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 It's just an outdated economic model built on unsupported assertions and completely erroneous notions of value.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.
You're not alone in finding Marx/Engels to be pretty incomprehensible. I've heard that pretty much all of the Hegelians are, but they seem to be particularly good at ignoring input information and reaching the conclusion they want to reach.
Interesting... I always thought that the Hegelian method was remarkably similar to the so-called "creationist method," which is why I've been calling it the "ideological method" for quite some time now. Start with a conclusion, then twist, dismiss, or outright ignore any facts that are inconvenient to it.
Marx and Engels seem to be particularly exacerbated by the way that Hegel's own way of doing things is reflected in their work.
Hegel is notorious for his defense of autocracy.
He makes a case that a robust constitution is the best defense for freedom, but then argues that the only way to get that strength is through a living figure, hence an autocrat.
The dialectic method is a great defense because "you don't understand the argument" but it also is built on obscurantism and the embrace of contradicting things, including the evidence for the Hegelians' own points.
That is easily the most succinct description of Hegelian philosophy I've ever read. Furthermore, it explains perfectly something rather noisome I've noticed about German philosophy and culture in general, as contrasted with English philosophy (the origin of liberalism, of course). German culture is extremely rigid in its structure and prone to authoritarian thinking; I have noticed that, if one wishes to get a German to behave a certain way, one need only tell them "it's the law," and most won't question it (which, believe it or not, contrasts quite clearly with certain other cultures I could name).
I may, perhaps, be putting the cart before the horse myself, as I don't really know if this aspect of German culture inspired Hegel or was derived from his work, but the connection is nonetheless apparent.
Some Hegelians are people who have little in the way of an association with authoritarianism (e.g. Stirner), but it's fair to say that Continental philosophy more broadly has strains of absolutism and autocracy that you don't see in the liberal strains of England and the like. Some Austrians are noteworthy exceptions (Mises and Kuehnelt-Leddinh are good examples of Austrian liberalism) and there are liberal strains in some continental schools of thought.
I'd argue that Hegel is more of a paid courtier coming up with justifications for the political order, which is Popper's theory. Of course, he's also incredibly self-contradictory and Hegel fans will complain that people don't understand Hegel. The crisis of the 1800s as far as politics in Europe goes was something like what to do with the decline of monarchies, so there's a lot of weird stuff going down.
If Popper's theory is correct, that's funny and sad at the same time. Then again, maybe it's funny only because I enjoy dark humour. As far as the difference between English and Continental philosophy, the correlation seems to apply only to the western part of the continent. Northern and Eastern Europe are rather different, probably because of far more loosely-structured societies (to be expected with a lower population density).
Returning to the "it's the law" line used to manipulate people, I've noticed certain centuries-old stereotypes that I find rather humourous, and also somewhat enlightening (i.e. a tiny reflection of the culture). Perhaps you might as well.
A Chinaman will respond enthusiastically and comply.
A German will say nothing and comply.
A Russian will say nothing, then do whatever he wants as soon as your back is turned.
An American will give you his opinion on the law, then do whatever he wants right in front of you.
Money is worth exactly what we agree it's worth, hence the market fluctuations. Likewise, goods and services are worth exactly what we agree to pay for them. When things are set in stone, such as the value minted on a coin or printed on a price tag, the rate of exchange doesn't fluctuate particularly quickly. When you have something abstract, however, the rate of exchange fluctuates much more quickly, e.g. the stock market.
Neither mechanism is driven by a top-down, centralised administration, which is necessary for Marx to even have a valid point here. As I mentioned when you started this little endeavour, I haven't read this particular book, but I predict you're going to see the cart getting put before the horse a lot.
The root of the problem here is, and this is something that Marx obsessed about nearly twenty years earlier in The Communist Manifesto, attempting to certify that labour is fairly compensated. How, precisely, does one determine how much labour is worth, the amount of calories burned during it?
Was there ever another part of this?
Not yet. Personal life chaos has made this project take a lower priority for now.
I appreciate the interest, though. Perhaps I'll try to finish that section of the book this weekend.