Does anyone know of any work (either by an Austrian or non Austrian) that attempts to derive the value of money in terms of amount of some produce or an amount of hours worked. Perhaps something along the lines of, if there are X dollars in total in the society and (other things defined...) then on average each dollar will buy Y hours labour.
As an illustration, here is my own formulation: Imagine a very simple society in which there is only one commodity: sandwiches. Everyone in the land grows the ingredients for their sandwiches in their gardens. Often they will exchange sandwiches with their neighbours just for variety. There is no money in this society only barter. But then one day the king of the land says "I've just invented something I'm going to call money. It consists of metal coins called shekels. I will give everyone in the land 1000 shekels and from now on bartering is banned. All exchanges must be via the medium of exchanging shekels. What's more, nobody is allowed to eat their own sandwiches." The question now is: how many shekels will a sandwich cost? It may well be that on day one, people will not have a clue and all sorts of silly prices may get paid... but presumably over time the price will gravitate towards a certain value. What will that value be?
Again, what you are talking about is not at all Austrian. It is sometimes called the chartalist school of thought, where money derives value from government fiat and mainly acts as a unit of account. In many ways, I think that this definition of money is both circular and misses the point.
The post-keynesian economist, Randall Wray, has a number of papers on this topic.
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DD5:The answer is that it cannot be done!
I really like that answer because part of the reason I am asking these questions is that I've already solved the problem. If I find that nobody has solved the problem before then I would like to publish my results in an economics journal.
If you have "solved" the problem in some way, I seriously doubt that it is a new solution. As I said, Neo-Ricardians have been working with such models for years, proving all sorts of theorems. Once you accept some version of the LTV, you can prove all sorts of theorems in n commodity economies. The difficulty is not with the mathematics, it is that the model bears no relation with reality.
ziragt:The post-keynesian economist, Randall Wray, has a number of papers on this topic.
I see he's published an awful lot of papers! Any idea which one(s) addressed this issue?
It's hard for me to know exactly what you're looking for, but I'll try to recommend something by him. He has an interesting essay in "What is Money?," that goes over the basic chartalist theory. Another paper is "The Neo-Chartalist Approach to Money", I haven't read these in quite a while, so I'm not sure how pertinent they are.
I should warn you to take everything in his work with a grain of salt, however. While it's always good to read outside the narrow scope of Austrian economics, if you're not deeply read in the literature, you may get taken in by misleading arguments.
ziragt:Once you accept some version of the LTV, you can prove all sorts of theorems in n commodity economies.
I do not support LTV in any way.
ziragt:The difficulty is not with the mathematics, it is that the model bears no relation with reality.
Whilst my theory is most easily tested on a simplified model economy, the principle would apply equally well to a real economy with real people.
mickanomics: Do you know of any more recent developments/tweaks/improvements to the theory since 1912?
ziragt:I'll try to recommend something by him.
Great, thanks for that - I'll give them a read.
ziragt:I should warn you to take everything in his work with a grain of salt
If I draw any conclusions from his work, I shall run them by you to make sure I haven't been led astray :-)
You may not think it is the LTV, but it is at least a variant, from what I can tell. That is, it is a cost of production theory. Otherwise, there is no reason why prices would gravitate toward some value.
DD5:Here, read this from MES: http://mises.org/rothbard/mes/chap4b.asp#5B._Money_Regression
Thank you.
ziragt:You may not think it is the LTV, but it is at least a variant, from what I can tell.
Absolutely 100% not.
ziragt:Otherwise, there is no reason why prices would gravitate toward some value.
You are mistaken. But the explanation as to why is rather complicated and I and not going to reveal all just yet.
It's possible I'm misinterpreting your entire theory. If so, the readings I've suggested will not be as fruitful, since they were based on that interpretation.
Still, the comment about a point which the prices are gravitating toward is very close to classical theories of value.
I'll quote Lachmann describing this: "For Sraffa, real-world market prices are determined by supply and demand. But behind them, as a centre of gravity, there lies the equilibrium position."
market prices are determined by the marginal pairs.
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
ziragt:It's possible I'm misinterpreting your entire theory. If so, the readings I've suggested will not be as fruitful,
I'm not looking for a good solution to the problem (I already have that :-)). What I really want is to read about other peoples attempts at a solution. The worse they are the better I'll feel! The last thing I want is to find is that someone has a good solution already.
As I was half way through reading "The Origin of Money and Its Value" I was terrified because LvM's thinking was looking dangerously close to my own, but luckily he seemed to take a detour at the last second and failed to solve the problem.
nirgrahamUK: market prices are determined by the marginal pairs.
Perfectly true, but that doesn't solve my original problem on its own.
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