Marx’s Explanation of Money’s Functions: Overturning the Quantity Theory by Martha Campbell by Shaquian Richards

Overview Campbell breaks down Marx’s argument against the quantity theory of money. The concept of the quantity theory of money began in the 16th century. The quantity theory of money states that there is a direct relationship between the quantity of money in an economy and the level of prices of goods and services sold. The equation is : M*V= P*Q Where, M = Money supply V = Velocity of money P = Price level Q= quantity of goods and services produced and sold in the economy (GDP)

Main Points The circulation of money is a reflection of the circulation of commodities Credit money is the money of capitalism The quantity of money is determined by commodity prices Value vs. Price

Thoughts In a capitalist society, the characteristics of money follow from the characteristics of the commodity meaning there is money being circulated in the process of production (labor)  and exchange (purchase of goods). Money is not enough to explain capital that why it is necessary to understand production Values should determine the quantity of money in circulation rather than prices because they fluctuate Price is not transparent. It does not reveal true.

Continued Quantity theorists focus more on prices and Marx and Campbell are showing why value is more important. Marx went against classical economists who were obsessed with measurement and seem to ignore social aspect in Capitalism. He is emphasizing that many of the thing we take for granted (eg. the commodity, money, price) have a social origin and meaning. Money’s function as measure is missing from the quantity theory because it lacks a concept of value and money is not only exclusively a means of circulation I disagree with Marx’s point that money is not the gold of Capitalism. Because to explain production you have to address the purchase of labor.

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