Marx’s Explanation of Money’s Functions: Overturning the Quantity Theory

Abstract

At the beginning of the Chapter on Money in the Grundrisse, Marx discusses the operation and effects of 'modern credit institutions', touching on several of the questions he will later consider in Capital, Vol. III. An argument he will later present in Capital, Vol. II is implicit in his rhetorical question: would 'large scale modern industry' be possible 'without the concentration of credit …created' by "our present banks'? Referring to the great variety of financial instruments generated by the credit system, he states that 'the thousand forms of circulating paper…are as much the preconditions as the product of modern commerce and modern industry'. 1 It is clear from this that Marx knows that capitalist money is not gold and, moreover, that capitalism could not have developed as it did without the credit system. The obvious question, then, is, if he knows it is unrealistic to assume that money is gold, why does he do this throughout Capital? There is the obvious 'expositional' advantage that gold money gives Marx a way of presenting money and value so that he can proceed to the concept of capital, which presupposes both; banking, by contrast, presupposes not only capital but the division into different kinds of capital. 2 Another expositional convenience is that Marx uses gold money throughout Capital, Vol. I as the measure, or expression of value, in order to explain, for example, the origin of surplus value and the factors that influence its quantity. By treating gold 1 All quotations from Marx 1939: 122. The 'forms of circulating paper' include bank notes and bills of exchange, which Marx has already discussed in this passage, but, since Marx refers to thousands, also things like brokers notes, warehouse receipts, bills of lading, which are mentioned in Capital, Vol. III. In addition, Lapavitsas (2000: 637) lists important events in the first half of the 19th century, in which banknotes played a crucial role in alleviating or preventing monetary crises because they were already the adequate form of exchange value. As he indicates, Marx was well aware of these events. 2 See Matthews 1996: 74 and Campbell 1997: 89. 'derives money as the form necessary to constitute value objectively'. 5 A symbol, by contrast, is indifferent to what is symbolized; the latter, on the other side, is complete by itself, or has no need to be symbolized (an example, as Arthur notes, is the idea of money as a veil). Making the same point in different terms, Murray captures Marx's idea of the necessary relation between value and money by the conception of value as an essence. Because essence must appear, value requires money. 6 It follows that money cannot represent value, as would be true in a symbolizing relationship, since value has no way of being presented except in money. 3 See Marx 1867: 225, n35. By the standard of price, Marx means a monetary unit that applies to a money commodity itself (e.g., some weight of gold). Prices are actually expressed in the unit of account, which Marx calls the standard of money (or sometimes just...

The mercantile form of value and its place in Marx's theory of the commodity

“…However, critique of the Uno school and Lapavitsas's (2005) understanding of the universal equivalent as the monopolist of the ability to buy reveal that the expanded form is a contradiction in terms. 34 In agreement with Campbell (2005), this paper implies that the primary function of money is that of measure of mercantile value, its functions as a means of circulation, as a means of payment and as a store of value stemming from its primary function. 35 The fact that aggregate mercantile value cannot be less than aggregate value implies neither adherence to Say's Law nor a state of general equilibrium.…”

“…Second, this section puts an end to the confusion between the quantitative determination of value and its measure Eldred & Hanlon, 1981;Foley, 2005;Nelson, 2005;Reuten, 2005), which highlights the absurdity of Reuten's (2005) distinction between an introversive and an extroversive measure of value. Finally, it locates the false statement that value cannot exist without money Campbell, 2005;Murray, 2005;Reuten, 2005) in the incomplete historical characterisation of the commodity.…”

“…In addition, Marx's theory of money explains why money was originally a commodity, and necessarily is one at the abstract theoretical level of the commodity (Campbell, 2005;Foley, 2005;Germer, 2005). However, it is not the theory of a money commodity Bellofiore, 2005;Campbell, 1997Campbell, , 2005Eldred & Hanlon, 1981;Lapavitsas, 2005;Levín, 1997;Reuten, 2005).…”

“…However, it is not the theory of a money commodity Bellofiore, 2005;Campbell, 1997Campbell, , 2005Eldred & Hanlon, 1981;Lapavitsas, 2005;Levín, 1997;Reuten, 2005). As follows from section 4, the role of universal equivalent is unrelated to the natural characteristics of commodities.…”

“…28 Campbell (2005) argues that money arises from the need of commodities to express their [mercantile] values in a single unit. This makes clear that in the process giving rise to money commodities are the prime movers, and that, contrary to claim, the equivalent form of mercantile value is passive.…”