Chapter 8: Money as the Measure of Value and Medium of Exchange

Measures of value and measures of quantity

We now consider money as:

  1. The measure of value, and then
  2. The medium of exchange.

People naturally use a common standard to compare the rest.

Similarly, there were natural measures of quantity, such as fathoms, cubits, inches.

But they found that:

Therefore, wise men tried to fix some more accurate measure, so that equal quantities might be of equal values.

An inch was inconsiderable when their dealings were confined to a few yards.

The remains of this inaccuracy can be found in countries with small dealings.

Generally, metals seemed best to answer this purpose.

In consequence of gold and silver becoming the measure of value, it also came to be the instrument of commerce.

In the age of shepherds, it might not be too inconvenient that cattle should be the medium of exchange.

  • The butcher and shoemaker might at times have no use for each other’s commodities.
  • To remedy this, those materials which were before considered as the measure of value, came also to be the instrument of exchange.
  • Gold and silver had all the advantages.
  • However, gold and silver do not get their whole utility from being the medium of exchange.
  • At first, their balances were not very accurate.
  • To facilitate exchange therefore, they needed some expedient to ascertain the accuracy of weight and fineness.
  • Accordingly, the coins of every country bore the weights corresponding to them.

    Gold could be easily exchanged into silver.

    The measure of quantity has always increased, while the measure of value has decreased.

  • It is the baker and brewer's interest to make the measure of quantity as small as possible.
  • All our measures taken from the Roman foot, fathom, and inch, are now much more.
  • Accordingly, averdupois (avoir du poise), or heavy weight, was settled at 13 ounces.
  • Thus the measure of quantity has been increasing.

  • When the government takes the coinage into its own hands, the expenses naturally fall on it.
  • The government took the task upon themselves.
  • In rude and barbarous periods, the government was laid under many temptations to debase the coin, or, according to the mint language, to raise it.

  • Many operations of this kind have been performed in every country.
  • The inconveniences of such practices are very great.

  • People keep their goods from the market because they do not know what they will get for them.
  • Nobody will lend any sum to the government, or bargain with it because he might be paid with half of it.
  • However, this scheme serves its purpose for a short time.
  • When the coin is debased, a debt of 20 shillings is then paid with 10 shillings.
  • To prevent this loss, the French and all other nations on a like occasion, when they double the money by edict without re-coinage, make the augmentation after the money is called in, and before it goes out, and a reduction is made before next term of payment.
  • A reduction is always worse than an augmentation.
  • If I owe 10 pounds and am obliged to pay 15, common industry must be excessively embarrassed.
  • The coins of most countries are either of copper, silver, or gold.

  • The different coins are regulated by the market price of gold and silver, not by the government's caprice.
  • Guineas have been valued between 20-22 shillings.
  • The gold rises more in proportion in Britain than anywhere else.
  • Silver buys more gold abroad than at home.
  • Some time ago, a proposal was given in to remedy this.