Money - A Commodity?

[Vilhelmo]

The Economics 101: FAQ states:

Money ... a commodity in and of itself

This is NOT true of national currencies.
A Canadian Dollar (CAD) is obviously NOT a commodity but a financial instrument (the financial asset of the bearer & liability of the issuer (Canadian Government)).

In fact, I don't think it's true of any currency.

How can money be a commodity?

[argeiphontes]

I would think that the conception of money as a commodity dates to money backed by commodities. Nowadays, money does not represent any commodities since it's fiat money, and is a financial instrument. Every US Dollar issued is a loan from the Federal Reserve Bank, and I assume CAD are the same.

I'm sure there's been an attempt to update the theories to take this into account. I found some relevant articles but haven't read through them yet, maybe they'll be helpful:

https://critiqueofcrisistheory.wordpress.com/responses-to-readers-austrian-economics-versus-marxism/the-failure-of-capitalist-production-by-andrew-kliman-part-2/

http://ioakimoglou.netfirms.com/resources/Lesxi-Kataskopwn/Marx-on-Money.pdf

[argeiphontes]

So here's a verbatim quote from Kliman's comment to Part 2 of the blog article, and, incidentally, my answer to Remus Bley's question to me as to what I think money is ;) Apparently, the TSSI (Temporal Single-Single Interpretation) of Marxian Economics has no problem with fiat money:

[ From Alan Freeman and Andrew Kliman, “A Welcome Step in a Useful Direction: A Response to Changkeun Kim,” _Marxism 21_, Vol.8, No.2, Summer 2011, available at http://nongae.gsnu.ac.kr/~issmarx/eng/article/22/Freeman&Kliman22.pdf%5D (http://nongae.gsnu.ac.kr/%7Eissmarx/eng/article/22/Freeman&Kliman22.pdf%5D) ]

“Because Marx’s theory does not tell us what the monetary expressions of aggregate values and prices are, the TSSI need not and does not make any assumption about what actually serves as money. It is compatible with the assumption that cowrie shells, or silver, or gold, or fiat money, credit money, tax-credit money, or land-based assignats constitute the true or ideal foundation of the monetary system. The TSSI simply argues that whatever functions as money, its relation to value will be governed by equation (9) [which says that the aggregate value of output in terms of labor-time determines and is equal to the ratio of the aggregate money price of output divided by the MELT].

“Thus, the only function of money with which the TSSI deals is the function that Marx calls ‘standard of price. It is also known as the ‘unit of account’ function. In this capacity, a unit of money is merely the unit in which prices are expressed.

“This implies that debates about whether instruments that have no intrinsic value are ‘actually’ money have no bearing on the TSSI. To serve as the standard of price, an instrument need not have intrinsic value; we can and do express the prices of things, including prices of produced commodities, in terms of other things― dollars, euros, yen, sterling―that lack intrinsic value. Moreover, in both Marx’s own theory and the TSSI, the real values of commodities (as distinct from the nominal expressions of these values) are determined exclusively by the amounts of labor that are socially necessaryfor their production. This means that the real values remain unchanged when the relationship between the real values and the standard of price changes. So it does not matter, insofar as the determination of any real value magnitude is concerned, whether the particular instrument that serves as the standard of price is ‘actually’ money or not.

“Does this mean that the intrinsic value of money has no bearing on Marx’s theory of money or capitalism? Not at all. A whole series of relations in capitalism act to limit the number of instruments that perform functions of money. … This is because money cannot function as a mere instrument of circulation or a mere standard of price (see Freeman 2004). It also has to function as means of payment, store of value, and world money. …

“The world’s current monetary system is, in effect, an inverted pyramid based on the exchangeability of all commodities for the dollar, which in turn is based in a complex way on the latter’s exchangeability for gold, or for some basket of gold and other produced commodities.” [pp. 197-9 of Alan Freeman and Andrew Kliman, “A Welcome Step in a Useful Direction: A Response to Changkeun Kim,” _Marxism 21_, Vol.8, No.2, Summer 2011, available at http://nongae.gsnu.ac.kr/~issmarx/eng/article/22/Freeman&Kliman22.pdf%5D (http://nongae.gsnu.ac.kr/%7Eissmarx/eng/article/22/Freeman&Kliman22.pdf%5D)

--------------------------------------

So money is all that but not a commodity.

[Vilhelmo]

I would think that the conception of money as a commodity dates to money backed by commodities. Nowadays, money does not represent any commodities since it's fiat money, and is a financial instrument.

Even money backed by commodities, such as under a Gold Standard, is a financial instrument.

[argeiphontes]

Even money backed by commodities, such as under a Gold Standard, is a financial instrument.

Sure, it would be an I.O.U for the amount of gold it represents.

Here's a paper outlining Marx's development of the commodity theory of money:
http://www.hetsa.org.au/pdf/33-A-4.pdf

The essential claim seems to be that the value of money is determined by the labor involved in the production of the underlying commodity, the gold, which is no longer true. There is still, like Kliman says, some relationship of money's value to its exchangeability for some commodities, I would assume.

[Vilhelmo]

Sure, it would be an I.O.U for the amount of gold it represents.


Just to be clear, under any Gold Standard the government sets the price of gold & promises to redeem government money (a state IOU), on demand, at the set price.

[o well this is ok I guess]

the usual definiton of a commodity (not the marxian definition), in the simplest terms, is something that it can be sold more dearly than it is bought. CAD can indeed function in this way, in that an amount of USD changed into CAD can (markets willing) be exchanged for a greater amount of USD than initially invested, since even if the real value of commodities remains constant the purchasing power of an individual dollar is subject to fluctuation.
It might not function as a commodity in the strictest sense, but I assume that last things on a traders mind are theoretical concerns. Hell, I'd assume anyone engaged in speculation probably knows the illusory nature of the trade.

[argeiphontes]

Just to be clear, under any Gold Standard the government sets the price of gold & promises to redeem government money (a state IOU), on demand, at the set price.

I don't think it would affect a modern Marxian interpretation of money. I would agree that money is a financial instrument.

Since the TSSI interpretation of Marxian econ doesn't require a commodity money, by the Theory of Backasswards Justificationism, I don't have to believe that money is a commodity :)

[Vilhelmo]

the usual definiton of a commodity (not the marxian definition), in the simplest terms, is something that it can be sold more dearly than it is bought.

What?
New to me.

Usually "commodity" refers to real assets.
This is what I meant.

[o well this is ok I guess]

What?
New to me.

Usually "commodity" refers to real assets.
This is what I meant. I've never bothered to actually look at the FAQ until now, so I was operating under the assumption you referred to a general econ 101 faq. Here, it is necessary to present the full quote.


Money itself arises as a means of circulation and exchange, a commodity in and of itself. As someone else said, this particular quote refers the historical origins of money, which began as a real asset (say, gold) that could be used as a means of universally comparing values of other commodities, not necessarily its present state.
By the marxist definition these receipts would not be currency unless they functioned as means of universal exchange. If receipts represented an amount of grain, then the real currency would be the grain itself.

[Vilhelmo]

As someone else said, this particular quote refers the historical origins of money, which began as a real asset (say, gold) that could be used as a means of universally comparing values of other commodities, not necessarily its present state.

Money did NOT begin as a real asset.

There is no evidence of this.
There is, however, ample evidence of its origins in the Temples & Palaces (Public Sector) of Bronze Age Sumer.

I recommend " (http://arno.daastol.com/books/wray/Wray,%20Credit%20and%20State%20Theory%20of%20Money %20%282004%29a.pdf)Credit and State Theories of Money: The Contributions of A. Mitchell Innes" (http://arno.daastol.com/books/wray/Wray,%20Credit%20and%20State%20Theory%20of%20Money %20%282004%29a.pdf).
It includes the excellent article "The Archaeology of Money: Debt vs Barter Theories of Money's Origins" by Michael Hudson (http://cas.umkc.edu/econ/economics/faculty/wray/papers/hudson.pdf)

[Vilhelmo]

By the marxist definition these receipts would not be currency unless they functioned as means of universal exchange.

The "medium of exchange" function was the last to develop.
Most transactions in antiquity were on credit.

[cyu]

Most transactions in antiquity were on credit.


If my kingdom issues a gold coin that is backed by a bushel of wheat, would you consider that a credit, since the coin represents a debt equal to one bushel of wheat?

[Vilhelmo]

If my kingdom issues a gold coin that is backed by a bushel of wheat, would you consider that a credit, since the coin represents a debt equal to one bushel of wheat?

I am assuming, for argument's sake, that "a gold coin... backed by a bushel of wheat" signifies a gold coin that is made redeemable for wheat at a fixed price set by government fiat.

In any case, being "backed" by a commodity is not what makes a coin credit (ie: a financial instrument).

A coin is credit not because of what it is but because of what it represents, namely, a debt of the issuer.
As a financial instrument its issuance gives rise to a financial asset of one entity (the bearer) & a corresponding financial liability of another entity (the issuer).
It is from this contractual relationship that money derives value.
No liability, no asset.

A coin that isn't a financial asset isn't a coin but a lump of gold.

[cyu]

A coin is credit not because of what it is but because of what it represents, namely, a debt of the issuer.



Would you say that in this case, it is a debt of the issuer (ie. the king or farmer's cooperative) where the debt is equal to one bushel of wheat?

[Vilhelmo]

Would you say that in this case, it is a debt of the issuer (ie. the king or farmer's cooperative) where the debt is equal to one bushel of wheat?
Yes, of course.

[cyu]

Let's say the locals in an area decided to defy their government, forming farm cooperatives (or maybe oil field cooperatives, depending on the location). Let's say one of these cooperatives decided to issue a note / coin / digital currency in which it is backed by the food that cooperative produces, or the barrels of crude that cooperative produces, or whatever. Do you believe the notes / coins / digital currency issued in this way would have valid use as "money"?

[Vilhelmo]

. Let's say one of these cooperatives decided to issue a note / coin / digital currency in which it is backed by the food that cooperative produces, or the barrels of crude that cooperative produces, or whatever. Do you believe the notes / coins / digital currency issued in this way would have valid use as "money"?

It's not "backing" that makes credit money nor is it "backing" that ensures money's acceptance.

A currency that is "backed" by gold, is just a government fiat currency where the government sets, by fiat, the price of gold & promises to redeem, on demand, currency for gold at the set price.
It is government fiat currency with government price fixing & on-demand redeemability.
It is a type of voluntary constraint.

State credit (IOUs) is money because it serves as the national unit of account. The debt owed is that the state will accept its IOUs in payment of any debt owed to the state.
It is by imposing taxation payable in its currency (IOUs) alone that the state ensures the acceptance & value of its money (state IOUs).

Absent taxation, the co-op's money will not be widely accepted, certainly not as the money of account, outside the co-op.
In this case, the only reason it may be accepted is because it is "backed".

[Five Year Plan]

It's not "backing" that makes credit money nor is it "backing" that ensures money's acceptance.

A currency that is "backed" by gold, is just a government fiat currency where the government sets, by fiat, the price of gold & promises to redeem, on demand, currency for gold at the set price.
It is government fiat currency with government price fixing & on-demand redeemability.
It is a type of voluntary constraint.

State credit (IOUs) is money because it serves as the national unit of account. The debt owed is that the state will accept its IOUs in payment of any debt owed to the state.
It is by imposing taxation payable in its currency (IOUs) alone that the state ensures the acceptance & value of its money (state IOUs).

Absent taxation, the co-op's money will not be widely accepted, certainly not as the money of account, outside the co-op.
In this case, the only reason it may be accepted is because it is "backed".

You reject the labor theory of value, which you appear not to understand at all (e.g., equating rent with surplus value, then backtracking to call it a form that surplus value takes). As a result you reject the commodity theory of money. No surprises there. What is puzzling is what you hope to accomplish on this forum, and why you're not posting in Opposing Ideologies, which is explicitly carved out for people not won over to the idea of revolution, so they can debate these kinds of issues without obstructing and derailing discussion on the main forum.

[Prof. Oblivion]

Vilhelmo I think you need to read the first part of Marx's capital to understand the origin of this conception. I also think you need to understand that "commodity" has a very specific definition in Marxian economics that is distinct from how it is used in modern discussions (i.e. "commodities trading/futures" etc.). Most (all?) Marxists would agree that money is a debt instrument and not a commodity in itself, based on the common definition.

http://www.marxists.org/glossary/terms/c/o.htm#commodity

[Vilhelmo]

I also think you need to understand that "commodity" has a very specific definition in Marxian economics that is distinct from how it is used in modern discussions (i.e. "commodities trading/futures" etc.). Most (all?) Marxists would agree that money is a debt instrument and not a commodity in itself, based on the common definition. Thank you. I am ignorant of this specialized usage. It took "commodity" to mean a real not financial asset. My point being that money is a financial not real asset.

[cyu]

In this case, the only reason it may be accepted is because it is "backed".
Well, if anarchists overthrew the government, there wouldn't be one to collect taxes now, would there?

Personally I would prefer an economy that was not based on trade (and thus no use of money), but if some anarchists wanted to issue money from their cooperatives, I could certainly see this happening.

Now, if you can't imagine an economy without exchange and trade, I'd suggest http://en.wikipedia.org/wiki/The_Dispossessed

[Vilhelmo]

Well, if anarchists overthrew the government, there wouldn't be one to collect taxes now, would there?

I can easily imagine an anarchist society with some form of Economic Rent "tax" to redistribute rents from production units to other institutions.


Personally I would prefer an economy that was not based on trade (and thus no use of money), but if some anarchists wanted to issue money from their cooperatives, I could certainly see this happening.

What about relations between coops?
The distribution & allocation of resources between coops?
Other institutions of society?

[cyu]

What about relations between coops?



Whatever they feel like - however, Goldman's principle still stands: If they do not give you work or bread, then take bread. In other words, no matter what relationships exist or agreements exist, if anybody is starving, anarchists (or at least my kind of anarchists) would give that starving person the "right" to anything required to avoid starvation. http://cjyu.wordpress.com/article/if-they-do-not-give-you-work-or-bread-gcybcajus7dp-10/


Other institutions of society?

You've already asked this before - want me to pull up the previous thread?

[Vilhelmo]

Whatever they feel like - however, Goldman's principle still stands: If they do not give you work or bread, then take bread. In other words, no matter what relationships exist or agreements exist, if anybody is starving, anarchists (or at least my kind of anarchists) would give that starving person the "right" to anything required to avoid starvation.

We're talking about an anarchist society not anarchists.
How is this principle implemented in society?
Why would it be followed?

What about productivity differentials stemming from natural endowments?
What about the Economic Rents they are the source of?
Do workers of co-ops with above average productivity stemming entirely from nature get more than others?
According to the LTV, the value of their labour (wages) is the same as in other firms across the economy.
The excess is Economic Rent, Unearned Income.
The workers have no moral or economic claim to this unearned increment.

[Creative Destruction]

gold is a commodity-money, which is represented by paper-money. paper money can be turned into a commodity for which it will make even more money, which is expressed in the term M - C - M', but, it's correct that the debt instrument -- the paper-money -- is not a commodity itself. this still holds true whether or not the fiat is backed by commodity-money or the general faith and health in the economy, as it goes now.

[Vilhelmo]

gold is a commodity-money,

What do you mean?
Can you give an example?

[Creative Destruction]

How is this principle implemented in society?

Ideally, free access.


Why would it be followed?

Because obtaining free stuff is better than slaving for it.


What about productivity differentials stemming from natural endowments?

What about it?


What about the Economic Rents they are the source of?

If we're talking about a socialist society here, there wouldn't be "economic rents" if everything is held in common ownership.


Do workers of co-ops with above average productivity stemming entirely from nature get more than others?

I don't know what this is supposed to mean. Get "more" of what?


According to the LTV, the value of their labour (wages) is the same as in other firms across the economy.

Wages aren't the value of their labor. The commodity they produce is the value of a worker's labor.


The excess is Economic Rent, Unearned Income. The workers have no moral or economic claim to this unearned increment.

I still don't know what you mean by "Economic Rent" in this context. But since the worker produced the entire value of the product, whatever value they don't get back, and whatever surplus is pocketed by capitalists (surplus value is the value of the commodity minus the worker's wages) is stolen value. That's exploitation and, yes, workers do have an economic and moral claim to the full value of what they produce.

[Creative Destruction]

What do you mean?
Can you give an example?

I gave you an example. You quoted it. Gold is a commodity-money.

To Marx, there was two kinds of "money." Commodity-money, which was a physical representation -- or value form -- to which all other commodities were judged. Gold and silver are traditionally the most widely used commodity-money. Even today, gold is considered to be a "commodity" -- it's traded as such on the market. It's the product of abstract labor; mined, processed and given value through the labor process. And it is also singled out as a currency, or was.

The second kind of money that existed, in the time that Capital was written, was "paper-money" which was just a debt certificate that said, by law, you could trade it for other commodities or you could exchange it for real commodity-money, either gold, silver or whatever the standard was.

Since the gold standard was done away with, all that is left is paper-money. That paper-money itself is not a commodity (whatever value it has does not come from labor but through law), but it is a representation of a whole bunch of commodities being traded and how well they're being traded; that is, the economy in general. However, it can still be transformed into a commodity as a way of making more money. Wall Street does this every day when they trade futures or when they do things like credit default swaps or trade on mortgages. The money being put up acts as the commodity (again, in the formulation M - C - M') in order to make a profit.

[Vilhelmo]

I gave you an example. You quoted it. Gold is a commodity-money.

I meant could you give me an example of gold as commodity-money.
Do you mean lumps of gold, gold coins, a gold standard?


Even today, gold is .... also singled out as a currency, or was.

It is not & never was.


Since the gold standard was done away with, all that is left is paper-money.

A gold standard was "paper money".
It is government fiat money (state IOU) with government price setting & redeemability.
The government sets, by fiat, the price of gold & promises to redeem, on-demand, money for gold at the set price.


That paper-money itself is not a commodity (whatever value it has does not come from labor but through law), but it is a representation of a whole bunch of commodities being traded and how well they're being traded; that is, the economy in general.

No.
Money represents state credit (a state IOU).

[Vilhelmo]

Because obtaining free stuff is better than slaving for it.

Then why isn't it followed now?


If we're talking about a socialist society here, there wouldn't be "economic rents" if everything is held in common ownership.

Economic Rents would still exist in a society with common ownership.
The are a fact of natural or contrived exclusivity.


I don't know what this is supposed to mean. Get "more" of what?

Receive wages more than the value of their labour.


The commodity they produce is the value of a worker's labor.

Not according to the LTV.


yes, workers do have an economic and moral claim to the full value of what they produce.

Again, not according to the LTV.

[cyu]

The workers have no moral or economic claim to this unearned increment.


How would you judge economic morality or what is rightly earned or unearned? If the concept of property were truly abolished, there would be no such thing as either "earned" or "unearned". Stuff simply exists. A worker might spend some time putting some stuff together, and transforming that stuff into other stuff, but it's still stuff. It just sits there like it did before.

Of course, you may argue that this is not a good economic strategy for producing what is needed for the general population. But that is just a question of strategy. Ultimately you would just be discussing how best to produce enough for everybody.

What causes one system to produce more than another economic system? Corruption, graft, and alienation do play a part. But if workers aren't as willing to work under one system as another, then it is an issue of motivation. Do you feel you understand human motivation? Do you believe it is based on greed? Or maybe you believe people can only be truly motivated by threat of death? Or torture?

[Creative Destruction]

Not according to the LTV.



Again, not according to the LTV.

Then you have a fundamental misunderstanding of the LTV, or at least Marx's LTV. Before we go any further, you should really go back and correct your misconceptions. Otherwise, we have an intractable disagreement.

[Vilhelmo]

Then you have a fundamental misunderstanding of the LTV, or at least Marx's LTV. Before we go any further, you should really go back and correct your misconceptions. Otherwise, we have an intractable disagreement.

The misunderstanding is yours.

[Creative Destruction]

The misunderstanding is yours.

Nope. Sorry, dude. I don't know what version of Capital that you read, but in the one that is widely available and universally accepted, value is given to a commodity through the labor process. And as far as the surplus value goes, this is the entire basis for exploitation. If Marx didn't think that labor was entitled to the full value of the commodity they produced, I doubt he would've said this constitutes exploitation.

I mean, come on. This is shit from the first three chapters of Capital. Get it together. You're embarrassing yourself.

[Vilhelmo]

Then you have a fundamental misunderstanding of the LTV, or at least Marx's LTV. Before we go any further, you should really go back and correct your misconceptions. Otherwise, we have an intractable disagreement.

Classical Political Economy used the Labour Theory of Value to isolate Economic Rent (unearned income) as the excess of market price over cost value - the element of price that cannot be resolved into labour.
Again, Economic Rent is the non-labour element of price that, having no cost of production, is not ultimately reducible into labour.

[Vilhelmo]

Nope. Sorry, dude. I don't know what version of Capital that you read, but in the one that is widely available and universally accepted, value is given to a commodity through the labor process.

Yes, I didn't say otherwise.


If Marx didn't think that labor was entitled to the full value of the commodity they produced, I doubt he would've said this constitutes exploitation.

Economic Rent is Unearned whether taken by the landlord or the farmer.
One hour of Labour is only entitled to the value of one hour of labour.

You obviously don't understand the LTV or the distinction between "Earned" & "Unearned Income"

Why is the farmer on naturally super productive land entitled to, in addition to his one hour of labour, the rents that stem, not from any effort or labour on his part but entirely from nature?

[Prof. Oblivion]

Classical Political Economy used the Labour Theory of Value to isolate Economic Rent (unearned income) as the excess of market price over cost value - the element of price that cannot be resolved into labour.
Again, Economic Rent is the non-labour element of price that, having no cost of production, is not ultimately reducible into labour.

Marx is not Ricardo. See this critique:

http://www.marxists.org/archive/marx/works/1863/theories-surplus-value/ch11.htm

[BornDeist]

It is a commodity, but a different type of commodity that is used only for judging the exchange value amongst different commodities. Before paper money, Marx had talked about Gold being money.

[cyu]

Are mortgage debts, school loan debts, and rental agreements commodities? Does it matter?

[BornDeist]

Are mortgage debts, school loan debts, and rental agreements commodities? Does it matter?

Let's look at Student Debts. You exchange money for education. The only problem is that you don't have the money right now. Debt is simply the owed amount of absent money. But somewhere that money exists even though it's not in your hands. But even nonphysical money like money that exists on your card or currencies like Bitcoin are money because they still have a labor value. Someone had to make a machine that makes the money therefore transferring it's value.

[Vilhelmo]

Marx is not Ricardo. See this critique:
I did not claim he was. Thank you for the suggestion, it is greatly appreciated.

[Vilhelmo]

Are mortgage debts, school loan debts, and rental agreements commodities? Does it matter?

It matters to an economist or an accountant. The distinction between Real & Financial Assets is vital.

[Vilhelmo]

Let's look at Student Debts. You exchange money for education. The only problem is that you don't have the money right now. Debt is simply the owed amount of absent money. But somewhere that money exists even though it's not in your hands. . What? I'm not sure what you're saying except that money exists even if it's not in my hands. I agree that money exists.
But even nonphysical money like money that exists on your card or currencies like Bitcoin are money because they still have a labor value. Someone had to make a machine that makes the money therefore transferring it's value. Money, being created by computer keyboards, has (next to) no cost of production. Money is a claim on wealth.

[Vilhelmo]

If the concept of property were truly abolished, there would be no such thing as either "earned" or "unearned" Why would anyone want to abolish, as if it were even possible, the concept of property?
Stuff simply exists. A worker might spend some time putting some stuff together, and transforming that stuff into other stuff, but it's still stuff. It just sits there like it did before. I agree, stuff exists
Of course, you may argue that this is not a good economic strategy for producing what is needed for the general population. But that is just a question of strategy. Ultimately you would just be discussing how best to produce enough for everybody. What strategy? It's not that its not a good economic strategy but that it's not an economic strategy.
Do you feel you understand human motivation? I don't feel I understand anything much less human motivation.
Do you believe it is based on greed? Or maybe you believe people can only be truly motivated by threat of death? Or torture? I do not believe human motivation to be based on greed nor do I believe that people can only be truly motivated by threat of death or torture. On the contrary. I believe that the best incentive is to reward individual effort & sacrifice.

[cyu]

I believe that the best incentive is to reward individual effort & sacrifice.


Do you believe this kind of motivation is best because you haven't yet heard of anything better, but are open to the possibility that there are better motivations - or do you believe this kind of motivation is best based on faith and assertion?

[Vilhelmo]

Do you believe this kind of motivation is best because you haven't yet heard of anything better, but are open to the possibility that there are better motivations - or do you believe this kind of motivation is best based on faith and assertion?

I don't believe it's the best "kind" of motivative only the best incentive to produce (the topic of debate).
I am open to other possibilities but as of yet haven't heard anything better than rewarding effort & sacrifice.
I would be happy to explain further.

I would like to hear your views.

[cyu]

Like most organisms, I would say humans have 2 basic motivations: to live and to reproduce.

Forced labor, slavery, intimidation, torture, etc are an attempt to use the motivation to live, in order to motivate behavior. In general, modern cultures consider the use of such motivating factors as "immoral" - in part, I would say, because such motivating factors are inefficient, since they in general result in http://en.wikipedia.org/wiki/Reactance_%28psychology%29 - and a pretty powerful form at that. However, this form of motivation has not been totally eliminated in modern society - ie. people who do not have money are still often forced to die of hunger, sickness, or exposure.

Access to reproduction / sexual motivations isn't something that's widely used in any economy. It does play an indirect role, however. For example, people may spend their money to buy status symbols, in hopes of attracting sexual pleasure. But there isn't really much direct attempts at sexual motivation along the lines of "if you don't build a pyramid for the president, you don't get sex."

I would say there's a third motivation beyond our two "primal motivations" - it is not a physical / biological motivation, but rather a psychological one. I would lump that together under the category of "pride". A person might want to make a lot of money, not because they want to buy stuff, but because they just want to show off how big their salary is. A person might buy stuff not because they actually want to use it, but because it is a status symbol they can use to show off to their peers. As I've mentioned before, this category of motivations is much more malleable than the two biological ones - if you control the culture (ie. the mass media and the means of communication in your society), you can basically make people proud of doing anything - whether it's running marathons, eating 50 hot dogs in one go, sacrificing their lives for their children or fellow soldiers, or even toilet cleaning, if you really wanted to.

[Vilhelmo]

Like most organisms, I would say humans have 2 basic motivations: to live and to reproduce. I thought we were discussing remuneration norms?

[cyu]

Motivation is one aspect of economics. "Remuneration" is one way to motivate people, just as intimidation is one way to motivate people. But to limit all discussion of economic motivation down to "remuneration" is about as naïve as trying to limit all discussion of economic motivation down to intimidation.

...then again, it's pretty normal to be short-sighted with respect to what you know. For example, people in the military may be limited only to motivation via intimidation.

[Vilhelmo]

But to limit all discussion of economic motivation down to "remuneration" is about as naïve as trying to limit all discussion of economic motivation down to intimidation. I was NOT trying to limit all discussion of economic motivation down to "remuneration". I merely thought we were discussing what remuneration norm provides most the effective incentive for individuals & society to produce the most amount of goods/services. I asked for your views on the most effective remuneration norm & you went off on a tangent. When I attempted again to illicit yours views on the topic you responded with insults & invective. It seems that you are only interested in debating those that hold views identical to your own.

[cyu]

Again, sounds like trolling to me. What makes you think your version of economic motivation is the best type of economic motivation?

http://cjyu.wordpress.com/article/equal-pay-for-unequal-work/

In today’s system, you convince people to work by offering them money. You convince them to want money by advertising goods they can buy. Without product advertising, would people still want those goods (or money) as much? What then is the purpose of it all? To create a “desire” that wouldn’t have existed otherwise, so you can fill that desire – it seems to me to just be a system of creating unnecessary work. Now before you make the argument that advertising isn’t all that effective in getting people to buy what they don’t want, consider this: why spend so much effort on advertising? It supports all of network television. Companies wouldn’t spend so much if it didn’t work.

[Vilhelmo]

Again, sounds like trolling to me.

That the expression of views contrary to your own "sounds like trolling" demonstrates that you have no interest in honest debate, no regard for differing views & no respect for those that hold them.


What makes you think your version of economic motivation is the best type of economic motivation?


As I doubt your sincerity, I shall link to a relevant discussion that outlines my basic position.
http://zcomm.org/wp-content/uploads/zinstructionals/htdocs/EconVision/id43.htm



Remuneration

It could be that we each have claims on output in proportion to how much of the means of production we own, or how productive the means of production we own are.
This option yields differential income with no basis in anything that the individuals involved have actually done or committed of themselves. It is inequitable in the same simple way that it is inequitable if you give one child a very narrow straw, and another a wide straw, and set them both to the task of drinking out of a single milk glass, day in and day out for breakfast.
As with the children, only more so, division according to capital ownership is not conducive to solidarity; jealousy and attempts to grab the bigger straw get in the way.

More, when translated to income from milk consumption, the different income to different property owned approach ensures that those with high income will utilize it to enhance their abilities to control other choices—who gets which toys, and, even more important, who gets the next technical innovation, the next bit of additional productive property, the computer as compared to the abacus for doing homework, thus also violating self management in a progressive spiral of divergence from proportionate say for all actors over the decisions affecting their lives.
Regarding diversity, the option has relatively minor implications, I suppose, beyond narrowing options for some.

As to efficiency, the option does foster the most productive use (or, more accurately, the most profitable use for the owner) of capital goods. But it does not lead to the widest possible development and utilization of people's talents and abilities. So if we could accomplish the first end--and improve it by making the aim of the use of the capital goods social well being rather than private profit--without sacrificing the second aim, the development of human potentials, we could make progress on the efficiency front too.

• Or it could be that we each have claims on output in proportion to how much of it we are ourselves responsible for producing.

This is a very popular conception, including among people who call themselves socialists. If you produce more of the overall output of society than I do, you should have just that much more claim on the social product. Or so goes the argument.
But what determines this gap between what you produce and what I produce?
It could be ownership of better tools, etc., unless we have already ruled that out, as above.
But it could also be that you work harder. Or that you have better training. Or that you are just plain more productive, intrinsically, because independent of how hard we work or how much training we have, you are quicker, stronger, calculate faster, have a better eye for design, or whatever.

Should such differences be rewarded?
Let's leave out of consideration the work harder component of the difference in output for now, dealing with it below, to consider first, instead, genetic endowment.
If you are physically bigger and stronger, and we work equally hard and for an equal period of time, should you get more reward because your pile of output (picked oranges or whatever) is bigger than mine? Well, to reward this is to say that hey, since you were already lucky in the genetic lottery, now we will bestow on you some more advantage to go with what that luck already gave you. What justice is there in this? And it can't be a matter of incentives, as opposed to justice, either. For surely no matter how much or in what manner we set up our payment schemes, no one is going to be able to respond by improving their genetic endowment. There is no incentive effect on attributes that are beyond our control. And there is no moral reason to reward what we have nothing to do with determining either. So the option is inequitable and without redeeming worth.

But what about differences in skill and knowledge that are learned, rather than inherited. Suppose I go to school for four years while you sweat in a mine. Then we both work someplace where my school training makes me more productive. Do I deserve to be paid more? First I enjoyed my school days while you enhanced your probability of dieing of black lung. Then I benefit again on top of that when I work at the same effort level as you, because my learned skills increase my output.

What's the logic? It can't be moral. It can't be that I deserve more for my pleasurable time in school. Incentives you might say. We need to pay for the schooling or else people wouldn't do it. Well, yes, if the schooling is onerous and involves sacrifice and hard work, we ought to pay for that, like we pay for it in any productive contribution, because it is deserving and because the incentive effect is needed. But if a task we undertake is pleasant and fulfilling, than why do we have to pay a whole bunch extra to get people to do it?

Answer: of course, we do not. This is just one more of the almost endless array of idiotic lies hoisted by economists upon the public. Ask yourself, given the choice do you opt for grad school or a job, say, in a coal mine, for the next 6 years? Suppose the coal miner's pay is $30,000 a year. The incentives argument is that we need to pay you more, over a lifetime, in returns on the schooling, to get you to do it. Well, is this true? Would you do the schooling or the coal mining at $30,000 each. Now, how high do we have to raise the coal mining salary to get you to do it instead of the grad schooling at $30,000?

The deduction is simple. There are elements of schooling and learning skills that should be remunerated, as work, in the same way as work is. But the accumulated skill, talents, and knowledge, which then contributes to output, should not be remunerated per se.

OK, so what are the impacts on solidarity, self management, diversity, and efficiency? Well, what we are really talking about here, I believe, is a clear class division. A gap created between conceptual/order giving economic actors and instrumental order taking actors based on the qualitative effects of their activity, and on the remuneration for it as well. However this gap initially opens up (genetic endowment, training, luck, brute force) once it exists those with power and extra income will use it to further enhance the conditions of their dominance (by setting up things like the AMA, school tracking, etc.) thus gaining a disproportionate control over economic outcomes. A class rule is fostered: coordinator class dominance over working class dominated. Solidarity is gone. Diversity is delimited for those at the bottom--and even for those at the top who must defend their positions.

Why then is this choice popular among many who call themselves socialists? Well, I have to say that I think that the answer is either ignorance, or that these individuals are victims of, rather than transcending, their class position. They are advocates of coordinator class vision and values, however unself-consciously, pure and simple. Often they take their stands with a heart...but then capitalists sometimes show a little heart too, as long as the basic underlying values that keep them on top are preserved.

• Or it could be that we each have claims on output as large as we are able to bargain for, in a competition negotiation with others.

This is just war by another name. And it is, in fact, what exists in real market economies. Remuneration is a function of such things as monopoly buying or selling power, control over technologies, barriers to entry, organizational might (in unions or corporations), ability to withhold assets and thereby wreck havoc, and so on and so forth. Power, bargaining power to be exact, is the main determinant of income.
There is no equity in any humane sense. More like the law of a nightmare. Solidarity is gone. Self management is gone, etc.

• Or it could be that we each have any claims on output that we wish to make--we just get whatever we say we want.

Well this would be nice. And where does it all come from? This is, indeed, utopian. Meaning it is impossible because of limitations built into the domain we are discussing. It is like asking trees to fly, or the New York Times to tell the whole truth. Actually, in this event it is more like the former, as the constraints are due to physical laws not solely social ones (as in the Times case), but otherwise I hope the point is clear.

• Or it could be we each have claims on output in proportion to our needs, as compared to everyone else.

This one is nice too. Indeed, it is really just four with a lid on demand. But what is the lid? Where is it established? Is it our needs/wants? And (a) how do we measure these, and (b) why is there in fact a lid on our needs/wants? The only way such a lid can arise is if we put limits on ourselves before the fact of knowing what society can deliver, or if we do it in light of understanding what the economy's situation and potential are. How do we do curtail ourselves without knowledge of potentials? Does everyone do it the same? Is it even a good idea? And if we are curtailing ourselves in light of potentials, that is merely operating in terms of a budget, and is not option 5. These are things to think about because they actually have implications later. The point is, we don't have to spend much time on this one now because surely expressed needs would greatly exceed available output now, so that this option immediately reverts to option 4 or has to be passed over on route to option 6. But what if we had socialist (or parecon) people, who had developed a profound social responsibility as a natural part of their beings (much as people now learn quite early how to grab?). Would we then want an economy in which people essentially limit their requests, but get what they say they want? (The only alternative still in the range of option 5 would be some objective determination of need from without, which would remove control over our lives from us, and is obviously a fiasco.) Would this in fact be good, as many intuitively think (especially greens)? (It is worth thinking about. I think the answer is no, this would not be ideal...) Anyhow, in the real world, for now and the indefinite future, 5 is utopian at least if thought of as operating as the sole criterion for allocation of all goods. (Though, say, for health care it might work fine...).

• Or it could be that we each have claims on output in proportion to the effort we expend and the sacrifices we incur in creating output.

Well, clearly I like this. It rewards what we in fact do have control over. So as an incentive it makes sense. As a fair act in response to our efforts it makes sense. I don't think it would disrupt solidarity, even if some people work a little harder and earn a little more and other people work a little less hard and earn a little less, supposing each person is free to choice any available option. The income differentials couldn't become very large, certainly not large enough to disrupt self management. All in all, I don't see any problem other than the following: What if I can't work? Or what if I have a disease, or a hurricane hits my neighborhood and so I have way more expenses than others?

The answer, it seems to me is to have distribution according to need for calamities, health, and some other related similar facets of consumption. Where does it come from? Everything always comes form the overall social product. So, it must be that in our good economy some part of the total social product is set aside for these purposes. Thus, it is a kind of social fund, or insurance fund, if you like...

• Or, it could some combination of the above.
Which is what I arrived at under the option 6 discussion above.

[cyu]

While I like Michael Albert more than, say, Charles Koch, I would say Albert lacks the insights of Alfie Kohn. Have you heard of Kohn?

...although http://en.wikipedia.org/wiki/Reactance_%28psychology%29 isn't directly mentioned at http://www.alfiekohn.org/books/pbr.htm - I would say the underlying principles are generally the same.

[Die Neue Zeit]

It matters to an economist or an accountant. The distinction between Real & Financial Assets is vital.

It matters much more to economists or investment finance analysts than to accountants.

[ralfy]

Gold has little practical value except as physical money, i.e., it is rare, easy to mold, and generally indestructible.

Paper backed by gold was used instead because the former was much more convenient to use and carry around.

Today, most money comes in the form of numbers in hard drives.

Finally, in terms of credit, the largest component of credit is unregulated derivatives, which globally has a notional value of between $600 trillion and more than a quadrillion dollars.

[exeexe]

Under a commodity monetary standard, a medium of exchange and unit of account is either a commodity or a claim to a commodity and the commodity is a good that would have value even if it were not used for money. Put differently, the commodity has an intrinsic value, in contrast to the paper money of an inconvertible paper standard that has value only by government fiat and is called fiat money for that reason.http://encyclopedia-of-money.blogspot.dk/2010/01/commodity-monetary-standard.html

So yes money is a commodity but fiat money is not. So the Economics 101: FAQ is correct.