It's been about three weeks since I wrote the last installment in this series. Motivation to continue is in short supply. I have read books that were entertaining. I have read books that were informative. I have read books where I disagreed with the author, but found something enlightening nonetheless. But this? This is just painful. It's not even as silly as Ancient Aliens or flat earth videos. It's just an outdated economic model built on unsupported assertions and completely erroneous notions of value. But I shall carry on. Here we go. Maybe some surprises are still in store.
Introduction
Part 1
Part 2
Part 3
Part 4
Book I, Part I, Chapter III: Money, or the Circulation of Commodities
Section 2.—The Medium of Circulation
Marx begins with a false dichotomy and bad analogy in his attempt to reconcile his view of value with the economic reality he observes. He recognizes that money is used in indirect barter, but somehow sees the use of a commodity as money like a superfluous step. He recognizes that the productive economy is a complex division of labor that has effectively sprung up organically, and is always in a state of flux as technology and demand change. He even apparently recognizes that prices serve as a signal of supply and demand that can encourage better use of scarce productive resources. But he doggedly persists in his model of homogeneous human labor and labor as the source of intrinsic value anyway.
He is obsessed with a systemic metamorphosis model. He uses a sort of mathematical equation where M=money and C=commodity
M—C, a purchase, is, at the same time, C–M, a sale; the concluding metamorphosis of one commodity is the first metamorphosis of another.
He sees each exchange as a transmutation or metamorphosis of equal value, as he has consistently indicated in his labor theory of value and his belief in exchange as a zero-sum game. He uses individuals in his example to illustrate his point while entirely overlooking the acting individual assigning subjective value for personal benefit
The remainder of this section strikes me as little more than word salad. Perhaps the translation is to blame, or perhaps the fault lies with Marx himself.
Hence, the identity of sale and purchase implies that the commodity is useless, if, on being thrown into the alchemistical retort of circulation,it does not come out gain in the shape of money; if, in other words, it cannot be sold by its owner, and therefore be bought by the owner of money.
If there is no buyer at a given price, it is because no buyer subjectively values it above that sum. This is just a price signal, not a flaw of money or a failure of the market.
If the interval in time between the two complementary phases of the complete metamorphosis of a commodity becomes too great, if the split between the sale and the purchase becomes too pronounced, the intimate connexion between them, their oneness, asserts itself by producing—a crisis. The antithesis, use-value and value; the contradictions that private labour is bound to manifest itself as direct social labor, that a particularized concrete kind of labor has to pass for abstract human labor; the contradiction between the personification of objects and the representation of persons by things; all these antitheses and contradiction, which are imminent in commodities, assert themselves, and develop their modes of motion, in the antithetical phases of the metamorphosis of a commodity.
If there are so many contradictions and conflicts, is this because of the nature of a market economy, or because there is a flaw in your analysis, Marx?
Marx then explores the currency, or circulation, of money. There is at least a precursor of Keynesian flow and velocity analysis. Marx also casually dismisses the idea of money supply inflation having an effect on prices without examining historical incidents such as the Spanish economy during the influx of Conquistador plunder.
Finally, he tackles coinage. Marx starts on fairly solid ground here, since, as noted previously, he was writing in an era of hard money. In his day, a national monetary unit was defined in a weight of gold or silver, and exchange rates were easily calculated as a ratio. He does assume that coining money and establishing standards in pricing are alike the business of the State, though, and I challenge this assumption. Many, perhaps most, industry standards are set today by industry, not by legislation or bureucrats. This could also apply to precious metal coinage weights and purity, as demonstrated by the NORFED Liberty Dollar project, and we see it occurring in the realm of cryptocurrency today.
Marx further discusses paper money, both as a convertible note and pure fiat. Here, he seems to approach again the problem of fiat money supply inflation, which is admittedly different from the specie supply inflation he dismissed a few pages earlier.
If the quantity of paper money issued be double what it ought to be [as a circulating substitute for gold reserves], then, as a matter of fact, £1 would be the money-name not of 1/4 of an ounce, but of 1/8 of an ounce of gold. The effect would be the same as if an alteration had taken place in the function of gold as standard of prices. Those values that were previously expressed by the price of £1 would now be expressed by the price of £2.
So he recognizes the price inflation and money devaluation of paper money substituting for the old practice of debasing coins which he had previously addressed. He does not seen to grasp the ongoing effects of the change as it occurs, though, and merely considers the mathematical ratio of prices after the fact.
I will stop here before continuing to Section 3, the final section of Chapter III and Part I. Perhaps the final section on money will fill some gaps and answer some of my complaints. We will see. Feel free to chime in below with your comments. After all, I am just an anonymous commentator poking at a 150-year-old work held in high regard by many, and I have barely even begun the book, much less grasped its entire meaning.
I would, however, like to note that while the first edition of Capital was published in 1867, Carl Menger's truly revolutionary Principles of Economics was published just a few years later in 1871, well before the revised second edition of Capital would be published in 1873, and long before Marx's death in 1883. The complete lack of any engagement with the marginal revolution ushered in by this landmark contemporary work is astonishing.
