Chapter V: Money (1)

The subject of Money presents few difficulties, or rather none of any depth, to one who has thoroughly mastered the subject of Value. To all others the difficulties are insuperable. Essay after essay and volume after volume has been written in this country upon Money, by men who would have become good economists and good monetaries, if they had only begun their inquiries at the right place and followed them in the right direction. As we saw in the last chapter that it is impossible for anybody to understand the subject of Credit without first comprehending the matter of Value, so we shall see in this chapter that in the order of Nature Value precedes Money, and that the latter can only be learned in the light of the former. The logical reason for this in general is, that Money itself is always a Valuable, and comes to its function as money only through a comparison of itself with other Valuables.

The thin difficulties that confront the student of Money, who has reached the topic along the proper highway cast up for economical inquiries, arise apparently from two sources; and we will begin our present discussion by first looking at these in their order.

In the first place, Money is the only Valuable that may belong to two out of the three possible categories into which Valuables may be scientifically thrown. All Valuables are either Commodities, or Services, or Credits. These categories never change places. Once a Commodity always a commodity, so long as value can be predicate of it; a personal Service can never take on any other valuable form; and a Credit is ever a credit, and nothing else, until it is annihilated by Fulfilment. Now Money is the only Valuable that ever appears in two of these forms. The same Dollar indeed cannot be both a Commodity and a Credit; but some Dollars are a Commodity cut out from gold and silver, and some other Dollars (so-called) are a Credit issued by Government or parties responsible to government; while Money as a general term properly enough covers both kinds of Dollars, the Commodity-Dollar and the Credit-Dollar. In other words, Money is of two kinds, and only two kinds, either a Piece of valuable metal stamped as to weight and fineness by the image and inscription of Cæsar,--a Commodity; or a Promise to pay to somebody some of these pieces,--a Credit. This unique peculiarity of Money, by which, always a Valuable, it may appear and does appear in two out of three possible predicaments of Valuables, makes a little difficulty at the outset of its discussion, and requires continued care in formulating its scientific propositions.

In the second place, a more considerable difficulty, and yet a slight one still, is found in the fact that the choices and the legislations of men have more to do in shaping the propositions of Money than in most other economical propositions. It is true, that Nature and men coöperate in the determination of every case of Value whatsoever; while there is a difference in the cases, though perhaps not a distinction, in respect to the fixedness and universality of the natural laws involved, in contrariety to the purely human impulses concerned. The Providential elements in Economics, both the social and the physical, are of course relatively fixed and unchangeable, otherwise Science could not grapple with and classify them; and so also are those principles of Human Nature related to exchanges, which may be said to be _universal_ in their character,--such as, for example, the preference to receive a larger rather than a less return-service, and to render a smaller rather than a larger effort; and at the same time there are other principles of human nature related to exchanges much more _variable_ in their character than these, such, for instance, as the nation's choice of the kind of Money it will use, or the kind of Taxation it will impose. It certainly follows from this, that some Economical laws must be more _general_ than others, owing to a less variation in the human impulses concerned in them: it follows, for example, that the law of landed rents, or the law of the approach of the price of raw materials to that of the finished products, is more universal in its terms of generalization than most of the propositions of Money and Taxation can be.

It seems like a paradox, that those parts of Economics in which the human elements of variable choice may predominate over the relatively fixed laws of nature and of mind, should be just the parts hardest for men to catch clearly and hold firmly; because, we naturally think, that difficulty and mystery are rather to be found in those departments in which an Infinite Mind has been at work upon an infinite plan, and that there is no such profundity in the works of men; but after all, even those natural laws like Gravitation, which are clear and universal as laws, if they be such as the devices of men have to do with, such as may be modified and in a certain sense controlled by human actions, become from that very circumstance liable to some difficulty and perhaps to some mystery. Now all the truths of Money, and as we shall see in the final chapter all the truths of Taxation also, belong to this class of less general generalizations; still, it is scarcely less than foolish to say, that Money is such an elusive and ideal agent that nobody can understand it. That is the language of indolence and lack of penetration. Money is wholly a matter of man's device, though it comes into constant contact with something greater and more fixed than itself; it was invented, just as any other instrument is invented, to accomplish a certain economical purpose; and it would be strange indeed if men by taking pains could not perfectly comprehend what men themselves have wholly devised. We hope, accordingly, in the following paragraphs to clear up completely to all intelligent readers the whole doctrine of Money. The key to unlock all the superficial difficulties (and there are no others) is this: Money is always a Valuable before it becomes money, and continues a valuable independently of the fact that it _is_ money; and, it is always one or other of two kinds, either itself a Commodity or a Promise to pay a commodity. In this chapter, we will not begin with definitions and justify them afterwards, but will come up to them step by step, and, as it were, justify them beforehand.

1. Economical Exchanges may begin, be profitable to both parties, and go forward to a certain extent, without the use of any money at all. As a matter of fact and probably for a long time, while the Civilizations were gathering their inchoate forces for a further progress, men exchanged one Service directly for another without the intervention of any medium. This form of trade is called Barter. King Hiram of Tyre furnished to King Solomon of Judea a certain quantity of cedars from Mt. Lebanon for the building of the new Temple at Jerusalem, and Solomon in return furnished to the Tyrians a certain quantity of wheat and oil, Judea being a fertile agricultural country with no forests, and Tyre a wooded country with no farms. This may well serve us as an instance of Barter, although Money had been in current use in those regions a thousand years before, as is seen in the purchase by Abraham of the cave and field of Machpelah, for which he weighed out "_four hundred shekels of silver, current money with the merchants_."

It is obvious, however, that while Barter is a good deal better than no exchanges at all, there are inherent and immense difficulties in that form of trade.

(a) Under Barter trade is extremely limited in its _personnel_. Only those parties can engage in it, each of whom is in position to render to the other just such a Service as the other is in direct and immediate need of, and each of whom also wants another Service in kind and quantity exactly what the second man has to render. It is not enough under these conditions, that a man should have some Service to sell, but he must also find some other man, who not only wants that specific service but who also has some service to render in return just such as the first man wants. If A has wheat which he wishes to exchange for a coat, he must first find a party desiring wheat and also having a coat to sell, and moreover who wants just as much wheat as will pay for a coat, no more and no less; if he wants more, he may have nothing to render for the excess which A is willing to accept; if less, A may have nothing besides wheat with which to help pay for the coat. Even in the simpler states of Society the inconveniences of thus hunting up a specific market for each specific service are very great, and in more advanced states of civilization would become intolerable, if it were possible (as it is not) for Society to become advanced under such conditions.

(b) Barter presents insuperable obstacles to trade in point of _place_. While men still exchanged in kind, as it is called, and knew no other mode, the purchasing-power of any Service was necessarily confined to that locality, and would not be parted with except in view of a return service actually there present in the same place. There could be no commercial contact without a local contact. The ultimate parties to every exchange must come together face to face. There could be no middle-men or distributors. The market was circumscribed to the hamlet.

(c) Buying and selling under the scheme of Barter is also wretchedly limited in point of _time_. The fruit-dealer, for example, must dispose of his product quickly, or it perishes on his hands. So of many other commodities. If they are to be sold at all, they must be sold quick. The ultimate buyer must be on hand in time. As the result of these three concomitants of Barter, ten thousand things that are now bought and sold to profit never came to a market or thought of a market, exchanges were so limited in time and place and variety, human associations were so hampered, and the development of all peculiar talents so impeded, that one of the initial steps in the progress of all Civilization has been to hit upon some expedient to lessen these intrinsic difficulties, and so to facilitate Exchanges.

2. The Invention of Money was nothing in the world but the tentative selection by certain people in a certain locality of some Commodity then and there _valuable_, that is, capable of buying _some_ things then and there, and gradually giving to that commodity by general consent the capacity of buying _all_ things then and there salable. The commodity thus slowly becoming money, whatever it was, had and must have had a _limited_ purchasing-power to start with, because no instance to the contrary has ever been shown, and still more because that peculiar comparison between _two_ things that lies at the bottom in each single case of Value is exactly the same kind of comparison that holds between money and the _many_ things which money purchases; given a _valuable_ in common use as a starting-point, and the transition is easy and natural to a _generalized_ valuable, that is, to a recognized money; the relation of mutual purchase between the commodity and _some_ other things was a common fact to begin with, the making it money was merely the common consent that thereafter it should have a general purchasing-power within the circuit; so that as a simple result, whenever anybody had anything to exchange, he might first exchange it for this selected product, which was valuable before but is now generally valuable, and then with this money-product in hand he could buy whatever he might want at any time or place within the circuit.

It is impossible from the very nature of Value, impossible from that comparison of two distinct Services, that precedes every Exchange, as well under Money as under Barter, that anything except a valuable anterior to and independent of its becoming money, could ever have become money at all. Money makes no alteration in any law of Value, but only substitutes for convenience' sake in every transaction in which it plays a part, a general for a specific purchasing-power; a book, for example, has a specific purchasing-power, since there is somebody who wants it, and is willing to give a sum of money for it; and the owner of the book by the sale of it parts with a product which has only the power to purchase something from a few persons, and receives a product in return which has the power to purchase something from all persons; it is not true to say that the money is worth more than the book, because they are just worth each other, as is demonstrated by the sale; but it _is_ true to say that the seller of the book has substituted in the place of a limited purchasing-power, of which he was proprietor, a general purchasing-power, of which he has now become proprietor; that is, that the command of the money, which has no larger value than the book had, does carry along with it a superior command over purchasable articles generally. In one word, Value in the form of money is in a more available shape for general buying and selling than value in any other form. This is the exact and ultimate expression for all the truth there is in the common vague remark, namely, that Money is something different from all other Valuables; it _is_ different from them in just one respect, namely, while they have the power of buying some things from some persons, it has the power derived from the _consensus_ of Society to buy all sorts of things from all sorts of persons.

This simple change or substitution, which seems in itself so little and easy and natural, has changed in its ever-enlarging results the face of the world! It makes the valuable now selected to be money seem to the minds of men to be a very different thing from what it was before, although the change in itself is slight indeed. It removes most of the inconveniences of Barter as by a stroke of the hand. So soon as a commodity selected to become money by one people comes to be acceptable as such to all other peoples, as is the case with gold, the advantages of its use are vastly multiplied to all. Experience has shown many times over, and reflection will explain to any one, how that there is no other machine that has economized labor like money; no other instrument that plays so deep and broad a part in Production; no invention whatever, unless it be the invention of letters, which has contributed more to the civilization of mankind. Money makes vast distances relatively indifferent; for it is sufficient to constitute a market for any valuable that it is practically wanted anywhere on the round globe, the middle-man paying the seller for it in money transports it thither, and receives back his investment with a profit from the ultimate buyer. So, also, money generalizes any purchasing-power in point of time. The dealer, exchanging his perishable products for money, may keep its power of purchase locked in this form as long as he lists, putting an interval at his own pleasure between selling and buying, and with this generalized power in his pocket he may buy when he will and what he will and where he will. Money, too, makes any purchasing-power portable, divisible, and loanable. A man may carry the value of his farm in his purse, and may divide it up for a thousand different purchases, and especially is able to loan it in this form in order to receive it back again with interest at a future day.

3. It is important to notice in the next place, that, whatever made the commodity selected as money originally desirable and valuable, it has now become desirable and valuable for other and wider reasons. The tobacco of Virginia, for example, in the early days of that Colony, became valuable at first on account of the demand for it as a narcotic both there and in England; but as soon as it was made a legal money in the Colony by the general consent already described, its value depended in part upon another set of causes. Of course Demand and Supply still controlled its value just as before, only certain parties who had not desired it before as a mere _commodity_ thereafter desired it as a current _money_. Its convenience and necessity as money widened the circle of those parties willing to receive it and glad to render a return for it. It is true, that many now received it only because they could pay it out again to buy something else with; but that made no difference so far as Value is concerned; it was valuable before under a certain limited demand, and continued valuable under an additional and broader demand; we cannot certainly say, that it became _more_ valuable under this new and wider demand, because we do not know how the then combined demand affected the Supply. We may probably say, that the value became _steadier_ if not _larger_, under the double demand than under the previous single one; and the vital point to mark and remember is, that the _value of money_, previously valuable as a commodity only, is still maintained under the law of Demand and Supply, just as all other values are, the only peculiarity being this, namely, as a generalized valuable and consequently a potent social agent money is in demand by everybody who has anything else to sell.

It follows from this in necessary sequence, that Money as such, whatever may have been the ground of its original value as a commodity, _is always received as money in order to be parted with_. It is not bought for its own sake to be used and enjoyed, as most other things are, but is only bought to be sold again. Men will sell everything to buy it, with the sole intent to sell it again to buy something else; and the odd thing about it is, that everybody buys it to sell again, not at all as the speculator buys grain to sell it again at a higher price by the bushel or centner, but, the money remaining constant in their minds, they sell for it something they care less about in order to buy with it something they care more about. Money, therefore, becomes a _medium_ in men's exchanges. The word "medium" in this proposition is to be taken in its etymological and strict sense, as something that comes between two extremes and serves also to relate them to each other. This is not the ultimate characteristic of Money, as we shall see, nor can a final definition be founded here, but it is a good step towards ultimates to see that money is exchanged for other things as a means and not as an end, that it is a great help in exchanging all other valuables but is never exchanged for itself in an ultimate transaction.

Small boys, indeed, sometimes swop cents; but men, the miser excepted, who is under a deplorable fallacy of the senses, use and estimate money mainly as the _medium_ that facilitates the real exchanges of Society. What is actually and ultimately exchanged is the wheat, the cloth, the lumber, the furniture, the commercial service of every kind, and Money is but the instrument making those exchanges easy, which might perhaps go on in part without it, though with difficulty and loss. In short, money is somewhat like a railroad ticket. Transportation to a given place is what is really bought when one pays for a railroad ticket. The proof of the purchase is the bit of paper exhibited. That comes in as a _medium_ between the traveller and the railroad company; and while it facilitates the real exchange, it also partly disguises it. This comparison holds good in the main feature, but in two respects the resemblance fails: Money is not a specific ticket for a single purpose, as the pasteboard is, but is a general ticket (so far as it goes), for all purposes of purchase; and secondly, Money really stands as a value in its own right (so far as any single thing can so stand) at the same time it is serving as a _medium_, while the railroad ticket does not. Still, we are all desirous to get money, not for the sake of the money itself, but for the sake of those things which the money will buy. We part with money freely and constantly for those things which we care more about. What we exactly care for is what our money will buy, is the conscious command over all services and commodities which the possession of money insures to us. If we could give our own commodity or service or claim, whatever it may be, and receive directly in return the claim or commodity or service which we want, whatever that might be, there would be no need of money at all; but this is always inconvenient, and generally impossible; and, therefore, we introduce a middle term, and money is found to be a good mean to help exchange the two extremes.

4. We are now getting on towards a just conception and a true definition of Money, though two or three more points must still be noted as preparatory to that consummation. As a result of the fact already reached, that money serves as a _medium_ in men's exchanges, it follows of course that the power of money as such a medium is multiplied by what has been called _rapidity of circulation_, that is, a brisker use of the volume already in circulation will reach the same end as the increase of its volume. As in mechanics, so in money, the whole power is the product of mass and velocity. Money also is like any other tool, the more constant its use the more profitable its agency. The quick movement of a small mass, accordingly, is better than the torpid movement of a large mass, both in what it saves of expense, and in what it presupposes of the general conditions of exchange. The value of the money-volume of any country is a small fraction of the aggregate value of those products which the money helps directly to exchange; and a very small fraction indeed of the aggregate value of all the products which it helps indirectly to exchange through Credit by means of its _denominations_. We shall see better a little farther on, that Money works not only as a medium direct, itself exchanged against other Services, but also as furnishing those denominations of Value, like the _dollar_, which are always used in bargaining; and also used in all cases of Credit, in which settlement is not made by money but by offsetting one piece of indebtedness against another, and these denominations can arise only from the use of money as a direct medium. Therefore, we may say that the hub and the spokes and the rim of the wheel of exchange consist of personal services and commercial credits and all material commodities except money, while, to borrow the famous comparison of Hume, "Money is but the grease which makes the wheel turn easier." It would be a vast mistake to suppose, as some of the ancients did, that the grease is really the wheel.

While Money thus facilitates the revolution of the wheel of Exchange, it follows too from its nature as a medium, that the dimensions of the wheel as a whole are vastly greater than they would have been but for the Money. Money indeed helped to exchange the products that already existed and were coming into existence at its first invention, but by far the largest part of products since have come into existence largely through the agency of Money. We get quite too low a view of the functions of this potent agent, if we think of it merely as an aid in circulating products, that would have existed whether or no; some products would certainly have existed whether or no, and money would surely be of great use and convenience in helping bring these to the ultimate consumers; but this is a partial and wholly inadequate view of the function of Money as a medium of exchange. The fact that such a medium is in universal circulation, and that the present holders of it are ready to exchange it against any sort of Services adapted to gratify their desires, exercises a kind of creative power, and brings a thousand products to the market which would otherwise never have come into existence. Since money will buy anything, men are on the alert to bring forward something which will buy money; and since Money is divisible into small pieces, an incredible number and variety of small services are brought forward to be exchanged against these pieces, for example, into railroad cars and fares of all sorts, which services we have no reason to suppose would ever be brought forward at all were it not for the strong attraction of the money.

5. From this last point of view we may gain another closely connected with it, namely, that Money must be a very important part of the _Capital_ of the world. We have already thoroughly learned that Capital is any product outside of man himself from whose use springs a pecuniary increase. Now any one may see that the monetary medium of any country is the most active and the most essential and the most profitable of all those instruments reserved in aid of further production. The axe, the plough, the spindle, the loom, the wheel, the engine, are all instruments, are all Capital, and they each aid respectively some part or parts of the processes of Production; but Money is a form of Capital which stimulates and facilitates all the processes of Production without exception. Just as we have seen that Money is a form of Value generalized, so is it also a form of generalized Capital, that is to say, it is an instrument capable of aiding all processes of Production in every department, while every other capitalized instrument is capable of aiding but few processes in one department. Without Money, for instance, there could be no thorough Division of Labor, because there would be no adequate means of estimating or rewarding each one's share in a complicated process. By means of Money all services small or great contributing towards a common product are neatly measured, and may be paid for by some one, who thereby becomes proprietor of the whole product; or, if the contributors choose, they may wait till the product itself is sold, and then the money received is divisible without loss to each contributor, according to the service rendered. Thus the influence of Money as Capital pervades the whole field of Exchange from centre to circumference, facilitating every transfer and stimulating new transfers.

Now then, if Money be, as it is, a peculiar kind of Capital, since it is a Medium in all Exchanges, the question becomes pertinent, How much of it is wanted? Clearly, only _so much_ as will serve the _purposes_ which such a medium is fitted to subserve; there should be enough fairly to mediate between the Services actually ready to be exchanged then and there, and also enough fairly to call out other Services proper and profitable in the then circumstances of Society, and whose only obstacle to a profitable exchange then and there _is a lack of a facilitating medium_. All increase of the volume of money beyond this point, which the very nature of Money itself marks out as the boundary, leads to a diminution of Value of every part of it, to a consequent disturbance of all existing monetary contracts, to a universal rise of prices which are illusory and gainless, to unsteadiness and derangement in all legitimate business, and to a spirit of restless enterprise and speculation which seeks to draw off the excess of money in untried and reckless experiments. The only real subjects of Exchange are mutual efforts, mutual services, as these are expressed in Commodities and Services and Credits, and money is the instrument merely that comes in between the real exchanges to facilitate them; and, therefore, it seems to be perfectly conclusive on this point to remark that the quantity of money needed in any country or the whole world is limited by the number of the services ready to be exchanged, to make easy the exchange of which is the good purpose and sole end of Money.

The physical and mental powers of man, which alone can give birth to commercial services, when considered as they must be in this connection as belonging to a given number of men at a given time and place, are strictly limited of course; and although the presence of money then and there is both a stimulus and an aid to all these men to bring forward services of all sorts to the market, there are obvious restrictions both in their powers and in their circumstances; and the quantity of money needed among them is just that quantity which will fairly act as a medium in exchanging the services which they are able and willing to render to each other. All increase in the quantity of money beyond that point would have, and could have, the only effect of increasing the nominal Prices of Services, without making the services themselves any greater in number or better in quality.

It is with Money exactly as it is with any other form of Capital, allowance being made for the fact that Money is a kind of generalized capital. To illustrate, How many ships does a commercial nation need to employ? As many as will fairly take off its exports and bring in its imports. Ships are wanted for one definite purpose; and when enough are secured to answer that purpose, all additions will lessen the Value, that is, the purchasing-power, of ships generally. So of all instruments whatever. Enough is as good as a feast. Enough is better than more. In regard to every form of Capital, and consequently in regard to Money as such, the point of sufficiency is determined by the quantity of work to be done. And as no law of Congress is required to determine how many ships are best to do the transportation for the people of the United States, so no legislation is needed to fix the amount of Money that is best for the same people, or for any people. As the people find out for themselves how many steam-engines they want to do their work of the year, so they find out without any aid from their legislators how much money they want to make their exchanges of the year. The less Law and the more Liberty on all such points the better for all concerned.

Let the reader notice in passing, as a corollary from what has just been shown, that when forms of Credit like bank cheques come into growing use to make payments with and settle balances, they displace to a large extent commodity-moneys, like gold and silver, which would otherwise have to be employed. Speculations, and even scientific discussions, over the needful amounts of gold and silver for money in the United States, have usually overlooked this essential consideration of displacement; and one result of this has doubtless been too large a coinage of the precious metals, to the hazard of their stable value, and especially to the hazard of the permanent maintenance of the gold standard. Men forget in their zeal for Money that it is nothing but a Tool, and that the multiplication of tools beyond the amount of work to be done by means of them always makes the tools a drug; and they are apt to forget also that the cheaper and more convenient substitutes for metallic moneys, namely, forms of Credit, are all the time and more and more taking the place of the older moneys, which, nevertheless, must still be kept at the foundation, though a lessened quantity of them be needful for circulation.

6. We must now carefully sink our analysis one grade deeper, in order to reach the bottom characteristic of Money, and so to formulate an ultimate definition of it.

The only quality common to all valuable things is the fact that they are all _salable_; and if these various and multitudinous valuables are ever to be made in any way commensurable with each other, it must be by means of one of their number assumed as a _standard of comparison_ with the rest. Comparisons can only turn on points of _likeness._ The single respect in which all valuables whatsoever resemble each other is their common possession of purchasing-power, be it more or less. Therefore, as a yardstick, itself possessed of length, _and because it is possessed of length_, if assumed as a standard of comparison with other objects that have length, may be used to measure all such objects whatsoever, and may accurately express in units or fractions of itself the simple length of anything and everything; so, any valuable may be selected as a _standard_ with which to compare all other valuables, and by means of the terms of which to express numerically the reciprocal relations between all valuables whatsoever. This is just what is done whenever any valuable is selected as Money; and this is the exact and single purpose of such selection.

What is the precise change, then, in the valuable chosen as Money when it becomes money? This: it was a valuable before, else it could not by any possibility serve the present purpose, but now it has become a _standard_ valuable, with which other valuable things may be compared in the single point of their _value_. Valuables are now commensurable. That is all. But that is a great deal. As we have already learned to the nail, Valuables are all Services; and now some one Service has been selected from the rest, capable in its very nature of _measuring_ all the rest, and so capable of becoming immensely _useful_ to mankind.

What, accordingly, is the bottom characteristic of Money? And where shall we find the terms for an immutable definition of it? _The core of Money is this quality of being a Measure of Services, taken on in addition to the usual and universal qualities constituting anything a Valuable._ This additional quality arises under the choices and action of men, just as the ordinary qualities constituting anything a valuable arise under the choices and action of men. But it is an _additional_ quality, distinctly conferred, and vastly important. The valuable chosen as Money was a Service to start with, was constantly rendered as such then and there, and was consequently fitted by qualities already possessed to assume a further and a _unique_ quality, namely, the capacity to measure and express relatively to itself all other valuable Services whatever.

As each and every Valuable is the outcome of a _comparison_ instituted by two persons as between two things, as is thoroughly unfolded in the first Chapter, it is not at all strange, rather it is natural and inevitable, that there should arise in connection with Valuables as a whole class some such further _comparative_ measure, as Money is now shown to be; because, without some such common measure of Services in general, itself a Service of the same kind, it would be inconvenient, not to say impossible, to carry on any considerable traffic anywhere. For instance: a baker has only loaves of bread, and wishes to buy a hat, a horse, a house. How many loaves shall he give for each? Unless there be some common Service, in the terms of which these differing Valuables can be expressed, and by means of which they can be brought into commercial relations with each other, it would be an awkward piece of business to effect even the _three_ exchanges; and every time the baker wished to buy another article, there must be a rude and slow calculation from independent data, in order to decide upon the terms of the exchange. Let now some Common Service be introduced, in the terms of which each of these values can express itself independently, and the difficulty disappears in an instant. "My loaves are worth ten cents each," says the baker. "My hat is worth ten dollars," says the hatter. Their saying so does not indeed _make_ it so; that matter is a preliminary; but each has come to that approximate conclusion by a relatively easy comparison of two Services, his own and another common one; and if the loaves will duly bring ten cents and the hat ten dollars, the terms of their own exchange are one hundred for one, and there is no need of parleying. So of the rest; so of everything that is ever bought and sold. Money becomes by common consent a Measure of them; because it measures them, it makes the interchange of them a very facile matter; because it measures them, it easily becomes a medium between them; and, accordingly, because the money rendered is itself a Service, it is a natural and universal measure of all other Services.

MONEY IS A CURRENT AND LEGAL MEASURE OF SERVICES. With this final definition of "Money" the writer is more than willing to take all the risks. It was new when propounded many years ago in one of the editions of his earlier book. All subsequent testings of it in form and substance have but confirmed the original confidence in it. The word "legal" in this definition is not always to be pressed to its utmost signification, but denotes anything sanctioned by law or usage _equivalent to law_. The other words are to be taken in their full and technical meaning. It is believed that, while this definition is short and simple, it just covers the whole ground and no more. It is not enough that a certain valuable be "legal" as Money; it must also be "current" in order to be a true money. In the United States between 1862 and 1879, to take an example, gold coins, though legal tender all the time for all debts public and private, were not "current" in the full sense of that term, and hence were _not_ the Money of the country. Till the last-mentioned date, the gold dollar of 25-4/5 grains standard fine was required by law to pay customs-taxes with and the interest on the public debt, and was used to a small extent in a few branches of private business, and was not otherwise in the hands of the people. These dollars, accordingly, were not strictly money, but bore a premium over the "current" money of the country. To be Money, then, a Valuable must be recognized as money by law or custom as strong as law, and also circulate among all classes of the people as a medium in their exchanges.

But we are bound to observe that Money becomes a _medium_ in men's exchanges, because it first became a _measure_ in their Services. Some economists think that these two functions are separate, and are of equal rank; but it is easy to see that one only is original, and that the other is derived from that. Even Aristotle perceived that Money is a Measure, inasmuch as he defined property "_anything that can be measured by money_." We may be pretty sure, in opposition to Professor Jevons, in his Money and the Mechanism of Exchange at page 13, who thinks there are _four_ characteristics of Money, that Money as such has but _one_ primary characteristic difference from other forms of Value, namely, this _measure_-quality, this _standard_-quality, this publicly recognized function as a _common measure_ to which all other valuables are constantly referred. This additional attribute put upon a money-valuable by law or custom is not what _makes_ it valuable, since an ounce of uncoined gold standard fine is worth within a very small fraction as much as an ounce of gold coins, but it makes the money a far more convenient instrument to purchase with, inasmuch as money, having now the attribute of making all other valuables easily commensurable with itself, becomes at once something which everybody is ready to receive, because everybody knows in general what its power will be to purchase all other things. In other words, Money becomes a _medium_ in exchanges just because it has already become a _measure_ of Services in general; and there are not consequently two prime functions of Money, still less four, but only one. This view seems to simplify the whole subject of Money very much; and we may be sure that it will be found to be scientifically correct, and that we shall find many means of testing its accuracy as we go on.

To maintain, as we do, that "Money is a measure of Services," is much better than to say, in connection with many economists, that "Money is a Measure of Value." That phrase is objectionable because Value is always relative to two Services exchanged for each other; and to say that money is a measure of that _relation_ is neither so simple nor so ultimate as to say that it is a measure of each of the Services entering _into_ that relation. The Services may be conceived of and spoken of separate from the Value into which they merge, although they come into existence solely for the sake of that resultant Value, and it is more exact and final to propound that Money, itself a Service, is a measure of all other Services considered as constituent elements of the Values into which they fall. We are not without strong hopes, accordingly, that competent economists will concede, that here is a radical improvement in the nomenclature of our Science.

In the place of our expression and definition, and the foregoing explanation consequent upon its use, President Walker in his Money, pages 280 _et seq._, prefers the mathematical and excellent phrase, "_the common denominator in exchange_"; Professor Bonamy Price, in his Practical Political Economy, page 363, shows his fondness for the formula (and it is a good one), "_the tool of exchange_"; and Henry Dunning Macleod, in his Elements of Banking, page 17, insists with much less reason, that "_Money is the representative of Debt_." He says: "The quantity of money in any country represents the amount of Debt which there would be if there was no money; and consequently when there is no debt there can be no money." The unfortunate use by some countries of a paper money, which is indeed a form of debt, gives some plausibility to the notion that Money is a representative of Debt; and perhaps the fact that Money is often used to pay debts previously contracted, and that debts are almost always contracted in the terms of Money, may give some additional plausibility to this view; but as Macleod himself goes on to say that "no substance possesses so many advantages as a metal for money," and that "all civilized nations therefore have agreed to adopt a metal as money, and of metals, gold, silver, and copper have been chiefly used," we do not see how he can logically hold that a gold dollar, or a gold sovereign, whose value is as substantive and independent as that of any Valuable in the world can be, becomes through coinage and circulation "a representative of Debt." Instead of saying as he does, "where there is no debt there can be no money," it may be confidently asserted on the other hand, where all transactions are settled at once in solid money there can be no debt.

7. Having thus looked into the nature of Money, and seen what is its one essential characteristic, and its one obvious and universal function as the result of that, it will help us now in our further discussion, to examine some of the material commodities that have served as Money at different times and places.

_Cattle_ appear to have been the earliest money of which there remains any record. Homer, near the middle of the sixth book of the Iliad, indicates in the following lines that oxen were an incipient money in the Heroic age:--

"Then did the son of Saturn take away
The judging mind of Glaucus, when he gave
His arms of gold away for arms of brass
Worn by Tydides Diomed,--the worth
Of fivescore oxen for the worth of nine."

We cannot certainly infer, when it is said in Genesis that "Abraham departed out of Egypt very rich in _cattle_ and silver and gold," that any of these were anything more than articles of valuable merchandise; but on the other hand it is certain from the Latin name of Money, _Pecunia_, which is derived from the root _pecus_, which means "_cattle_," that Cattle were the Money of the early Romans; and Pliny writes expressly that King Servius Tullius stamped the first bronze money of Rome with the _image of cattle_, undoubtedly indicating by that some equivalence in current value between the two. At any rate cattle have been used as Money among pastoral peoples very widely in place and in time, and are still so used in various parts of Africa.

In the region of the Euphrates and Tigris the precious metals became money in very remote antiquity; for the art of coining, and all other arts, came thence westward to the Greek cities of Asia Minor, and to Greece itself, and we learn that Pheidon, King of Argos, coined silver money on a scale derived from the East in 869 B.C.; and a better proof still is the fact that burnt clay tablets are found in the Royal Library at Nineveh, discovered by Layard, which are really credit-money, notes issued by the Government, and made redeemable in gold and silver money on presentation at the king's treasury. Tablets of this character are extant bearing date as early as 625 B.C. But the gold and silver money must have been circulating a long time in their own right as valuables, before such a credit-money, such a promise-money, as those tablets are, could have originated in connection with them. Abraham, who himself migrated from "Ur of the Chaldees" about 2000 years B.C., not long after reaching the Mediterranean, "weighed unto Ephron the silver which he had named in the audience of the sons of Heth, four hundred shekels of silver, current money with the merchant." This is expressly said to be "money" and "current money." Perhaps it was coined money. At any rate, it was cut and piece money. It was indeed weighed out, and not counted out. This is still the more accurate and speedy manner, when the facilities for the weighing are present. The Bank of England at this day weighs, and not counts, the coins received and paid out. The Romans first coined silver money in 269 B.C., and gold money in 207 B.C., and gold coins were stamped in Greece about the time of Alexander the Great, say 333 B.C.

Other metals than those called precious were also early used as money. Long before Pheidon's silver coinage in Greece, _copper skewers_ were used as money in that country, of which six made up a _drachm_, which was afterwards both a coin and a unit of weight, the coin being worth about 17 cents of our money, and the weight being about 66 grains avoirdupois. The word drachm is derived from ~dragma~, _a handful_; and the sixth part of it, called an _obol_, from the Greek word meaning a _spit_, became also both a coin and a weight, all which makes it evident that these were used in connection with roasting meat, and that one skewer or obol was originally a unit both of value and of weight. In Adam Smith's day, in certain districts in Scotland, _nails_ were still used as small money, which is a forcible reminder of these old Greek skewers. Iron became money in Sparta; money of lead was known to the ancients, and is still current in the Burman empire; the earliest Roman coins were of copper, which were cast rather than stamped, for no die would have sufficed for pieces so large and heavy, and the _denarius_ was the unit divided into ten _asses_, the _denarius_ being nearly the equivalent of the Greek _drachma_ whether of copper or silver, because the Romans reckoned from the first the ratio of copper to silver as 250:1; bronze is a mixture of copper and tin, and brass of copper and zinc, and copper coins with both these admixtures--used for the purpose of hardening the copper, it being a general law of metals that a mixture of two is harder than either--have been very common in ancient and modern times; Sicilian, Roman, and old British coins of tin alone are known to have been struck; and Herodotus makes the statement that the Lydians of Asia Minor were the first to make a coinage of _electrum_, which, as some claim, was a mixture of gold and silver, and of which ancient specimens are still existing.

Cowry _shells_ are still used in the East Indies, and also in Africa in the place of small coins, and have sometimes been imported into England from India to be exported in trade to the coast of Africa, being reckoned in Bengal at about 3200 to a silver rupee, which is about 46 of our cents. The New England Indians also used beads or shells of periwinkles (white) and of clams (black), of which 360 made up a belt of _wampum_, as they called it, the black being counted worth twice as much as the white; and the English colonists accepted the wampum in their exchanges with the Indians, regarding a string of white as equal to five shillings, and a string of black to ten shillings, and afterwards made it legal tender among themselves for small sums, and even counterfeited it. Cakes of _tea_ have passed as money in India, and elsewhere; and it is said, that at the great annual fair at Novgorod, in Russia, the price of tea has first to be determined before the prices of other things can be settled upon, since that is a kind of standard of Values in that great mart. _Salt_ has been current money in Abyssinia; _cod-fish_ in Ireland and Newfoundland; and _beaver-skins_ in New Netherlands, New England, and the western parts of America.