The Value of Money, by Prabhat Patnaik. New York: Columbia University Press, 2009.

Abstract

Why does an otherwise worthless bit of paper—money—have a finite and positive value? The author of The Value of Money asserts that understanding capitalism's logic and prolonged existence lies in answering this question. While accepting the superiority of the traditional Marxist/Keynesian argument (namely, that money's value is exogenously determined in any given period) over the mainstream framework, this argument nevertheless fails to identify what ensures money's stability across periods. The real value of money across periods is determined by the rate of inflation, which in turn depends on the class conflict over ex ante shares in total output. Therefore, an isolated capitalist system, as visualized by both Marx and Keynes, cannot have such stability from within unless one of the claimants is a price taker. Only by introducing a semicapitalist periphery as a shock absorber to the capitalist core, both as a price taker and as a market “on tap,” can this stability be ensured.

Key Words:

• Capitalist Dynamics
• Class Conflict
• Monetarism
• Monetary Stability
• Prabhat Patnaik

Notes

1. The argument would not change even if there were an array of n commodities. Then the logic would be that, if the money market were to clear, not all the commodity markets would simultaneously have excess capacity (i.e., there would not be generalized overproduction).

2. It seems that Patnaik is treating the core and the periphery strictly as spatial categories, but it needs to be clarified that he considers the distantly located periphery to be semi-capitalist. So, while the peripheral manufacturing sector is capitalist, its primary goods-producing sector is noncapitalist. The former acts as a market “on tap” and the latter as a price stabilizer for the core. Even for the core one could assume, though Patnaik does not, that there are noncapitalist modes of production coexisting with a dominant capitalist sector. But it would not alter his argument if we were to consider, realistically, that for social stability to be maintained in the core even the noncapitalist sector's ex ante share in the output has to be ensured, in which case, far from stabilizing the system, this periphery from within adds to the instability. Moreover, Patnaik's spatial categorization of core-periphery emanates from his argument that capitalism has historically been, and continues to be, imperialist.