able commodity such as fresh fish must be sold within a limited period. Customers must be had at any price, and accordingly in Billingsgate market the price of fish often varies on the same day 50 or 100 per cent. Corn is not easily destructible if it is well stored, but it is liable to great variations in value owing to the fact that the annual supply is ordinarily consumed within the year; if the corn harvest all over the world is 30 per cent. short of the average, the whole of the world's supply of corn for the year would be reduced by 30 per cent. and the rise in value of corn would be enormous. But if the annual supply of gold fell off 30 per cent. the effect on the value of gold would hardly be felt at all, because the diminution in the annual supply of 30 per cent. would only affect to a very trifling degree the entire stock of gold in the world. The meaning of a Double Standard of Value. It is sometimes proposed that what is called a double standard of value should be adopted. The meaning of the expression "double standard” is, that it should be legal to offer either gold or silver in payment of any debt, no matter what the amount of it may be. There are obvious disadvantages in this plan. Suppose that, owing to any circumstances, the value of silver declined between the time when a debt was contracted and when it was paid; it would then be to the advantage of the person who had incurred the debt to discharge it in silver instead of gold. But, as previously shewn, if the standard of value fluctuates between the incurring of a debt and the payment of it, the terms of every monetary contract are disturbed, and a most disastrous effect is produced on commerce. For example, A lends B £25, B promising to pay at the end of a year; it is quite possible that the relative value of gold and silver may have changed before the time arrives for discharging the debt. If B is allowed to choose whether he will repay the loan in gold or silver, he will probably avail himself of any change that has taken place in the value of either silver or gold. If gold has declined in value, he will discharge his debt in gold; if silver is less valuable, he will pay his debt in silver. Hence, if there is a double standard, the terms of every monetary contract are liable to be disturbed by the fluctuations in the value of two substances, instead of being influenced only by one, as in those cases where there is a single standard of value. There is not a Double Standard in this Country. It may be thought that as in this country there are gold, silver and copper coins in circulation, there is not only a double, but a treble standard. This is not, however, the case. The silver and copper coinages are subsidiary. Their representative value is greater than their intrinsic value. If the silver contained in twenty shillings were melted down, its exchange value would be less than £1 sterling. Two new half-crowns weigh one ounce; but the price of silver, which is quoted almost daily in the newspapers, has for several years been lower than 60d. per ounce. The present price (October 1888) is 42d. per ounce. The English silver and copper coins are issued and used because they provide a convenient means of making small payments; but they are not legal tender beyond a certain amount. No debt of more than 40s. can be discharged in silver unless the creditor consents; and, in the same way, no debt of more than is. can be discharged in pence. The bronze of which pence and half-pence are made is worth about 10d. per pound troy, and this weight will make nearly 40 pennies. The government therefore make a profit on all the silver and bronze coins they issue. These subsidiary or token coins are really akin in their nature to bank notes, in so far as their intrinsic value is less than their nominal value. Great injustice would be done if it were attempted to make these token coins legal tender for an unlimited amount, but as it is no one is injured; the government make a profit which renders it possible to convert gold bullion into coin free of charge and this profit also renders the Mint more than self-supporting, while the public are supplied with a much more convenient coinage than they would have if every penny contained bronze of the value of th part of a pound sterling; for in this case every penny would weigh about 2 ounces (as much as 4 half-crowns) and the inconvenience of carrying such coins would be felt by every one. Another inconvenience would arise if it were endeavoured to oth part of a make every penny exactly equal in value to sovereign; for the weight of these pennies would have to be altered with every fluctuation in the value of bronze. Bi-metalism. Some advocates of a double standard maintain that if several countries agreed to fix by law the relative value of gold and silver (making for instance 15 parts of silver always legally exchangeable for one part of gold), that whenever the actual value of the two metals did not correspond to this legal value, it would immediately become profitable to all persons to discharge their debts in the metal which had fallen in relative value; there would thus be created a greater demand for it and a smaller demand for the metal which had risen in relative value. This alteration in the demand would, it is argued, tend to restore the two metals to the relative value prescribed by law by raising the value of that which had declined and lowering the value of that which had risen. This proposal is known as bi-metalism. Its fallacy rests on the assumption that the value of commodities, of which the supply can be increased, can be1 ultimately regulated by anything except their cost of production. Suppose the relative value of gold and silver to be fixed by law at the rate of 15 to 1, and then that some extraordinary discovery of silver were made which rendered it easier to produce from the mines 10 ounces of silver than one ounce of gold. If this continued to be the case no acts of parliament could make people willing to exchange gold and silver in the proportion of 15 to 1. An illustration from M. Bastiat. With one more observation on the subject of money this chapter will be concluded. An immense number of fallacies have been committed under the idea that money is the sole source of wealth. Every one knows that the more money he has the richer he is, and this has led to the conclusion that the more money there is in circulation the richer will be the community which possesses it. The error of this conclusion is well illustrated by the following example of M. Bastiat :-"Ten men sat down to play a game, in which they agreed to stake 1000 francs. 1 The causes which regulate the value of commodities is the subject of the next chapter. Each man was provided with 10 counters, each counter representing 10 francs. When the game was finished, each received as many times 10 francs as he happened to have counters. One of the party, who was more of an arithmetician than a logician, remarked that he always found at the end of the game that he was richer in proportion as he had a greater number of counters, and asked the others if they had observed the same thing. 'What holds in my case,' said he, 'must hold in yours, for what is true of each must be true of all.' He proposed, therefore, that each should have double the former number of counters. No sooner said than done. Double the number of counters were distributed; but when the party finally rose from play, they found themselves no richer than before. The stake had not been increased, and fell to be proportionally divided. Each man, no doubt, had double the number of counters, but each counter, instead of being worth 10 francs was found to be worth only 5; and it was at length discovered that what is true of each is not always true of all." QUESTIONS ON CHAPTER II. On Money. I. What are the functions of money? 2. Describe what is meant by a measure of value; and give an illustration. 3. Describe what is meant by a medium of exchange; and give an illustration. 4. Is the substance selected as money necessarily gold or silver? 5. What substances have been used at different times and in different countries as money? 6. Enumerate the qualities which the substance selected as money should possess. 7. Explain and illustrate the importance of each of these qualities. 8. What substances possess these qualities in an eminent degree? 9. What are the special disadvantages of using labour as the standard of value? IO. What is meant by a "double standard of value "? II. 12. What are the disadvantages of a double standard? 13. What is meant by "bi-metalism" and what fallacy does it involve? 14. Repeat the excellent example by means of which M. Bastiat has illustrated the true nature of money. I. In India there is no gold coinage. What should you say was the effect of this on the mode of paying small debts? If you had 10 to pay away in about ten different shops, should you like to start out for the purpose with 100 florins in your pocket? 2. Does a man who discovers a gold mine add to the wealth of the country? 3. What would be the effect on the general wealth if every one suddenly found that the quantity of money in his possession was doubled? 4. Would buying and selling come to an end if all the gold, silver, and copper in the world were destroyed? CHAPTER III. The Value of Commodities. Commodities, when considered in relation to their Value, may be divided into Three Classes. Ist. Those which possess a monopoly value, and whose supply cannot be increased; such as the pictures of a deceased artist. 2nd. Those whose cost of production increases as an additional supply is produced; such as agricultural and mineral produce. 3rd. Those whose supply can be increased without increasing their cost of production, such as manufactured commodities. as Cost of Production. In enumerating these three classes of commodities the expression "Cost of production" has been employed. Mr Mill has defined "cost of production consisting mainly of wages and profits. Prof. Cairnes, however, has adopted a different definition, and one which seems more in harmony with the actual facts of the case: he |