On the Origins of Money
Carl Menger
[Reprinted from the Economic Journal, Vol.2,
1892, pp.239-55, translated by C.A. Foley]
I. Introduction
There is a phenomenon which has from of old and in a peculiar
degree attracted the attention of social philosophers and practical
economists, the fact of certain commodities (these being in advanced
civilizations coined pieces of gold and silver, together
subsequently with documents representing those coins) becoming
universally acceptable media of exchange. It is obvious even to the
most ordinary intelligence, that a commodity should be given up by
its owner in exchange for another more useful to him. But that every
economic unit in a nation should be ready to exchange his goods for
little metal disks apparently useless as such, or for documents
representing the latter, is a procedure so opposed to the ordinary
course of things, that we cannot well wonder if even a distinguished
thinker like Savigny finds it downright 'mysterious.'
It must not be supposed that the form of coin, or document,
employed as current-money, constitutes the enigma in this
phenomenon. We may look away from these forms and go back to earlier
stages of economic development, or indeed to what still obtains in
countries here and there, where we find the precious metals in a
uncoined state serving as the medium of exchange, and even certain
other commodities, cattle, skins, cubes of tea, slabs of salt,
cowrie-shells, etc.; still we are confronted by this phenomenon,
still we have to explain why it is that the economic man is ready to
accept a certain kind of commodity, even if he does not need it, or
if his need of it is already supplied, in exchange for all the goods
he has brought to market, while it is none the less what he needs
that he consults in the first instance, with respect to the goods he
intends to acquire in the course of his transactions.
And hence there runs, from the first essays of reflective
contemplation of a social phenomena down to our own times, an
uninterrupted chain of disquisitions upon the nature and specific
qualities of money in its relation to all that constitutes traffic.
Philosophers, jurists, and historians, as well as economists, and
even naturalists and mathematicians, have dealt with this notable
problem, and there is no civilized people that has not furnished its
quota to the abundant literature thereon. What is the nature of
those little disks or documents, which in themselves seem to serve
no useful purpose, and which nevertheless, in contradiction to the
rest of experience, pass from one hand to another in exchange for
the most useful commodities, nay, for which every one is so eagerly
bent on surrendering his wares? Is money an organic member in the
world of commodities, or is it an economic anomaly? Are we to refer
its commercial currency and its value in trade to the same causes
conditioning those of other goods, or are they the distinct product
of convention and authority?
II. Attempts at Solution Hitherto
Thus far it can hardly be claimed for the results of investigation
into the problem above stated, that they are commensurate either
with the great development in historic research generally, or with
the outlay of time and intellect expended in efforts at solution.
The enigmatic phenomenon of money is even at this day without an
explanation that satisfies; nor is there yet agreement on the most
fundamental questions of its nature and functions. Even at this day
we have no satisfactory theory of money.
The idea which lay first to hand for an explanation of the
specific function of money as a universal current medium of
exchange, was to refer it to a general convention, or a legal
dispensation. The problem, which science has here to solve, consists
in giving an explanation of a general, homogeneous course of action
pursued by human beings when engaged in traffic, which, taken
concretely, makes unquestionably for the common interest, and yet
which seems to conflict with the nearest and immediate interests of
contracting individuals. Under such circumstances what could lie
more contiguous than the notion of referring the foregoing procedure
to causes lying outside the sphere of individual considerations? To
assume that certain commodities, the precious metals in particular,
had been exalted into the medium of exchange by general convention
or law, in the interest of commonweal, solved the difficulty, and
solved it apparently the more easily and naturally inasmuch as the
shape of the coins seemed to be a token of state regulation. Such in
fact is the opinion of Plato, Aristotle, and the Roman jurists,
closely followed by the mediaeval writers. Even the more modern
developments in the theory of money have not in substance got beyond
this standpoint.(1*)
Tested more closely, the assumption underlying this theory gave
room to grave doubts. An event of such high and universal
significance and of notoriety so inevitable, as the establishment by
law or convention of a universal medium of exchange, would certainly
have been retained in the memory of man, the more certainly inasmuch
as it would have had to be performed in a great number of places.
Yet no historical monument gives us trustworthy tidings of any
transactions either conferring distinct recognition on media of
exchange already in use, or referring to their adoption by peoples
of comparatively recent culture, much less testifying to an
initiation of the earliest ages of economic civilization in the use
of money.
And in fact the majority of theorists on this subject do not stop
at the explanation of money as stated above. The peculiar
adaptability of the precious metals for purposes of currency and
coining was noticed by Aristotle, Xenophon, and Pliny, and to a far
greater extent by John Law, Adam Smith and his disciples, who all
seek a further explanation of the choice made of them as media of
exchange, in their special qualifications. Nevertheless it is clear
that the choice of the precious metals by law and convention, even
if made in consequence of their peculiar adaptability for monetary
purposes, presupposes the pragmatic origin of money, and selection
of those metals, and that presupposition is unhistorical. Nor do
even the theorists above mentioned honestly face the problem that is
to be solved, to wit, the explaining how it has come to pass that
certain commodities (the precious metals at certain stages of
culture) should be promoted amongst the mass of all other
commodities, and accepted as the generally acknowledged media of
exchange. It is a question concerning not only the origin but also
the nature of money and its position in relation to all other
commodities.
III. The Problem of the Genesis of a Medium of Exchange.
In primitive traffic the economic man is awaking but very
gradually to an understanding of the economic advantages to be
gained by exploitation of existing opportunities of exchange. His
aims are directed first and foremost, in accordance with the
simplicity of all primitive culture, only at what lies first to
hand. And only in that proportion does the value in use of the
commodities he seeks to acquire, come into account in his
bargaining. Under such conditions each man is intent to get by way
of exchange just such goods as he directly needs, and to reject
those of which he has no need at all, or with which he is already
sufficiently provided. It is clear then, that in those circumstances
the number of bargains actually concluded must lie within very
narrow limits. Consider how seldom it is the case, that a commodity
owned by somebody is of less value in use than another commodity
owned by somebody else! And for the latter just the opposite
relation is the case. But how much more seldom does it happen that
these two bodies meet! Think, indeed, of the peculiar difficulties
obstructing the immediate barter of goods in those cases, where
supply and demand do not quantitatively coincide; where, e.g., an
indivisible commodity is to be exchanged for a variety of goods in
the possession of different person, or indeed for such commodities
as are only in demand at different times and can be supplied only by
different persons! Even in the relatively simple and so often
recurring case, where an economic unit, A, requires a commodity
possessed by B, and B requires one possessed by C, while C wants one
that is owned by A -- even here, under a rule of mere barter, the
exchange of the goods in question would as a rule be of necessity
left undone.
These difficulties would have proved absolutely insurmountable
obstacles to the progress of traffic, and at the same time to the
production of goods not commanding a regular sale, had there not
lain a remedy in the very nature of things, to wit, the different
degrees of saleableness (Absatzfahigkeit) of commodities. The
difference existing in this respect between articles of commerce is
of the highest degree of significance for the theory of money, and
of the market in general. And the failure to turn it adequately to
account in explaining the phenomena of trade, constitutes not only
as such a lamentable breach in our science, but also one of the
essential causes of the backward state of monetary theory. The
theory of money necessarily presupposes a theory of the saleableness
of goods. If we grasp this, we shall be able to understand how the
almost unlimited saleableness of money is only a special case, --
presenting only a difference of degree -- of a generic phenomenon of
economic life -- namely, the difference in the saleableness of
commodities in general.
IV. Commodities as More or Less Saleable.
It is an error in economics, as prevalent as it is patent, that
all commodities, at a definite point of time and in a given market,
may be assumed to stand to each other in a definite relation of
exchange, in other words, may be mutually exchanged in definite
quantities at will. It is not true that in any given market 10 cwt.
of one article = 2 cwt. of another = 3 lbs. of a third article, and
so on. The most cursory observation of market phenomena teaches us
that it does not lie within our power, when we have bought an
article for a certain price, to sell it again forthwith at the same
price. If we but try to dispose of an article of clothing, a book,
or a work of art, which we have just purchased, in the same market,
even though it be all once, before the same juncture of conditions
has altered, we shall easily convince ourselves of the
fallaciousness of such an assumption. The price at which any one can
at pleasure buy a commodity at a given market and a given point of
time, and the price at which he can dispose of the same at pleasure,
are two essentially different magnitudes.
This holds good of wholesale as well as retail prices. Even such
marketable goods as corn, cotton, pig-iron, cannot be voluntarily
disposed of for the price at which we have purchased them. Commerce
and speculation would be the simplest things in the world,if the
theory of the 'objective equivalent in goods' were correct, if it
were actually true, that in a given market and at a given moment
commodities could be mutually converted at will in definite
quantitative relations -- could, in short, at a certain price be as
easily disposed of as acquired. At any rate there is no such thing
as a general saleableness of wares in this sense. The truth is, that
even in the best organized markets, while we may be able to purchase
when and what we like at a definite price, viz.: the purchasing
price, we can only dispose of it again when and as we like at a
loss, viz.: at the selling price.(2*)
The loss experienced by any one who is compelled to dispose of an
article at a definite moment, as compared with the current
purchasing prices, is a highly variable quantity, as a glance at
trade and at markets of specific commodities will show. If corn or
cotton is to be disposed of at an organised market, the seller will
be in a position to do so in practically any quantity, at any time
he pleases, at the current price, or at most with a loss of only a
few pence on the total sum. If it be a question of disposing, in
large quantities, of cloth or silk-stuffs at will, the seller will
regularly have to content himself with a considerable percentage of
diminution in the price. Far worse is the case of one who at a
certain point of time has to get rid of astronomical instruments,
anatomical preparations, Sanskrit writings, and such hardly
marketable articles!
If we call any goods or wares more or less saleable, according to
the greater or less facility with which they can be disposed of at a
market at any convenient time at current purchasing prices, or with
less or more diminution of the same, we can see by what has been
said, that an obvious difference exists in this connection between
commodities. Nevertheless, and in spite of its great practical
significance, it cannot be said that this phenomenon has been much
taken into account in economic science. The reason of this is in
part the circumstance, that investigation into the phenomena of
price has been directed almost exclusively to the quantities of the
commodities exchanged, and not as well to the greater or less
facility with which wares may be disposed of at normal prices. In
part also the reason is the thorough-going abstract method by which
the saleableness of goods has been treated, without due regard to
all the circumstances of the case.
The man who goes to market with his wares intends as a rule to
dispose of them, by no means at any price whatever, but at such as
corresponds to the general economic situation. if we are going to
inquire into the different degrees of saleableness in goods so as to
show its bearing upon practical life, we can only do so by
consulting the greater or less facility with which they may be
disposed of at prices corresponding to the general economic
situation, that is, at economic prices.(3*) A commodity is more or
less saleable according as we are able, with more or less prospect
of success, to dispose of it at prices corresponding to the general
economic situation, at economic prices.
The interval of time, moreover, within which the disposal of a
commodity at the economic price may be reckoned on, is of great
significance in an inquiry into its degree of saleableness. It
matters not whether the demand for a commodity be slight, or whether
on other grounds its saleableness be small; if its owner can only
bide his time, he will finally and in the long run be able to
dispose of it at economic prices. Since, however, this condition is
often absent in the actual course of business, there arises for
practical purposes an important difference between those
commodities, on the one hand, which we expect to dispose of at any
given time at economic, or at least approximately economic, prices,
and such goods, on the other hand, respecting which we have no such
prospect, or at least not in the same degree, and to dispose of
which at economic prices the owner foresees it will be necessary to
wait for a longer or shorter period, or else to put up with a more
or less sensible abatement in the price.
Again, account must be taken of the quantitative factor in the
saleableness of commodities. Some commodities, in consequence of the
development of markets and speculation, are able at any time to find
a sale in practically any quantity at economic, approximately
economic, prices. Other commodities can only find a sale at economic
prices in smaller quantities, commensurate with the gradual growth
of an effective demand, fetching a relatively reduced price in the
case of a greater supply.
V. Concerning the Causes of the Different Degrees of
Saleableness in Commodities.
The degree to which a commodity is found by experience to command
a sale, at a given market, at any time, at prices corresponding to
the economic situation (economic prices), depends upon the following
circumstances:
- Upon the number of persons who are still in want of the
commodity in question, and upon the extent and intensity of that
want, which is unsupplied, or is constantly recurring.
- Upon the purchasing power of those persons.
- 3. Upon the available quantity of the commodity in relation to
the yet unsupplied (total) want of it.
- Upon the divisibility of the commodity, and any other ways in
which it may be adjusted to the needs of individual customers.
- Upon the development of the market, and of speculation in
particular. And finally,
- Upon the number and nature of the limitations imposed
politically and socially upon exchange and consumption with
respect to the commodity in question.
We may proceed, in the same way in which we considered the degree
of the saleableness in commodities at definite markets and definite
points of time,to set out the spatial and temporal limits of their
saleableness. In these respects also we observe in our markets some
commodities, the saleableness of which is almost unlimited by place
or time, and others the sale of which is more or less limited.
The spatial limits of the saleableness of commodities are mainly
conditioned --
- By the degree to which the want of the commodities is disturbed
in space.
- By the degree to which the goods lend themselves to
transport,and the cost of transport incurred in proportion to
their value.
- By the extent to which the means of transport and of commerce
generally are developed with respect to different classes of
commodities.
- By the local extension of organised markets and their
inter-communication by 'arbitrage'.
- By the differences in the restrictions imposed upon commercial
inter-communication with respect to different goods, to interlocal
and, in particular, in international trade.
The time limits to the saleableness of commodities are mainly
conditioned --
- By permanence in the need of them (their independence of
fluctuation in the same).
- Their durability, i.e. their suitableness for preservation.
- The cost of preserving and storing them.
- The rate of interest.
- The periodicity of a market for the same.
- The development of speculation and in particular of
time-bargains in connection with the same.
- The restrictions imposed politically and socially on their
being transferred from one period of time to another.
All these circumstances, on which depend the different degrees of,
and the different local and temporal limits to, the saleableness of
commodities, explain why it is that certain commodities can be
disposed of with ease and certainty in definite markets, i.e. within
local and temporal limits, at any time and in practically any
quantities, at prices corresponding to the general economic
situation, while the saleableness of other commodities is confined
within narrow spatial, and again, temporal, limits: and even within
these the disposal of the commodities in question is difficult, and,
in so far as the demand cannot be waited for, is not to be brought
about without a more or less sensible diminution in price.
VI. On the Genesis of Media of Exchange. (4*)
It has long been the subject of universal remark in centres of
exchange, that for certain commodities there existed a greater, more
constant, and more effective demand than for other commodities less
desirable in certain respects, the former being such as correspond
to a want on the part of those able and willing to traffic, which is
at once universal and, by reason of the relative scarcity of the
goods in question, always imperfectly satisfied. And further, that
the person who wishes to acquire certain definite goods in exchange
for his own is in a more favourable position, if he brings
commodities of this kind to market, than if he visits the markets
with goods which cannot display such advantages, or at least not in
the same degree. Thus equipped he has the prospect of acquiring such
goods as he finally wishes to obtain, not only with greater ease and
security, but also, by reason of the steadier and more prevailing
demand for his own commodities, at prices corresponding to the
general economic situation -- at economic prices. Under these
circumstances, when any one has brought goods not highly saleable to
market, the idea uppermost in his mind is to exchange them, not only
for such as he happens to be in need of, but, if this cannot be
effected directly, for other goods also, which, while he did not
want them himself, were nevertheless more saleable than his own. By
so doing he certainly does not attain at once the final object of
his trafficking, to wit, the acquisition of goods needful to
himself. Yet he draws nearer to that object. By the devious way of a
mediate exchange, he gains the prospect of accomplishing his purpose
more surely and economically than if he had confined himself to
direct exchange. Now in point of fact this seems everywhere to have
been the case. Men have been led, with increasing knowledge of their
individual interests, each by his own economic interests, without
convention, without legal compulsion, nay, even without any regard
to the common interest, to exchange goods destined for exchange
(their "wares") for other goods equally destined for
exchange, but more saleable.
With the extension of traffic in space and with the expansion over
ever longer intervals of time of prevision for satisfying material
needs, each individual would learn, from his own economic interests,
to take good heed that he bartered his less saleable goods for those
special commodities which displayed, beside the attraction of being
highly saleable in the particular locality, a wide range of
saleableness both in time and place. These wares would be qualified
by their costliness, easy transportability, and fitness for
preservation (in connection with the circumstance of their
corresponding to a steady and widely distributed demand), to ensure
to the possessor a power, not only 'here' and 'now' but as nearly as
possible unlimited in space and time generally, over all other
market-goods at economic prices.
And so it has come to pass, that as man became increasingly
conversant with these economic advantages, mainly by an insight
become traditional, and by the habit of economic action, those
commodities, which relatively to both space and time are most
saleable, have in every market become the wares, which it is not
only in the interest of every one to accept in exchange for his own
less saleable goods, but which also are those he actually does
readily accept. And their superior saleableness depends only upon
the relatively inferior saleableness of every other kind of
commodity, by which alone they have been able to become generally
acceptable media of exchange.
It is obvious how highly significant a factor is habit in the
genesis of such generally serviceable means of exchange. It lies in
the economic interest of each trafficking individual to exchange
less saleable for more saleable commodities. But the willing
acceptance of the medium of exchange presupposes already a knowledge
of these interest on the part of those economic subjects who are
expected to accept in exchange for their wares a commodity which in
and by itself is perhaps entirely useless to them. It is certain
that this knowledge never arises in every part of a nation at the
same time. It is only in the first instance a limited number of
economic subjects who will recognize the advantage in such
procedure, an advantage which, in and by itself, is independent of
the general recognition of a commodity as a medium of exchange,
inasmuch as such an exchange, always and under all circumstances,
brings the economic unit a good deal nearer to his goal, to the
acquisition of useful things of which he really stands in need. But
it is admitted, that there is no better method of enlightening any
one about his economic interests than that he perceive the economic
success of those who use the right means to secure their own. Hence
it is also clear that nothing may have been so favourable to the
genesis of a medium of exchange as the acceptance, on the part of
the most discerning and capable economic subjects, for their own
economic gain, and over a considerable period of time, of eminently
saleable goods in preference to all others. In this way practice and
a habit have certainly contributed not a little to cause goods,
which were most saleable at any time, to be accepted not only by
many, but finally by all, economic subjects in exchange for their
less saleable goods; and not only so, but to be accepted from the
first with the intention of exchanging them away again. Goods which
had thus become generally acceptable media of exchange were called
by the Germans Geld, from gelten, i.e. to pay, to perform, while
other nations derived their designation for money mainly from the
substance used, (5*) the shape of the coin, (6*) or even from
certain kinds of coin. (7*) It is not impossible for media of
exchange, serving as they do the commonweal in the most emphatic
sense of the word, to be instituted also by way of legislation, like
other social institutions. But this is neither the only, nor the
primary mode in which money has taken its origin. This is much more
to be traced in the process depicted above, notwithstanding the
nature of that process would be but very incompletely explained if
we were to call it 'organic' or denote money as something
'primordial', or 'primaeval growth', and so forth. Putting aside
assumptions which are historically unsound, we can only come fully
to understand the origin of money by learning to view the
establishment of the social procedure, with which we are dealing, as
the spontaneous outcome, the unpremeditated resultant, of
particular, individual efforts of the members of a society, who have
little by little worked their way to a discrimination of the
different degrees of saleableness in commodities. (8*)
VII. The Process of Differentiation between Commodities which
have become Media of Exchange and the Rest.
When the relatively most saleable commodities have become 'money',
the great event has in the first place the effect of substantially
increasing their originally high saleableness. Every economic
subject bringing less saleable wares to market, to acquire goods of
another sort, has thenceforth a stronger interest in converting what
he has in the first instance into the wares which have become money.
For such persons, by the exchange of their less saleable wares for
those which as money are most saleable, attain not merely, as
heretofore, a higher probability, but the certainty, of being able
to acquire forthwith equivalent quantities of every kind of
commodity to be had in the market. And their control over these
depends simply upon their pleasure and their choice. Pecuniam
habens, habet omnem rem quem vult habere.
On the other hand, he who brings other wares than money to market,
finds himself at a disadvantage more or less. To gain the same
command over what the market affords, he must first convert his
exchangeable goods into money. The nature of his economic disability
is shown by the fact of his being compelled to overcome a difficulty
before he can attain his purpose, which difficulty does not exist
for, i.e. has already been overcome by, the man who owns a stock of
money.
This has all the greater significance for practical life, inasmuch
as to overcome this difficulty does not lie unconditionally within
reach of him who brings less saleable goods to market, but depends
in part upon circumstances over which the individual bargainer has
no control. The less saleable are his wares, the more certainly will
he have either to suffer the penalty in the economic price, or to
content himself with awaiting the moment, when it will be possible
for him to effect a conversion at economic prices. He who is
desirous, in an era of monetary economy, to exchange goods of any
kind whatever, which are not money, for other goods supplied in the
market, cannot be certain of attaining this result at once, or
within any predetermined interval of time, at economic prices. And
the less saleable are the goods brought by an economic subject to
market, the more unfavourably, for his own purposes, will his
economic position compare with the position of those who bring money
to market. Consider, e.g., the owner of a stock of surgical
instruments, who is obliged through sudden distress, or through
pressure from creditors, to convert it into money. The prices which
it will fetch will be highly accidental, nay, the goods being of
such limited saleableness, they will be fairly incalculable. And
this holds good of all kinds of conversions which in respect of time
are compulsory sales.(9*) Other is his case who wants at a market to
convert the commodity, which has become money, forthwith into other
goods supplied at that market. He will accomplish his purpose, not
only with certainty, but usually also at a price corresponding to
the general economic situation. Nay, the habit of economic action
has made us so sure of being able to procure in return for money any
goods on the market, whenever we wish, at prices corresponding to
the economic situation, that we are for the most part unconscious of
how many purchases we daily propose to make, which, with respect to
our wants and the time of concluding them, are compulsory purchases.
Compulsory sales, on the other hand, in consequence of the economic
disadvantage which they commonly involve, force themselves upon the
attention of the parties implicated in unmistakable fashion. What
therefore constitutes the peculiarity of a commodity which has
become money is, that the possession of it procures for us at any
time, i.e. at any moment we think fit, assured control over every
commodity to be had on the market, and this usually at prices
adjusted to the economic situation of the moment; the control, on
the other hand, conferred by other kinds of commodities over market
goods is, in respect of time, and in part of price as well,
uncertain, relatively if not absolutely.
Thus the effect produced by such goods as are relatively most
saleable becoming money is an increasing differentiation between
their degree of saleableness and that of all other goods. And this
difference in saleableness ceases to be altogether gradual, and must
be regarded in a certain aspect as something absolute. The practice
of every-day life, as well as jurisprudence, which closely adheres
for the most part to the notions prevalent in every-day life,
distinguish two categories in the wherewithal of traffic -- goods
which have become money and goods which have not. And the ground of
this distinction, we find, lies essentially in that difference in
the saleableness of commodities set forth above -- a difference so
significant for practical life and which comes to be further
emphasized by intervention of the state. This distinction, moreover,
finds expression in language in the difference of meaning attaching
to 'money' and 'wares', to 'purchase' and 'exchange'. But it also
affords the chief explanation of that superiority of the buyer over
the seller, which has found manifold consideration, yet has hitherto
been left inadequately explained.
VIII. How the Precious Metals became Money.
The commodities, which under given local and time relations are
most saleable, have become money among the same nations at different
times, and among different nations at the same time, and they are
diverse in kind. the reason why the precious metals have become the
generally current medium of exchange among here and there a nation
prior to its appearance in history, and in the sequel among all
peoples of advanced economic civilization, is because their
saleableness is far and away superior to that of all other
commodities, and at the same time because they are found to be
specially qualified for the concomitant and subsidiary functions of
money.
There is no centre of population, which has not in the very
beginnings of civilization come keenly to desire and eagerly to
covet the precious metals, in primitive times for their utility and
peculiar beauty as in themselves ornamental, subsequently as the
choices materials for plastic and architectural decoration, and
especially for ornaments and vessels of every kind. In spite of
their natural scarcity, they are well distributed geographically,
and, in proportion to most other metals, are easy to extract and
elaborate. Further, the ratio of the available quantity of the
precious metals to the total requirement is so small, that the
number of those whose need of them is unsupplied, or at least
insufficiently supplied, together with the extent of this unsupplied
need, is always relatively large -- larger more or less than in the
case of other more important, though more abundantly available,
commodities. Again, the class of persons who wish to acquire the
precious metals, is, by reason of the kind of wants which by these
are satisfied, such as quite specially to include those members of
the community who can most efficaciously barter; and thus the desire
for the precious metals is as a rule more effective. Nevertheless
the limits of the effective desire for the precious metals extend
also to those strata of population who can les effectively barter,
by reason of the great divisibility of the precious metals, and the
enjoyment procured by the expenditure of even very small quantities
of them in individual economy. Besides this there are the wide
limits in time and space of the saleableness of the precious metals;
a consequence, on the one hand, of the almost unlimited distribution
in space of the need for them, together with their low cost of
transport as compared with their value, and on the other hand, of
their unlimited durability and the relatively slight cost of
hoarding them. In no national economy which has advanced beyond the
first stages of development are there any commodities, the
saleableness of which is so little restricted in such a number of
respects -- personally, quantitatively, spatially, and temporally --
as the precious metals. It cannot be doubted that, long before they
had become the generally acknowledged media of exchange, they were,
amongst very many peoples, meeting a positive and effective demand
at all times and places, and practically in any quantity that found
its way to market.
Hence arose a circumstance, which necessarily became of special
import for their becoming money. for any one under those conditions,
having any of the precious metals at his disposal, there was not
only the reasonable prospect of his being able to convert them in
all markets at any time and practically in all quantities, but also
-- and this is after all the criterion of saleableness -- the
prospect of converting them at prices corresponding at any time to
the general economic situation, at economic prices. The
proportionately strong, persistent, and omnipresent desire on the
part of the most effective bargainers has gone farther to exclude
prices of the moment, of emergency, of accident, in the case of the
precious metals, than in the case of any other goods whatever,
especially since these, by reason of their costliness, durability,
and easy preservation, had become the most popular vehicle for
hoarding as well as the goods most highly favoured in commerce.
Under such circumstances it became the leading idea in the minds
of the more intelligent bargainers,and then, as the situation came
to be more generally understood, in the mind of every one, that the
stock of goods destined to be exchanged for other goods must in the
first instance be laid out in precious metals, or must be converted
into them, or had already supplied his wants in that direction. But
in and by this function, the precious metals are already constituted
generally current media of exchange. In other words, they hereby
function as commodities for which every one seeks to exchange his
market-goods, not, as a rule, in order to consumption but entirely
because of their special saleableness, in the intention of
exchanging them subsequently for other goods directly profitable to
him. No accident, nor the consequence of state compulsion, nor
voluntary convention of traders effected this. It was the just
apprehending of their individual self-interest which brought it to
pass, that all the more economically advanced nations accepted the
precious metals as money as soon as a sufficient supply of them had
been collected and introduced into commerce. The advance from less
to more costly money-stuffs depends upon analogous causes.
This development was materially helped forward by the ratio of
exchange between the precious metals and other commodities
undergoing smaller fluctuations, more or less, than that existing
between most other goods, -- a stability which is due to the
peculiar circumstances attending the production, consumption, and
exchange of the precious metals, and is thus connected with the
so-called intrinsic grounds determining their exchange value. It
constitutes yet another reason why each man, in the first instance
(i.e. till he invests in goods directly useful to him), should lay
in his available exchange-stock in precious metals, or convert
metals, and the consequent facility with which they can serve as res
fungibiles in relations of obligation, have led to forms of contract
by which traffic has been rendered more easy; this too has
materially promoted the saleableness of the precious metals, and
thereby their adoption as money. Finally the precious metals, in
consequence of the peculiarity of their colour, their ring, and
partly also their specific gravity, are with some practice not
difficult to recognise, and through their taking a durable stamp can
be easily controlled as to quality and weight; this too has
materially contributed to raise their saleableness and to forward
the adoption and diffusion of them as money.
IX. Influence of the Sovereign Power.
Money has not been generated by law. In its origin it is a social,
and not a state institution. Sanction by the authority of the state
is a notion alien to it. On the other hand, however, by state
recognition and state regulation, this social institution of money
has been perfected and adjusted to the manifold and varying needs of
an evolving commerce, just as customary rights have been perfected
and adjusted by statute law. Treated originally by weight, like
other commodities, the precious metals have by degrees attained as
coins a shape by which their intrinsically high saleableness has
experienced a material increase. The fixing of a coinage so as to
include all grades of value (Wertstufen), and the establishment and
maintenance of coined pieces so as to win public confidence and, as
far as possible, to forestall risk concerning their genuineness,
weight, and fineness, and above all the ensuring their circulation
in general, have been everywhere recognised as important functions
of state administration.
The difficulties experienced in the commerce and modes of payment
of any country from the competing action of the several commodities
serving as currency, and further the circumstance, that concurrent
standards induce a manifold insecurity in trade, and render
necessary various conversions of the circulating media, have led to
the legal recognition of certain commodities as money (to legal
standards). And where more than one commodity has been acquiesced
in, or admitted, as the legal form of payment, law or some system of
appraisement has fixed a definite ratio of value amongst them.
All these measures nevertheless have not first made money of the
precious metals, but have only perfected them in their function as
money.
NOTES
- Cf. Roscher, System Der
Volkswirthscaft, I sec. 116; my Grunsatze der
Volkswirischaftslehre, 1871, p. 255, et seq.; M. Block, Les
Progres de la Science economique depuis A. Smith, 1890, II. p. 59,
et seq.
- We must make a distinction
between the higher purchasing prices for which the buyer is
rendered liable through the wish to purchase at a definite point
of time, and the (lower) selling prices, which he, who is obliged
to get rid of goods within a definite period, must content himself
withal. The smaller the difference between the buying and selling
of an article, the more saleable it usually proves to be.
- The height of saleableness in
a commodity is not revealed by the fact that it may be disposed of
at any price whatever, including such as result from distress or
accident. In this sense all commodities are pretty well equally
saleable. A high rate of saleableness in a commodity consists in
the fact that it may at every moment be easily and surely disposed
of at a price corresponding to, or at least not discrepant from,
the general economic situation -- at a economic, or approximately
economic, price.
...The price of a commodity may be
denoted as uneconomic on two grounds: (1) in consequence of error,
ignorance, caprice, and so forth; (2) in consequence of the
circumstance that only a part of the supply is available to the
demand, the rest for some reason or other being withheld, and the
price in consequence not commensurate with the actually existing
economic situation.
- Cf. my article on 'Money' in
the Handwurterbuch der Staatswissenschaften (Dictionary of Social
Science), Jena, 1891, iii, p. 730 et seq.
- The Hebrew Keseph, the Greek ,
the Latin argentum, the French argent, etc.
- The English money, the Spanish
moneda, the Portuguese moeda, the French monnaie, the Hebrew
maoth, the Arabic fulus, the Greek , etc.
- The Italian danaro, the
Russian dengi, the Polish pienondze, the Bohemian and Slavonian
penise, the Danish penge, the Swedish penningar, the Magyar pens,
etc. (i.e. denare = Pfennige = penny).
- Cf. on this point my Grunsatze
der Volkswirtschaftslehre, 1871, p. 250 et seq.
- Herein lies the explanation of
the circumstances why compulsory sales, and cases of distraint in
particular, involve as a rule the economic ruin of the person upon
whose estate they are carried out, and that in a greater degree
the less the goods in question are saleable. Correct discernment
of the uneconomic character of these processes will necessarily
lead to a reform in the available legal mechanism.