Principles of Economics by Carl Menger
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Table of Contents
CHAPTER
VIII: THE THEORY OF MONEY
1. The
Nature and Origin of Money
IN THE EARLY
STAGES of trade, when economizing individuals are only slowly awakening
to knowledge of the economic gains that can be derived from
exploitation of existing exchange opportunities, their attention is, in
keeping with the simplicity of all cultural beginnings, directed only
to the most obvious of these opportunities. In considering the goods he
will acquire in trade, each man takes account only of their use value
to himself. Hence the exchange transactions that are actually performed
are restricted naturally to situations in which economizing individuals
have goods in their possession that have a smaller use value to
them than goods in the possession of other economizing individuals who
value the same goods in reverse fashion. A has a sword that has a
smaller use value to him than B’s plough, while to B the same plough
has a smaller use value than A’s sword—at the beginning of human trade,
all exchange transactions actually performed are restricted to cases of
this sort.
It is not difficult to see that the number of exchanges actually
performed must be very narrowly limited under these conditions. How
rarely does it happen that a good in the possession of one person has a
smaller use value to him than another good owned by another person who
values these goods in precisely the opposite way at the same time! And
even when this relationship is present, how much rarer still must
situations be in which the two persons actually meet each other! A has
a fishing net that he would like to exchange for a quantity of hemp.
For him to be in a position actually to perform this exchange, it is
not only necessary that there be another economizing individual, B, who
is willing to give a quantity of hemp corresponding to the wishes of A
for the fishing net, but also that the two economizing individuals,
with these specific wishes, meet each other. Suppose that Farmer C has
a horse that he would like to exchange for a number of agricultural
implements and clothes. How unlikely it is that he will find another
person who needs his horse and is, at the same time, both willing and
in a position to give him all the implements and clothes he desires to
have in exchange!
This difficulty would have been insurmountable, and would have
seriously impeded progress in the division of labor, and above all in
the production of goods for future sale, if there had not been, in the
very nature of things, a way out. But there were elements in their
situation that everywhere led men inevitably, without the need for a
special agreement or even government compulsion, to a state of affairs
in which this difficulty was completely overcome.
The direct provision of their requirements is the ultimate purpose of
all the economic endeavors of men. The final end of their
exchange operations is therefore to exchange their commodities for such
goods as have use value to them. The endeavor to attain this final end
has been equally characteristic of all stages of culture and is
entirely correct economically. But economizing individuals, would
obviously be behaving uneconomically if, in all instances in which this
final end cannot be reached immediately and directly, they were
to forsake approaching it altogether.
Assume that a smith of the Homeric age has fashioned two suits of
copper armor and wants to exchange them for copper, fuel, and food. He
goes to market and offers his products for these goods. He would
doubtless be very pleased if he were to encounter persons there who
wish to purchase his armor and who, at the same time, have for sale all
the raw materials and foods that he needs. But it must obviously be
considered a particularly happy accident if, among the small number of
persons who at any time wish to purchase a good so difficult to sell as
his armor, he should find any who are offering precisely the goods that
he needs. He would therefore make the marketing of his commodities
either totally impossible, or possible only with the expenditure of a
great deal of time, if he were to behave so uneconomically as to wish
to take in exchange for his commodities only goods that have use value
to himself and not also other goods which, although they would have
commodity-character to him, nevertheless have greater marketability
than his own commodity. Possession of these commodities would
considerably facilitate his search for persons who have just the goods
he needs. In the times of which I am speaking, cattle were, as we shall
see below, the most saleable of all commodities. Even if the armorer is
already sufficiently provided with cattle for his direct requirements,
he would be acting very uneconomically if he did not give his armor for
a number of additional cattle. By so doing, he is of course not
exchanging his commodities for consumption goods (in the narrow sense
in which this term is opposed to “commodities”) but only for goods that
also have commodity-character to him. But for his less saleable
commodities he is obtaining others of greater marketability. Possession
of these more saleable goods clearly multiplies his chances of finding
persons on the market who will offer to sell him the goods that he
needs. If our armorer correctly recognizes his individual interest,
therefore, he will be led naturally, without compulsion or any special
agreement, to give his armor for a corresponding number of cattle. With
the more saleable commodities obtained in this way, he will go to
persons at the market who are offering copper, fuel, and food for sale,
in order to achieve his ultimate objective, the acquisition by
trade of the consumption goods that he needs. But now he can proceed to
this end much more quickly, more economically, and with a greatly
enhanced probability of success.
As each economizing individual becomes increasingly more aware
of his economic interest, he is led by this interest, without any
agreement, without legislative compulsion, and even without regard to
the public interest, to give his commodities in exchange for other,
more saleable, commodities, even if he does not need them for any
immediate consumption purpose. With economic progress, therefore, we
can everywhere observe the phenomenon of a certain number of goods,
especially those that are most easily saleable at a given time and
place, becoming, under the powerful influence of custom,
acceptable to everyone in trade, and thus capable of being given in
exchange for any other commodity. These goods were called “Geld”
by our ancestors, a term derived from “gelten”
which means to compensate or pay. Hence the term “Geld” in our
language designates the means of payment as such.
The great importance of custom in the origin of money can be seen
immediately by considering the process, described above, by which
certain goods became money. The exchange of less easily saleable
commodities for commodities of greater marketability is in the economic
interest of every economizing individual. But the actual
performance of exchange operations of this kind presupposes a knowledge
of their interest on the part of economizing individuals. For they must
be willing to accept in exchange for their commodities, because of its
greater marketability, a good that is perhaps itself quite useless to
them. This knowledge will never be attained by all members of a people
at the same time. On the contrary, only a small number of economizing
individuals will at first recognize the advantage accruing to them from
the acceptance of other, more saleable, commodities in exchange for
their own whenever a direct exchange of their commodities for the goods
they wish to consume is impossible or highly uncertain. This advantage
is independent of a general acknowledgement of any one commodity as
money. For an exchange of this sort will always, under any
circumstances whatsoever, bring an economizing individual considerably
nearer to his final end, the acquisition of the goods he wishes to
consume. Since there is no better way in which men can become
enlightened about their economic interests than by observation of the
economic success of those who employ the correct means of achieving
their ends, it is evident that nothing favored the rise of money so
much as the long-practiced, and economically profitable, acceptance of
eminently saleable commodities in exchange for all others by the most
discerning and most capable economizing individuals. In this way,
custom and practice contributed in no small degree to converting the
commodities that were most saleable at a given time into commodities
that came to be accepted, not merely by many, but by all economizing
individuals in exchange for their own commodities.
Within the boundaries of a state, the legal order usually has an
influence on the money-character of commodities which, though small,
cannot be denied. The origin of money (as distinct from coin, which is
only one variety of money) is, as we have seen, entirely natural and
thus displays legislative influence only in the rarest instances. Money
is not an invention of the state. It is not the product of a
legislative act. Even the sanction of political authority is not
necessary for its existence. Certain commodities came to be money quite
naturally, as the result of economic relationships that were
independent of the power of the state.
But if, in response to the needs of trade, a good receives the sanction
of the state as money, the result will be that not only every payment
to the state itself but all other payments not explicitly contracted
for in other goods can be required or offered, with legally binding
effect, only in units of that good. There will be the further, and
especially important, result that when payment has originally been
contracted for in other goods but cannot, for some reason, be made, the
payment substituted can similarly be required or offered, with legally
binding effect, only in units of the one particular good. Thus the
sanction of the state gives a particular good the attribute of being a
universal substitute in exchange, and although the state is not
responsible for the existence of the money-character of the good, it is
responsible for a significant improvement of its money-character.
2. The
Kinds of Money Appropriate to Particular Peoples and to Particular
Historical Periods
Money is not the product of an agreement on the part of economizing men
nor the product of legislative acts. No one invented it. As economizing
individuals in social situations became increasingly aware of their
economic interest, they everywhere attained the simple knowledge that
surrendering less saleable commodities for others of greater
saleability brings them substantially closer to the attainment of their
specific economic purposes. Thus, with the progressive development of
social economy, money came to exist in numerous centers of civilization
independently. But precisely because money is a natural product of
human economy, the specific forms in which it has appeared were
everywhere and at all times the result of specific and changing
economic situations. Among the same people at different times, and
among different peoples at the same time, different goods have attained
the special position in trade described above.
In the earliest periods of economic development, cattle seem to have
been the most saleable commodity among most peoples of the ancient
world. Domestic animals constituted the chief item of the wealth of
every individual among nomads and peoples passing from a nomadic
economy to agriculture. Their marketability extended literally to all
economizing individuals, and the lack of artificial roads combined with
the fact that cattle transported themselves (almost without cost in the
primitive stages of civilization!) to make them saleable over a wider
geographical area than most other commodities. A number of
circumstances, moreover, favored broad quantitative and temporal limits
to their marketability. A cow is a commodity of considerable
durability. Its cost of maintenance is insignificant where pastures are
available in abundance and where the animals are kept under the open
sky. And in a culture in which everyone attempts to possess as large
herds as possible, cattle are usually not brought to market in
excessive quantities at any one time. In the period of which I am
speaking, there was no similar juncture of circumstances establishing
as broad a range of marketability for any other commodity. If we add to
these circumstances the fact that trade in domestic animals was at
least as well developed as trade in any other commodity, cattle appear
to have been the most saleable of all available commodities and hence
the natural money of the peoples of the ancient world.
The trade and commerce of the most cultured people of the ancient
world, the Greeks, whose stages of development history has
revealed to us in fairly distinct outlines, showed no trace of coined
money even as late as the time of Homer. Barter still prevailed, and
wealth consisted of herds of cattle. Payments were made in cattle.
Prices were reckoned in cattle. And cattle were used for the payment of
fines. Even Draco imposed fines in cattle, and the practice was not
abandoned until Solon converted them, apparently because they had
outlived their usefulness, into metallic money at the rate of one
drachma for a sheep and five drachmae for a cow. Even more distinctly
than with the Greeks, traces of cattle-money can be recognized in the
case of the cattle breeding ancestors of the peoples of the Italian
peninsula. Until very late, cattle and, next to them sheep, formed the
means of exchange among the Romans. Their earliest legal penalties were
cattle fines (imposed in cattle and sheep) which appear still in the
lex Aternia Tarpeia of the year 454 B.C., and were only converted to
coined money 24 years later.
Among our own ancestors, the old Germanic tribes, at a time
when, according to Tacitus, they held silver and earthen vessels in
equal esteem, a large herd of cattle was considered identical with
riches. Barter stood in the foreground, just as it did among the Greeks
of the Homeric age, and cattle again and, in this case, horses (and
weapons too!) already served as means of exchange. Cattle constituted
their most highly esteemed property and were preferred above all else.
Legal fines were paid in cattle and weapons, and only later in metallic
money.
Otto the Great still imposed fines in
terms of cattle.
Among the Arabs, the cattle standard existed as late as the
time of Mohammed. Among the peoples of eastern Asia Minor,
where the writings of Zoroaster, the Zendavesta, were held sacred,
other forms of money replaced the cattle standard only quite late,
after the neighboring peoples had long gone over to a metallic currency.
That cattle were used as currency by
the Hebrews, by the peoples of Asia Minor, and by the
inhabitants of Mesopotamia, in prehistoric times may be supposed
although we cannot find evidence of it. These tribes all entered
history at a level of civilization at which they had presumably already
gone beyond the cattle standard—if one may be permitted to draw general
conclusions, by analogy, from later developments, and from the fact
that it appears to be unnatural in a primitive society to make large
payments in metal or metallic implements.
But rising civilization, and above all the division of labor and its
natural consequence, the gradual formation of cities inhabited by a
population devoted primarily to industry, must everywhere have had the
result of simultaneously diminishing the marketability of cattle and
increasing the marketability of many other commodities, especially the
metals then in use. The artisan who began to trade with the farmer was
seldom in a position to accept cattle as money; for a city dweller, the
temporary possession of cattle necessarily involved, not only
discomforts, but also considerable economic sacrifices; and the keeping
and feeding of cattle imposed no significant economic sacrifice upon
the farmer only as long as he had unlimited pasture and was accustomed
to keep his cattle in an open field. With the progress of civilization,
therefore, cattle lost to a great extent the broad range of
marketability they had previously had with respect to the number of
persons to whom, and with respect to the time period within which, they
could be sold economically. At the same time, they receded more and
more into the background relative to other goods with respect to the
spatial and quantitative limits of their marketability. They ceased to
be the most saleable of commodities, the economic form of
money, and finally ceased to be money at all.
In all cultures in which cattle had previously had the character of
money, cattle-money was abandoned with the passage from a nomadic
existence and simple agriculture to a more complex system in which
handicraft was practiced, its place being taken by the metals then in
use. Among the metals that were at first principally worked by men
because of their ease of extraction and malleability were copper,
silver, gold, and in some cases also iron. The transition took place
quite smoothly when it became necessary, since metallic implements and
the raw metal itself had doubtless already been in use everywhere as
money in addition to cattle-currency, for the purpose of making small
payments.
Copper was the earliest metal from which the farmer’s plough, the
warrior’s weapons, and the artisan’s tools were fashioned. Copper,
gold, and silver were the earliest materials used for vessels and
ornaments of all kinds. At the cultural stage at which peoples passed
from cattle-money to an exclusively metallic currency, therefore,
copper and perhaps some of its alloys were goods of very general use,
and gold and silver, as the most important means of satisfying that
most universal passion of primitive men, the desire to stand out in
appearance before the other members of the tribe, had become goods of
most general desire. As long as they had few uses, the three metals
circulated almost exclusively in finished forms. Later, circulating as
raw metal, they were less limited as to use and had greater
divisibility. Their marketability was neither restricted to a small
number of economizing persons nor, because of their great usefulness to
all peoples and easy transportability at relatively slight economic
sacrifices, confined within narrow spatial limits. Because of their
durability they were not restricted in marketability to narrow limits
in time. As a result of the general competition for them, they could be
more easily marketed at economic prices than any other commodities in
comparable quantities (p. 227). Thus we observe an economic situation
in the historical period following nomadism and simple agriculture in
which these three metals, being the most saleable goods, became the
exclusive means of exchange.
This transition did not take place abruptly, nor did it take place in
the same way among all peoples. The newer metallic standard may have
been in use for a long time along with the older cattle-standard before
it replaced the latter completely. The value of an animal, in metallic
money, may have served as the basis for the currency unit even after
metal had completely displaced cattle as currency in trade. The
Dekaboion, Tesseraboion, and Hekatomboion of the Greeks, and the
earliest metallic money of the Romans and Gauls were probably of this
nature, and the animal picture appearing on the pieces of metal was
probably a symbol of this value.
It is, to say the least, uncertain whether copper or brass, as the most
important of the metals in use, were the earliest means of exchange,
and whether the precious metals acquired the function of money only
later. In eastern Asia, in China, and perhaps also in India, the copper
standard experienced its most complete development. In central Italy an
exclusively copper standard also developed. In the ancient cultures on
the Euphrates and Tigris, on the other hand, not even traces of the
former existence of an exclusively copper standard are to be found, and
in Asia Minor and Egypt, as well as in Greece, Sicily, and lower Italy,
its independent development was arrested, wherever it had existed at
all, by the vast development of Mediterranean commerce, which could not
be carried on adequately with copper alone. But it is certain that all
peoples who were led to adopt a copper standard as a result of the
material circumstances under which their economy developed, passed on
from the less precious metals to the more precious ones, from copper
and iron to silver and gold, with the further development of
civilization, and especially with the geographical extension of
commerce. In all places, moreover, where a silver standard became
established, there was a later transition to a gold standard, and if
the transition was not always actually completed, the tendency existed
nevertheless.
In the narrow commerce of an ancient Sabine city with the surrounding
region, and in keeping with the early simplicity of Sabine customs,
when the cattle-standard had outlived its usefulness, copper best
served the practical purposes of the farmers and of the city dwellers
as well. It was the most important metal in use, certainly the
commodity whose marketability extended to the largest number of
persons, and the quantitative limits of its marketability were wider
than those of any other commodity—the most important requisites of
money in the primitive stages of civilization. It was, moreover, a good
whose easy and inexpensive preservation and storage in small amounts
and whose relatively moderate cost of transportation qualified it to a
sufficient degree for monetary purposes within narrow geographical
limits. But as soon as the area of trade widened, as the rate of
commodity turnover quickened, and as the precious metals became more
and more the most saleable commodities of a new epoch, copper naturally
lost its capacity to serve as money. With the trade of this people
extending over the whole world, with the rapid turnover of their
commodities, and with the increasing division of labor, each
economizing individual felt more and more the need of carrying money on
his person. With the progress of civilization, the precious metals
became the most saleable commodities and thus the natural money of
peoples highly developed economically.
The history of other peoples presents a picture of great differences in
their economic development and hence also in their monetary
institutions. When Mexico was invaded for the first time by Europeans,
it appears already to have reached an unusual level of economic
development, according to the reports published by eye-witnesses about
the condition of the country at that time. The trade of the ancient
Aztecs is of special interest to us for two reasons: (1) it proves to
us that the economic thinking that leads men to activity directed to
the fullest possible satisfaction of their needs is everywhere
responsible for analogous economic phenomena, and (2) ancient Mexico
presents us with the picture of a country in the state of transition
from a pure barter to a money economy. We thus have the record of a
situation in which we can observe the characteristic process by which a
number of goods attain greater prominence than the rest and become
money.
The reports of the conquistadors and contemporary writers depict Mexico
as a country with numerous cities and a well organized and imposing
trade in goods. There were daily markets in the cities, and every five
days major markets were held which were distributed over the country in
such a way that the major market of any one city was not impaired by
the competition of that of a neighboring city. There was a special
large square in each city for trade in commodities, and in it a
particular place was assigned for each commodity, outside of which
trade in that commodity was forbidden. The only exceptions to this rule
were foodstuffs and objects difficult to transport (timber, tanning
materials, stones, etc.). The number of people assembled at the market
place of the capital, Mexico, was estimated to have been 20,000 to
25,000 for the daily markets, and between 40,000 and 50,000 on major
market days. A great many varieties of commodities were traded.
The interesting question that arises is whether, in the markets of
ancient Mexico, which were similar in so many ways to those of Europe,
there had also already appeared phenomena analogous in nature and
origin to our money.
The actual report of the Spanish invaders is that the trade of Mexico,
at the time they first entered the country, had long since ceased to
move exclusively within the limits of simple barter, and that some
commodities had instead already attained the special status in trade
that I discussed more extensively earlier—that is, the status of money.
Cocoa beans in small bags containing 8,000 to 24,000 beans, certain
small cotton handkerchiefs, golds and in goose quills that were
accepted according to size (balances and weighing instruments in
general being unknown to the Mexicans), pieces of copper, and finally,
thin pieces of tin, appear to have been the commodities that were
readily accepted by everyone (as money), even if the persons receiving
them did not need them immediately, whenever a direct exchange of
immediately usable commodities could not be accomplished.
Eye-witnesses mention the following commodities as being traded on the
Mexican markets: live and dead animals, cocoa, all other foods,
precious stones, medicinal plants, herbs, gums, resins, earths,
prepared medicines, commodities made of the fibers of the century
plant, of palm leaves, and of animal hair, articles made of feathers,
and of wood and stone, and finally gold, copper, tin, timber, stones,
tanning materials, and hides. If we consider not only this list of
commodities but also (1) the fact that Mexico, at the time of its
discovery by Europeans, was already a developed country with some
industry and populous cities, (2) that since the majority of our
domestic animals were unknown to them, a cattle-standard was entirely
out of the question, (3) that cocoa was the daily beverage, cotton the
most common clothing material, and gold, copper, and tin the most
widely used metals of the Aztec people, and (4) that the nature of
these commodities and the fact of their general use gave them greater
marketability than all other commodities, it is not difficult to
understand exactly why these goods became the money of the Aztec
people. They were the natural, even if little developed, currency of
ancient Mexico.
Analogous causes were responsible for the fact that animal skins became
money among hunting peoples engaged in external trade. Among hunting
tribes there is naturally an oversupply of furs, since providing a
family with food by means of hunting leads to so great an accumulation
of skins that at most only a competition for especially beautiful or
rare kinds of skins can arise among the members of the hunting tribe.
But if the tribe enters into trade with foreign peoples, and a market
for skins arises in which numerous consumable goods can, at the choice
of the hunters, be exchanged for furs, nothing is more natural than
that skins will become the most saleable good, and hence that they will
come to be preferred and accepted even in exchanges taking place
between the hunters themselves. Of course hunter A does not need the
skins of hunter B that he accepts in an exchange, but he is aware that
he will be able to exchange them easily on the markets for other goods
that he does need. He therefore prefers the skins, even though they
also have only the character of commodities to him, to other
commodities in his possession that are less easily saleable. We can
actually observe this relationship among almost all hunting tribes who
carry on foreign trade with their skins.
The fact that slaves and chunks of salt became money in the interior of
Africa, and that cakes of wax on the upper Amazon, cod in Iceland and
Newfoundland, tobacco in Maryland and Virginia, sugar in the British
West Indies, and ivory in the vicinity of the Portuguese colonies, took
on the functions of money is explained by the fact that these goods
were, and in some cases still are, the chief articles exported from
these places. Thus they acquire, just as did furs among hunting tribes,
a preeminent marketability.
The local money-character of many other goods, on the other hand, can
be traced back to their great and general use value locally and their
resultant marketability. Examples are the money-character of dates in
the oasis of Siwa, of tea-bricks in central Asia and Siberia, of glass
beads in Nubia and Sennar, and of ghussub, a kind of millet, in the
country of Ahir (Africa). An example in which both factors have been
responsible for the money-character of a good is provided by
cowrieshells, which have, at the same time, been both a commonly
desired ornament and an export commodity.
Thus money presents itself to us, in its special locally and temporally
different forms, not as the result of an agreement, legislative
compulsion, or mere chance, but as the natural product of differences
in the economic situation of different peoples at the same time, or of
the same people in different periods of their history.
3. Money
as a “Measure of Price” and as the Most Economic Form for Storing
Exchangeable Wealth
Since the progressive development of trade and the functioning of money
give rise to an economic situation in which commodities of all kinds
are exchanged for each other, and since the limits within which prices
are formed become progressively narrower under the influence of lively
competition (p. 201), it was easy for the idea to arise that all
commodities will stand, at a given place and at a given time, in a
certain price relationship to each other, on the basis of which they
can be exchanged for each other at will.
Suppose that the prices of the commodities listed below (assuming them
to be of given qualities), established in a particular market at a
given time, are as follows:
Now if it is assumed that the average price of a commodity is one at
which it can be both bought and sold, then 4 hundredweight of sugar
appears, in the example, as the “equivalent” of 3 l/3 hundredweight of
cotton, this as the “equivalent” of 16 2/3 hundredweight of wheat
flour, and of 100 Thalers, and vice versa. We need only call
the equivalent (in this sense) of a commodity (or one of its many
equivalents) its “exchange value,” and the sum of money for which it
can be both bought and sold its “exchange value in the preferred sense
of the term,” to arrive at the concept of exchange value in general and
of money as the “measure of exchange value” in particular, which
dominate our science.
“In a country in which there is a lively commerce,” writes Turgot,
“every kind of good will have a current price in terms of every other
good, which means that a definite quantity of one good will be
equivalent to a definite quantity of every other kind of good. To
express the exchange value of a particular good, it is evidently
sufficient to state the quantity of another known commodity that is
regarded as its equivalent. From this it can be seen that all kinds of
goods that can be objects of trade are measured, so to speak, against
one another, and that any one of them can serve as a yardstick for all
the others.” Similar thoughts have been expressed by
almost all other economists who come, like Turgot in the course of his
famous essay on the origin and distribution of national wealth, to the
conclusion that money, among all possible “measures of exchange value,”
is the most suitable and hence also the most common. The only defect of
this measure is said to lie in the fact that the value of money is not
fixed, but changeable, and that money therefore provides a reliable
measure of “exchange value” for any given moment but not for different
points in time.
In my discussion of price theory, however, I have shown that
equivalents of goods in the objective sense of the term cannot be
observed anywhere in the economy of men (p. 193), and that the entire
theory that presents money as the “measure of the exchange value” of
goods disintegrates into nothingness, since the basis of the theory is
a fiction, an error.
When a hundredweight of wool of given quality is sold in a particular
transaction on a wool market for 103 florins, it is often found that
transactions are taking place at higher and at lower prices on the same
market and at the same time, at 104, 103 1/2, and at 102 and 102
½ florins, for example. Often too, while the buyers on the
market declare themselves ready to “take” at 101 florins, the sellers
simultaneously declare that they are willing to “offer” only at 105
florins. What, in such a case, is the “exchange value” of wool? Or, to
state the same question in an inverse fashion, what quantity of wool is
the “exchange value” of 100 florins, for example? Obviously all that
can be said is that a hundredweight of wool can be bought or sold on
that market at that time between the limits of 101 and 105 florins.
But a particular quantity of
wool and a particular quantity of money (or any other
commodity) that can mutually be exchanged for each other—that are
equivalents in the objective sense of the term—can nowhere be observed
for they do not exist. There can thus be no question of a measure of
these equivalents (a measure of “exchange value”).
It is true that several economic objectives of practical life have
given rise to a need for valuations of approximate exactness,
especially valuations in terms of money Where only an approximate
correctness of the estimates is required, average prices can properly
serve as the basis of valuation, since they are generally most suitable
for this purpose But it is clear that this method of valuing goods must
prove itself completely in sufficient and even erroneous, even for
practical life, wherever a higher degree of precision becomes necessary
When an exact valuation of goods is necessary, three things must be
distinguished according to the intention of the person making the
estimate He must direct his attention to estimating (1) the price at
which certain goods, if brought to market, can be sold, (2) the
price at which goods of a certain kind and quality can be bought
on the market, and (3) the quantity of commodities or the sum of money
that is the equivalent, to the particular individual himself,
of a good or of a quantity of goods.
The basis for making the first two estimates follows from what has been
said. Price formation, we have seen, always takes place between two
extremes, the lower of which may also be called the demand price
(the price at which the commodity is asked for on the market) and the
higher of which may also be called the supply price (the price
at which the commodity is offered for sale on the market).
The former will generally be the basis
for making the first estimate and the latter the basis for making the
second. The third estimate is more difficult since it involves the
special position that the good or quantity of goods whose equivalent
(in the subjective sense of the term) is under consideration occupies
in the economy of the economizing individual. For when he estimates
this equivalent, he is also considering whether the good has
predominant use value or predominant exchange value to him; when
quantities of a good are involved, he is considering what portion has
predominant use value and what portion has predominant exchange value
to him.
Suppose that A possesses goods a, b, and c, which have a predominant
use value to him, and also goods d, e, and f, which have a predominant
exchange value to him. The sum of money he expects he could obtain
by selling the first group would not be an equivalent of these goods to
him since their use value to him is the higher, economic, form Instead,
only a sum of money that would purchase identical goods or such
goods as have the same use value to him will be an equivalent of these
goods to him. Goods d, e, and f, however, are commodities and hence
intended for sale In the ordinary course of events, they will be
exchanged for money The price expected for them by economizing
individual A is generally indeed the equivalent of these goods.
The equivalent of a good can be
correctly estimated therefore only with respect to the possessor and
the economic status of the good to him. The prerequisite that is
necessary for the determination of the equivalent of a complex of goods
(a person’s property) is the separate estimation of the equivalent of
each consumption good and each commodity in the complex.
Although the theory of “exchange value” in general, and as a necessary
consequence, the theory of money as a “measure of exchange value” in
particular, must be designated as untenable after what has been said,
observation of the nature and function of money teaches us nevertheless
that the various estimates just discussed (as distinguished
from measurement of the “exchange value” of goods) are usually most
suitably made in terms of money. The purpose of the first two
valuations is the estimation of the quantities of goods for which a
commodity may be bought or sold at a given time on a given market.
These quantities of goods will ordinarily consist only of money
if the prospective transactions are actually performed, and
knowledge of the sums of money for which a commodity can be
purchased or sold is naturally, therefore, the immediate objective of
the economic task of valuation.
Under conditions of developed trade, the only commodity in which all
others can be evaluated without roundabout procedures is money.
Wherever barter in the narrow sense of the term disappears, and only
sums of money (for the most part) actually appear as prices of the
various commodities, a reliable basis for valuation in any but monetary
terms is lacking. The valuation of grain or wool, for example, is
relatively simple in terms of money. But the valuation of wool in terms
of grain, or of grain in terms of wool, involves greater difficulties,
if for no other reason than because a direct exchange of these two
goods never takes place, or only in the rarest exceptional cases, with
the result that the foundation for such a valuation, the respective
effective prices, is wanting. A valuation of this kind is therefore
usually only possible on the basis of a computation involving, as a
prerequisite, the prior valuation of the two goods in terms of money.
The valuation of a good in terms of money, on the other hand, can be
made directly on the basis of the existing effective prices.
The valuation of commodities in terms of money thus not only answers,
as we saw before, the ordinary practical purposes of valuation most
effectively, but is also the most convenient and the simplest in
practical operation. Valuation in terms of other commodities is a more
complicated procedure that presupposes prior valuations in terms of
money.
The same may be said about the estimation of the equivalents of goods
in the subjective sense of the term, since again the first two
valuations constitute its prerequisites and foundation.
Thus it is clear why the only commodity in terms of which valuations
are usually made is money. In this sense, as the commodity in terms of
which valuations are as a rule and most suitably made under conditions
of developed trade, money may, if one desires, be called a measure of
prices.
I have explained above the reasons why estimates can generally be most
effectively made in terms of a commodity that has already attained
money character whenever such a commodity exists, and thus why
estimates are actually made in these terms unless peculiarities of the
commodity that has become money prevent it. But this outcome is not a necessary
consequence of the money character of a commodity. One can very easily
imagine cases in which a commodity that does not have money character
nevertheless serves as the “measure of price,” or cases in which only
one or another of several commodities that have attained money
character serve in this additional capacity. The function of serving as
a measure of price is therefore not necessarily an attribute of
commodities that have attained money character. And if it is not a necessary
consequence of the fact that a commodity has become money, it is still
less a prerequisite or cause of a commodity becoming money.
Actually, of course, money is generally a very suitable measure of
price. This is especially true of metallic money because of its high
divisibility and because of the relatively greater stability of the
factors determining its value. There are other commodities that have
attained money character (weapons, plate, bronze rings, etc.) but which
have never been used as measures of price. The function of serving as a
measure of price is not, therefore, contained in the concept of
money. Several economists have fused the concept of money and the
concept of a “measure of value” together, and have involved themselves,
as a result, in a misconception of the true nature of money.
The same factors that are responsible for the fact that money is the
only commodity in terms of which valuations are usually made are
responsible also for the fact that money is the most appropriate medium
for accumulating that portion of a person’s wealth by means of which he
intends to acquire other goods (consumption goods or means of
production). The portion of his wealth that an economizing individual
intends to use for purchasing consumption goods attains that form in
which he may, at any time, satisfy his needs in the most certain and
most rapid manner if it is first exchanged for money. The portion of an
economizing individual’s capital that does not already consist of
specialized factors of intended production is also, for the same
reason, more suitably held in the form of money than in any other form,
since any other commodity must first be exchanged for money in order to
be further traded for the desired means of production. In fact, daily
experience teaches us that economizing men endeavor to convert that
part of their store of consumption goods into money which consists of
goods that they no longer intend to use for the direct satisfaction of
their needs but instead regard as commodities. Similarly, that part of
their capital which does not consist of factors of intended production
they turn first into money and thereby take a not inconsiderable step
in furthering their economic purposes.
But the notion that attributes to money as such the function of
also transferring “values” from the present into the future must be
designated as erroneous. Although metallic money, because of its
durability and low cost of preservation, is doubtless suitable for this
purpose also, it is nevertheless clear that other commodities are still
better suited for it. Indeed, experience teaches that wherever less
easily preserved goods rather than the precious metals have attained
money-character, they ordinarily serve for purposes of circulation, but
not for the preservation of “values.”
If we summarize what has been said, we come to the conclusion that the
commodity that has become money is also the commodity in which
valuations answering the practical purposes of economizing men and in
which accumulations of funds for exchange purposes can most
appropriately be made provided that no impediments founded upon its
properties stand in the way. Metallic money (which writers in
our science always have primarily in mind when they speak of money in
general) actually answers these purposes to a high degree. But it
appears to me to be just as certain that the functions of being a
“measure of value” and a “store of value” must not be attributed to
money as such, since these functions are of a merely accidental
nature and are not an essential part of the concept of money.
4.
Coinage
From the preceding exposition of the nature and origin of money, it
appears that the precious metals naturally became the economic
form of money in the ordinary trading relations of civilized peoples.
But the use of the precious metals for monetary purposes is accompanied
by some defects whose removal had to be attempted by economizing men.
The chief defects involved in the use of the precious metals for
monetary purposes are: (1) the difficulty of determining their
genuineness and degree of fineness, and (2) the necessity of dividing
the hard material into pieces appropriate to each particular
transaction. These difficulties cannot be removed easily without loss
of time and other economic sacrifices.
The testing of the genuineness of precious metals and their degree of
fineness requires the use of chemicals and specific labor services,
since it can be undertaken only by experts. The division of the hard
metals into pieces of the weights needed for particular transactions is
an operation which, because of the exactness necessary, not only
requires labor, loss of time, and precision instruments, but is also
accompanied by a not inconsiderable loss of the precious metal itself
(because of the loss of chips and as the result of repeated smelting).
A very penetrating description of the difficulties that arise from the
use of the precious metals for monetary purposes has been given us by
the well-known traveler in southeastern Asia, Bastian, in his work
on Burma, a country where silver still circulates in an uncoined state.
“When a person goes to market in Burma,” Bastian relates,
he must take
along a piece of silver, a hammer, a chisel, a balance, and the
necessary weights. “How much are these pots?” “Show me your money,”
answers the merchant, and after inspecting it determines a price at
this or that weight. The buyer then asks the merchant for a small anvil
and belabors his piece of silver with his hammer until he thinks he has
found the correct weight. He thereupon weighs it on his own balance,
since that of the merchant is not to be trusted, and adds to or takes
away from the silver on the scales until the weight is right. Of course
a good deal of the silver is lost as chips drop to the floor, and the
buyer therefore usually prefers not to buy the exact quantity he
desires but one equivalent to the piece of silver he has just broken
off. In larger purchases, which are made only with silver of the
highest degree of fineness, the process is still more complicated,
since first an assayer must be called who determines the exact degree
of fineness, and who must be paid for this task.
This description furnishes us a clear picture of the difficulties
involved in the trade of all peoples before they learned to coin
metals. Frequently repeated experiences with these difficulties must
have made their removal seem most desirable to every economizing
individual.
The first of the two difficulties, the determination of the degree of
fineness of the metal, seems to have been the one whose removal
appeared to be first in importance to economizing men. A stamp
impressed by a public official or some reliable person on a metal bar
guaranteed, not its weight, but its degree of fineness, and exempted
the possessor, when he passed the metal on to other persons who
appreciated the reliability of the stamp, from the burdensome and
expensive assay test. Metal so stamped still had to be weighed, as
before, but its fineness required no further examination.
In some cases at the same time, and in other cases possibly somewhat
later, economizing men appear to have hit upon the idea of also
designating the weight of the pieces of metal in similar
fashion, and of dividing the metals from the beginning into pieces that
were reliably marked with their weight as well as their fineness. This
was naturally best accomplished by dividing the precious metal into
small pieces corresponding to the needs of trade, and by marking the
metal in such a way that no significant part could be removed from the
pieces without the removal becoming immediately apparent. This aim was
achieved by coining the metal, and it was in this way that our coins
came into being. Coins are thus, in their very nature, nothing but
pieces of metal whose fineness and weight have been determined in a
reliable manner and with an exactness sufficient for the practical
purposes of economic life, and which are protected against fraud in as
efficient a manner as possible. The fact of coinage makes it possible
for us, in all transactions, simply to count out the necessary weights
of the precious metals in a reliable manner without irksome assay
tests, division, and weighing. The economic importance of the coin,
therefore, consists in the fact that (apart from saving us from the
mechanical operation of dividing the precious metal into the required
quantities) its acceptance saves us the examination of its
genuineness, fineness, and weight. When we pass it on, it saves us from
giving proof of these facts. Thus it frees us from many
irksome, wearisome, procedures involving economic sacrifices, and as a
consequence of this fact, the naturally high marketability of the
precious metals is considerably increased.
The best guarantee of the full weight and assured fineness of coins
can, in the nature of the case, be given by the government itself,
since it is known to and recognized by everyone and has the power to
prevent and punish crimes against the coinage. Governments have
therefore usually accepted the obligation of stamping the coins
necessary for trade. But they have so often and so greatly misused
their power that economizing individuals eventually almost forgot the
fact that a coin is nothing but a piece of precious metal of fixed
fineness and weight, for which fineness and full weight the honesty and
rectitude of the mint constitute a guarantee. Doubts even arose as to
whether money is a commodity at all. Indeed, it was finally declared to
be something entirely imaginary resting solely on human convenience.
The fact that governments treated money as if it actually had been
merely the product of the convenience of men in general and of their
legislative whims in particular contributed therefore in no small
degree to furthering errors about the nature of money.
Originally the money metals were undoubtedly divided into pieces that
corresponded to the weights already in general use in commerce. The
Roman as was originally a pound of copper. In the time of Edward I, the
English pound sterling contained a pound, Tower weight, of silver, of a
certain fineness. Similarly, the French livre in the time of
Charlemagne contained a pound of silver according to Troyes weight. The
English shilling and penny were also weights customarily used in
commerce. “When wheat is at twelve shillings the quarter,” says an
ancient statute of Henry III, “then wastel bread of a farthing shall
weigh eleven shillings and four pence.” It is also known that the German mark,
schilling, pfennig, etc., were originally commercial weights. But the
repeated debasements of the currency that were brought about by the
masters of the mints soon caused the ordinary weights of bullion and
the weights according to which the precious metals were used in trade
(counted out as coins) to become very different in most countries. This
difference in turn contributed not a little toward causing money to be
regarded as a special “measure of exchange value,” even though the
standard coin in every natural economy is nothing but a unit of weight
defined by the weight according to which the precious metals are
traded. Frequent attempts have been made in recent times to bring the
unit of weight of bullion again into accord with the coinage unit, as
in Germany and Austria where the Zollverein pound was chosen as
the foundation of the coinage system.
The principal imperfections of our coins are that they cannot be made
in perfectly exact weights, and that even the exactness that could be
achieved is not attempted, for practical reasons (because of cost), in
the customary manufacturing processes employed in the mints. The
imperfections with which the coins originally leave the mint are
augmented during their circulation by use, with the result that a
perceptible inequality easily arises in the weights of coins of the
same denomination.
Obviously these defects are more pronounced the smaller the quantities
into which the precious metals are divided. The coining of the precious
metals into pieces as small as retail trade requires would lead to the
greatest technical difficulties, and even if it were done with moderate
care, it would require economic sacrifices that would be out of all
proportion to the face value of the coins. On the other hand, everyone
familiar with trade can easily understand the difficulties to which a
lack of coins of small denominations would lead.
“A smaller coin than 2 Annas,” Bastian reports, “did not exist in Siam.
Anyone wishing to buy anything below that price had to wait until the
addition of a new want justified the expenditure of such a sum or join
with other would-be buyers and split the purchase with them. Sometimes
small cups of rice served as money substitutes, and it is said that in
Sokotra small pieces of ghi, or butter, served as small change.” In
Mexican cities Bastian was given pieces of soap, and eggs in the
country, as small change. In the highlands of Peru it is the custom of
the natives to have a basket ready which they have divided into
compartments. In one compartment there are sewing needles, in another
spools of thread, and in others candles and other objects of daily use.
They offer a selection of these things equal to the amount of small
change needed. In upper Burma, lumps of lead are used for the smallest
purchases, such as fruit, cigars, etc., and every merchant has a large
case full of these lumps in his shop. They are weighed on a larger
balance than that used for silver. In villages where one does not
expect to get change for silver, a servant must follow with a heavy
sack of lead for small purchases.
In most civilized countries, the technical and economic difficulties of
coining the precious metals into very small pieces are evaded by
coining pieces of some ordinary metal, usually copper or brass.
Since, as a matter of convenience if for no other reason, no-one will
needlessly keep any sizeable part of his wealth in these coins, they
have merely a subsidiary position in trade, and can be coined
harmlessly at half weight, or even less, for the greater convenience
of the public, provided only that they can, at any time, be exchanged
at the mint for coins made of precious metals, or that only such small
quantities of subsidiary coin are issued that they remain in
circulation. The first is, in any case, the more correct method and at
the same time a more certain protection against government abuses
arising from the profit accruing to government from the issuance of
these coins. Such pieces of money are called subsidiary coin. Their
value is greater than the materials from which they are made, the
additional value being attributable to the fact that a certain number
of the subsidiary coins can be exchanged at the mint for a coin of
larger denomination, and to the fact that anybody can use them to
discharge his obligations to the issuing government and to any other
person up to the amount of the smallest full-weight coin. Because of
the greater convenience of subsidiary brass or copper coins, the public
in this case readily tolerates the small economic anomaly, since the
advantages of easier transportability and convenience are more
important than fullness of weight in the case of coins that are never
the center of important economic interests. In a similar manner, even
lightweight silver coins are minted in many countries. This is not
harmful as long as they are limited to denominations for which, for
technical or economic reasons, no suitable full-weight coins can be
made.
Theodor Mommsen, Geschichte
des römischen Münzwesens,Berlin, 1860, pp. v–xx, and
167ff.; Carnap, “Zur Geschichte der Münzwissenschaft und der
Werthzeichen,” Zeitschrift für die gesammte Staatswissenschaft,
XVI (1860), 348–396; Friedrich Kenner, “Die Anfänge des Geldes in
Alterthume,” Sitzungsberichte der Kaiserlichen Akademie der
Wissenschaften zu Wien: Philologisch-Historische Classe, XLIII
(1863), 382–490; Roscher, op cit., pp. 36–40; Hildebrand, op.
cit., p. 5; Scheel, op. cit., pp. 12–29; A.N. Bernardakis, “De l’origine des monnaies et de leurs
noms,” Journal des Economistes, (Third Series), XVIII
(1870), 209–245.
For obvious
reasons, the words “Geld” and “gelten” in this and the
following sentence are left untranslated.—TR.
See the first two paragraphs of Appendix I
(p. 312) for material originally appearing here as a footnote.—TR.
Custom as a factor in the origin of money is
stressed by Condillac, op. cit., pp. 286–290 and by G.F. Le
Trosne, De l’intérêt social,Paris, 1777, pp. 43f.
See Appendix J (p.
315) for material originally appended here as a footnote.—TR.
See Stein, op. cit., p. 55;
especially also Karl Knies, “Ueber die Geldentwerthung und die mit ihr
in Verbindung gebrachten Erscheinungen,” Zeitschrift für die
gesammte Staatswissenschaft, XIV (1858), 266; and Mommsen, op.
cit., pp. vii–viii.
See the last two paragraphs of Appendix I
(p. 313) for material appended here as a footnote in the original.—TR.
August Böckh, Metrologische
Untersuchungen über Gewichte, Münzfusse und Masse des
Alterthums, Berlin, 1838, pp. 385ff., 420ff.; Mommsen, op. cit.,
p. 169; Friedrich O. Hultsch, Griechische und römische
Metrologie, Berlin, 1862, pp. 124ff., 188ff.
Wilh. Wackernagel, “Gewerbe, Handel und
Schifffahrt der Germanen,” Zeitschrift für deutsches Alterthum,IX
(1853), 548ff.; Jakob Grimm, Deutsche Rechtsalterthümer,
4th edition prepared by A. Heusler and R. Hübner, Leipzig, 1899,
II, 123–124; Ad. Soetbeer, “Beiträge zur Geschichte des Geld- und
Münzwesens in Deutschland,” Forschungen zur deutschen
Geschichte, I (1862), 215.
Aloys Sprenger, Das Leben und die Lehre
des Mohammad, Berlin, 1861–65, III, 139.
Friedrich v. Spiegel, Commentar
über das Avesta,Wien, 1864–68, I, 94ff.
Moritz A. Levy, Geschichte der
jüdischen Münzen, Leipzig, 1862, p. 7.
Roscher, op. cit., note 5 on p. 309.
Plutarch, Lives, with an English
translation by Bernadotte Perrin, London: William Heinemann, 1914, I,
55; Pliny, The Natural History, translated by John Bostock and
H.T. Riley, London: H.G. Bohn, 1856, IV, 5–6; Heinrich Schreiber, “Die
Metallringe der Kelten als Schmuck und Geld,” Taschenbuch für
Geschichte und Alterthum, II, 67–152, 240–247, and III, 401–408.
Francesco Saverio Clavigero, The History
of Mexico,Richmond, 1806, II, 188ff.
A beaver skin is still the unit of exchange
value in several regions of the Hudson’s Bay Company. Three martens are
equal to one beaver, one white fox to two beavers, one black fox or one
bear equal to four beavers, and one rifle equal to 15 beavers (“Die
Jäger im nördlichen Amerika,” Das Ausland, XIX, no.
21, [Jan. 21, 1846], 84). The Estonian word “raha” (money) has
in the related language of the Laplanders the meaning of fur (Philipp
Krug, Zur Münzkunde Russlands, St. Petersburg, 1805). On
fur money in the Russian middle ages, see the report by Nestor (A.L.
Schlözer, translator, Nestor, Russische Annalen,
Goettingen, 1802–1809, III, 90). The old word, “kung” (money)
really means marten. As late as 1610 a Russian war chest containing
5450 rubles in silver and 7000 rubles worth of fur was taken. (See
Nikolai Karamzin, Geschichte des russischen Reichs, Riga,
1820–1833, XI, 183). See also Roscher, op. cit., p. 309, and
Heinrich Storch, Handbuch der National-Wirthschaftlehre, ed. by
K.H. Rau, Hamburg, 1820, III, 25–26.
Roscher, op. cit., note 13
on pp. 313–314.
Réflexions sur la formation et la
distribution des richesses, reprinted in Oeuvres de Turgot,
ed. by G. Schelle, Paris, 1913–23, II, 554. See also Roscher, op.
cit., pp. 297–303, Knies, op. cit., p. 262.
See on this especially J.A.R. v. Helferich, Von
den periodischen Schwankungen im Werth der edeln Metalle von der
Entdeckung Amerikas bis zum Jahre 1830, Nürnberg, 1843.
It is perhaps equally obvious that these are
not the limits described in Chapter V as those between which price
formation must take place. Other interpretations may be possible, but
it seems likely that the “limits” of this passage are simply the bids
and offers chosen by two bargainers as arbitrary starting points in a
haggling process, the seller intending to come down and the buyer to
come up. In spite of Menger’s apparent implication in the second
paragraph following that “the demand price” and “the supply price” of
that paragraph are the limits described in Chapter V, they are
evidently of the same character as the wool market “limits” here.—TR.
See note 20 above.—TR.
That is, the subjective equivalent of these
goods to A is the price expected by A. The original German passage runs
as follows: “der voraussichtlich dafür zu erzielende Preis ist
für das wirthschaftende Subject A allerdings der Regel nach das
Aequivalent dieser Güter.” —TR.
Although this difference has not yet been
sufficiently observed in our science, it has long been the object of
detailed investigations on the part of students of the law. This
question is of practical interest to them in cases in which there are
claims for damages as well as in many other cases (whenever there is
substitute fulfillment of a contract, for example). Consider, for
instance, the case of someone unlawfully preventing a scientist from
using his library. The “market price” of the books would be a very
insufficient compensation to the scientist for his loss. But the market
price would be the rightful equivalent of the library to the
scientist’s heir, to whom, the library would have a predominating
exchange value.
Aristotle already observed that money serves
as a measure in the trade of men (Ethica Nicomachea V. 5. 1133b,
16; and ix, 1. 1164a, 1). Among the writers who trace back
the origin of money exclusively or predominantly to the need of
economizing men for a measure of “exchange value,” or of prices, and
who regard the money character of the precious metals as due to their
special suitability for this purpose, I should like to mention here the
following: Carlo Antonio Broggia, Trattato delle monete,
(published 1743) in Scrittori classici Italiani di economia
politica, Milano, 1803–05, IV, 304; Pompeo Neri, Osservazioni
sopra il prezzo legale delle monete, (published 1751) in ibid.,VI,
134ff.; Ferdinando Galiani, Della moneta, in ibid.,XII,
23ff. and 120 ff.; Antonio Genovesi, Lezioni di economia
civile, in ibid., XV, 291–313 and 333–341; Francis
Hutcheson, A System of Moral Philosophy, London, 1755, II,
55–58; David Ricardo, op. cit., p. 40; Storch, op. cit.,
I, 45ff.; Lorenz v. Stein, System der Staatswissenschaft,
Stuttgart, 1852, I, 217 ff.; Albert E.F. Schäffle, Das
gesellschaftliche System der menschlichen Wirthschaft,Tübingen,
1873, I, 221f.
The next two paragraphs appear here as a
footnote in the original.—TR.
The chief representatives of this theory are
the great English philosophers of the seventeenth century. Hobbes
starts with the need of men for conserving perishable wealth that they
do not intend to use for immediate consumption, and he shows how this
end can be achieved by transformation (“concoctio”) of the
perishable wealth into metallic money. He also shows how wealth can
thereby be carried about more easily (Leviathan, ed. by A.D.
Lindsay, “Everyman’s Library,” London, 1914, p. 133). Locke makes the
same point (Two Treatises of Government, and Further
Considerations concerning Raising the Value of Money, in The
Works of John Locke,12th edition, London, 1824, IV, 364–365 and
139ff.).
Sallustio
Antonio Bandini develops a view that has its roots in the work of
Aristotle. He begins his exposition by showing the difficulties to
which pure barter leads, arguing that a person whose goods are wanted
by others was not always in a situation in which he could make use of
their goods, hence that a pawn (“un mallevadore”) became
necessary whose transfer was to assure future compensation, and that
the precious metals were chosen for this function. (Discorso
economico in Scrittori classici Italiani di economia politica,Milano,
1803–05, VIII, 142ff.) This theory was further developed in Italy by
Giammaria Ortes (Della economia nazionale, in ibid.,
XXIX, 271–276, and Lettere in ibid.,XXX, 258ff.); by
Gian-Rinaldo Carli (Dell’origine e del commercio della moneta,
in ibid., XX, 15–26); and by Giambattista Coriani (Riflessioni
sulle monete, and Lettera ad un legislatore della Republica
Cisalpina, in ibid.,XLVI, 87–102 and 153ff.). In France the
theory was developed by Dutot, (Réflexions politiques sur
les finances et le commerce, in E. Daire, ed., Economistes
financiers du XVIIIe Siècle, Paris, 1843, p. 895). In
Germany it was revised by T.A.H. Schmalz, (Staatswirthschaftslehre
in BriefenBerlin, 1818, I, 48ff.), and in England recently by Henry
Dunning Macleod, (The Elements of Economics,New York, 1881, I,
171ff.).
Menger does not give references to the
passages he quotes from Bastian and we were unable to find them in the
published works of Adolph Bastian that were accessible to us. It is
possible that Menger’s information was based on an unpublished lecture
or on a personal communication from Bastian.—TR.
The next paragraph appears in the original
as a footnote appended at the end of the previous paragraph.—TR.
See Adam Smith, op.
cit., p. 26.
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