Re: elasticity of production

[Basil Moore <bjm@xxxxxxxxxxxxxxxx>]

David

Money is not a commodity like other commodities. It is a social convention,
like a language. It is not produced using labor and capital by some
technologically determined physical production function. There is no
production function relationship for money.

Having said that, it is of course true that banks employ labor and capital
in the process of money creation. But the amount of money "produced" or
better "supplied" is not a function of the quantity of labor and capital
(means of production) employed.  The quantity of credit money supplied
depends on the quantity of bank credit demanded, by borrowers who are
judged by banks to be "credit-worthy", so long as banks are price-setters
and quantity-takers in lending markets.

I don't believe we have a disagreement?

Basil



At 09:10 AM 3/8/01 -0300, you wrote:
> In response to Kazuhiro:
>
>
> It is true that the argument of the elasticity of production appears in The
> General Theory in the middle of Keynes's discussion of the own-rates of
> interest. For the own-rate discussion, a variation in the quantity of an
> asset is important, especially since Keynes related the returns on an asset
> to its scarcity. However, I argued in my previous post that the elasticity
> of production is defined by Keynes (in chapter 17 of the GT)  in terms of a
> variation in the quantity of labour employed. Given this definition, the
> distinction between endogenous and exogenous
> money is not important for the discussion of the elasticity of production.
>
> In my view, if we want to think about how endogenous money relates to the
> elasticity of production, two questions must be distinguished:
> (1) can (a lot more of) labour be employed to produce (a larger quantity of)
> money?
> (2) can the supply of money increase?
>
>
> Cheers,
> David Dequech