The answer to your question is no I don't. I don't think Alan K does either. " ( ALB #59 ) Should I take it to mean that you don't think that ' all my points are " logical mistakes " ' ( Alan's comment #44 ), that ' Marx's concept of money is wrong, …  ' Just because I don't think that all your points are logical mistakes doesn't mean that I therefore think none of your points are. For you to conclude that I do would indeed be a logical mistake of the simplest kind (some A are B, therefore all A are . I am afraid I don't think you should be awarded a Nobel Prize or that statutes should be erected in your honour all over the world for the great service you imagine you have done to humanity by repeating something that has been known for over 2000 years. ( ALB's comment #63 )   Thank you a lot for voicing your thought. I don't think I ever stated anything like the silly logic that because ' some A [sic] are B, therefore all A [sic] are B ' It seems to be the invention of your fertile brain. I just meant to point to the limitations of your last comment ( #59 ) that did not clarify this point. I don't think I ever asked you either to propose my name for the Nobel Prize or erect my statue. I'd like to know what led you to make such comments. Nobody, not even Professor Robert J. Aumann nor, perhaps, you, knows who enlightened humanity about the thesis at issue 2 000 years back. And nobody knows either who proved it before me and thus enlightened humanity about its correctness.

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