Paul Krugman wrote: > "A final thought: the notion that there must be a “fundamental” source > for money’s value, although it’s a right-wing trope, bears a strong > family resemblance to the Marxist labor theory of value. In each case > what people are missing is that value is an emergent property, not an > essence: money, and actually everything, has a market value based on > the role it plays in our economy — full stop."
I totally agree with the idea that the "value" of money depends on the role it plays in the economy. More accurately, the "price" of money (the amount of the average commodity needed to buy a unit of money) depends on the scarcity of money. Under the gold standard, that scarcity is mostly based in the natural scarcity of gold, while with "fiat" money it's based on the power of the state. PK ignores -- or doesn't know -- that in CAPITAL, Marx _assumed_ that the value of money equaled the value of a unit of gold. Not only was gold the standard of the day, but it allowed him to move quickly on to the what he saw as the important issues (production, exploitation, accumulation, etc.) BTW, there's an article in the current _Science & Society_ by Spyros Lapatsioras and John Milios saying that in the GRUNDRISSE, Marx had a different conception of money than in CAPITAL. The assumption that the value of money = the value of a unit of gold, alas, has become fetishized among value theorists... PK continues: > So what is fiat money? It is, as Paul Samuelson put it in his original > overlapping-generations model ..., a “social contrivance”. It’s a > convention, which works as long as the future is like the past. > Obviously, such conventions can break down — but then so can things > like property rights. In fact, you could argue that almost every asset > in a modern economy owes its value to social convention; green pieces > of paper could become worthless, but then so could any paper claim, > which is, after all, worth something only because laws say it is — and > laws can be repealed. absolutely! > And once you realize that a social convention is not at all the same > thing as a bubble, several related fallacies fall into place. > > Take the common claim on the right that Social Security is a Ponzi > scheme because the system has few real assets. It’s true that Social > Security is mainly a system in which each generation pays for the > previous generation’s retirement, in the expectation that it will > receive the same treatment from the next generation. But like monetary > circulation, this process can go on forever; there’s nothing > unsustainable about it (yes, demography, but that’s about the levels > of taxes and benefits, not the fundamental nature of the scheme). So > there’s nothing Ponziesque at all. A Ponzi scheme requires _growing_ investment by new participants to pay for the dividends paid to the old ones, while the social security system only requires a _stable_ age distribution of the population to allow the payment of the same real amount to the retired each year. It does not require that there be a growing number of contributors (tax payers) to social security. Ponzi: if each share S pays dividends y and these dividends are only paid for by selling new shares (dS) at price P (assumed constant to start), then (ignoring the schemer's profits) total dividend payment y*S = the value of the total sale of new shares P*dS, so that the rate of growth of the number of shares dS/S = y/P. The volume of shares must continually grow if y > 0. Of course, that likely drives the price of shares down, making it harder to earn revenues and pay dividends.[*] Social security: if there are W young whippersnappers and G old geezers and each whippersnapper pays a tax t and each geezer gets benefits b, then b equals = t*W/G (ignoring payment out of the trust fund). If W/G stays constant, then t does not have to be raised. Even if W/G falls, the share of the whippersnappers' incomes going to the tax can fall, since each of them is more productive than in the past. Growing productivity replaces the need for a growing number of W. Somehow the money libertarians, who usually trumpet the growth of labor productivity under capitalism, forget about it when critiquing social security. -- Jim Devine / If you're going to support the lesser of two evils, at the very least you should know the nature of that evil. [*] in the case of a "legit" security, the corporation issuing stock would earn revenues r per share (either by extracting surplus-value or by benefiting from its redistribution from others). Then dividends y*S can be paid from P*dS or from r*S and (again ignoring profits), y*S = P*dS + r*S. The firm does not have increase the number of shares (dS > 0) unless y > r. Of course, it might do so to finance real expansion. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
